CSX Earnings, Income up in 2nd Quarter

CSX on Thursday reported higher operating revenue and net income in the second quarter of 2022. This came despite lingering operating personnel shortages that had led the railroad to turn away business.

In a news release, CSX said net income rose to $1.178 billion, or 54 cents per share, compared to $1.173 billion, or 52 cents per share in the second quarter of 2021.

Operating income was up 1 percent to $1.7 billion while revenue rose 28 percent to $3.82 billion.

CSX attributed the increases in nearly all markets to pricing gains, fuel surcharges and the addition of Quality Carriers, a North American provider of bulk liquid chemicals truck transportation.

The operating ratio – the percentage of revenue devoted to expenses – was up to 55.4 percent. In the second quarter of 2021 the operating ratio had been 43.4 percent.

The carrier said the increase reflected the effects of lower real estate gains, the acquisition of Quality Carriers and higher fuel prices.

The carrier said its second quarter 2022 financial results included $18 million of expense related to the acquisition of Pan Am Railways and a $122 million gain (4 cents per share after taxes) from property sales recognized from the 2021 agreement with Virginia.

Second-quarter 2021 results included a $349 million gain (12 cents per share after tax) from the same agreement.

Freight volumes reached 1,594,000, which was nearly the same as the second quarter 2021 volume of 1,59,000.

The carrier said it is still targeting full-year double-digit revenue and operating income growth for the year.

Coal traffic grew 58.2 percent in the second quarter, but CSX management expects that commodity may decline due to market conditions.

Automotive carload growth was 10.4 percent with CSX management anticipating further growth this year due to the alleviation of a semiconductor shortage that has hindered auto manufacturing in recent months.

CSX managers also expect velocity improvements will result in volume growth in intermodal, boxcar and coal traffic over the second half of the year.

Velocity improved in the second quarter with 83 percent of planned work completed on schedule. Intermodal trip plan compliance was 90 percent while carload on-time performance fell 10 points to 59 percent.

Industry analysts said that the key to second half growth lies in how well CSX is able to resolve its worker shortage issues.

Those issues received considerable attention during the second quarter earnings call with CSX executives saying they are looking to increase the number of train and engine workers to 7,000 by the end of September.

But to reach that goal CSX will need to overcome high attribution in the T&E ranks.

“Our ability to hire and retain new workers, which is vital to improving our service and growing the business, remains challenged,” CSX CEO James Foote said during the earnings call.

He said CSX is not alone in having this issue because the labor market is tight and the COVID-19 pandemic “has had a profound effect on employees’ work and lifestyle preferences. Our hiring process has been steady, but slow.”

CSX has 6,667 active T&E workers but Foote indicated that new hires and veteran locomotive engineers and conductors are leaving CSX at significantly higher rates than usual.

The company added 311 conductors during the second quarter but crew availability of late has been lower than usual due to rising COVID-19 infections and workers taking vacations.

The railroad said it has had to respond by making “tough decisions” about what traffic moves and what gets held.

Priority is given to service-sensitive intermodal traffic and in instances where crew availability is tight preference is being given to bulk traffic over merchandise trains because the bulk commodities involve grain or coal being added to large stockpiles.

That was particularly the case in the Southeast where CSX gave priority to grain used as chicken feed. The result was that merchandise freight sustained delays of 24 hours or more.

Foote said CSX is hiring at a faster pace than attrition and he expects to turn the corner on crew availability.

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