CSX Reports Big Jump in 3rd Quarter Earnings

CSX reported this week that its third-quarter net earnings jumped 95 percent to $894 million, or $1.05 per share. The comparison is with the third quarter of 2017 when CSX earned $459 million, or 51 cents per share

In a news release, CSX said its per-share earnings beat analysts’ estimates for the quarter.
The railroad said its operating ratio of 58.7 percent set a company third-quarter record. A year ago, CSX posted a third-quarter operating ratio of 68.4 percent.

Revenue in the quarter rose 14 percent over the prior year to $3.13 billion, which CSX attributed to “volume growth, increases in fuel recovery, favorable mix, higher supplemental revenue and pricing gains.”

Expenses dropped 2 percent to $1.84 billion, as expenses associated with increased volume and higher fuel prices were offset by efficiency gains as CSX continues to implement its scheduled railroading business model, company officials said.

Third-quarter operating income rose 49 percent to $1.29 billion from $868 million a year ago.

During an earnings conference call CEO James Foote said company officials are “very excited about the railroad’s strong performance.”

For all of 2018, CSX said it expects to reach 6 percent to 8 percent revenue growth, which Foote said would exceed what management anticipated.

“Only 8 months since our investor conference and — by almost any measure — we are ahead of where I thought I we would be,” Foote said. “I am proud of what has been accomplished and I’m encouraged by all the opportunity in front of us.”

Foote said CSX almost has met its workforce reduction target of 2,000 positions for 2018 and will continue reducing its employee rolls in 2019. He attributed that to expected efficiency gains. CSX employs 22,562.

Chief Financial Officer Frank Lonegro said CSX needs fewer people as it moves more tonnage with a smaller locomotive fleet and fewer rail cars.

“Clearly we are doing very well,” said Mark Wallace, CSX’s executive vice president of sales and marketing. “And service is excellent, the pricing environment is very, very good, customers are moving more freight back to the railroad — and that is a trend that will continue.”

Merchandise traffic was up 5 percent for the quarter while coal traffic grew 7 percent due to a 22 percent rise in export coal shipments.

However, domestic utility coal traffic fell by 2 percent and fertilizer traffic was down due to a plant closure. Intermodal traffic was up 3 percent for the quarter.

CSX said rail cars are spending less time in yards and trains are moving faster as terminal dwell times has fallen by 26 percent and average train velocity is up 28 percent.

However, there was little improvement in on-time originations, which remained at 85 percent. On-time arrivals improved 3 points to 64 percent.

The carrier said it has created a new service metric known as trip plan compliance, which monitors how well freight cars and intermodal containers and trailers meet their schedules.

That compliance was up 26 percent versus the first quarter and 13 percent compared to the second quarter.

“While we have made good progress, there’s plenty of room to improve,” Foote said during the conference call, noting that trip-plan compliance was in the upper 70-percent range for the quarter.

The railroad wants to get it closer to 100 percent, Foote said.

CSX said its real estate sales have increased by $52 million higher over last year largely due to the sale of some lines to short-line railroads.

The railroad said it expects to soon sell another 1,000 miles of railroad and continues to review its 8,000-mile systems for further sale opportunities.

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