Posts Tagged ‘CSX financial outlook’

CSX Gained 1% Increase in 3rd Quarter Revenue

October 18, 2017

CSX said on Tuesday that it had third quarter net earnings of $459 million, or 51 cents per share, up from $455 million, or 48 cents per share, in the same period last year.

Excluding a $1 million restructuring charge, CSX said its adjusted earnings per share remain at 51 cents.

The results marked a 1 percent increase in revenue over the third quarter of 2016 and came after several months of discontent by the railroad’s shippers and scrutiny by the U.S. Surface Transportation Board stemming from numerous service issues.

CSX said that its revenue increase was due to core pricing gains and offset by the impact of an unfavorable mix of freight.

Overall, traffic was up 1 percent for the quarter. Merchandise traffic declined 5 percent, but coal and intermodal rose by 5 percent.

The company cut its expenses by $2 million with efficiency gains of $95 million, which more than offset a 19 percent rise in inflation and fuel costs.

Total volume was stable, while operating income improved 4 percent  to $876 million and the operating ratio improved 90 basis points to 68.1. In the third quarter of 2016 the operating ratio was 69 percent.

CSX said it has completed a $1.5 billion share repurchase program that it began in April 2017 and increased in July 2017.

“The company’s results for the third quarter reflect the resiliency of precision scheduled railroading, even during times of transition,” said CSX CEO E. Hunter Harrison in a statement. “With that transition largely behind us, we are now intensely focused on driving superior service for our customers and lasting value for our shareholders.”

Adjusting for restructuring charges, CSX said it expects to post a 2017 operating ratio in the high end of the mid-60s.

It also expects earnings per share growth of 20 to 25 percent from a base $1.81 in 2016, and free cash flow before dividends of around $1.5 billion.

In the fourth quarter of 2017 CSX said that its outlook for volume is neutral.

On the plus side, demand for U.S. export coal should remain strong while consumer demand through the holidays will boost intermodal traffic.

On the downside, CSX is forecasting a less favorable outlook for automotive, crude oil and domestic coal traffic.

During a conference call with investors and analysts, CSX management said the 12 percent intermodal growth during the third quarter this year shows that service is improving.

“The customers are coming back to us very rapidly,” said Fredrik Eliasson, chief sales and marketing officer.

Harrison proclaimed that the service problems that hindered the railroad last summer are generally fixed and that CSX will move forward at “breakneck speed” to further improve and streamline its operations.

He also expected to gain back traffic lost to truckers and rival Norfolk Southern. “I think it shifts back immediately,” Harrison said. “Shippers out there, they’re trying to get the best bargain they can get.”

Advertisements

CSX Managers Tout Service Improvements

September 7, 2017

CSX executives told a railway conference this week that the carrier is emerging from its operations meltdown and making progress in implementing its precision scheduled railroading operating model.

CEO E. Hunter Harrison acknowledged in a statement issued ahead of the 10th Annual Global Transportation conference sponsored by Cowen and Company in Boston that the railroad’s service problems were in part due to a “too much, too soon” rush to implement the operating model.

But Harrison said CSX management now sees progress in overcoming those problems.

“The railroad is now returning to a normal operating rhythm, and our performance metrics are improving,” Harrison said. “Fluidity in our terminals largely has been restored and we are appropriately resourced to continue making progress. Car dwell has improved from week to week for the past five weeks, and system-wide velocity is increasing.

“I’m confident that many of the challenges we and our customers have recently faced are behind us.”

Chief Financial Officer Frank Lonegro said CSX “continues to expect free cash flow before dividends (excluding restructuring charges) of around $1.5 billion and record efficiency gains for 2017.”

However, the service issues that occurred in July and August have prompted CSX to change its 2017 full-year guidance from an operating ratio in the mid-60s to an operating ratio around the high end of the mid-60s and earnings per share growth from around 25 percent to a range of 20-25 percent.

Despite the improvements, CSX’s on-time performance was 50 percent last week, well behind last year’s 66 percent mark and the record 88 percent recorded in May this year.

“The CSX of the Hunter Harrison era is still under construction,” Frank Lonegro said at the conference. “While I say ‘please pardon our dust,’ I also tell you that the fundamental building blocks are in place to enable us to provide two very important things. The first is consistently high levels of service for our customers and the second is a radically improved financial trajectory for our owners.”

Lonegro said the railroad’s focus now is on reliably executing and refining the new operating plan.

He said CSX still expects to have between two and four hump yards and that by flat-switching two-thirds of its traffic, the railroad can cut the costs of processing cars, bolster yard productivity, trim hump-related capital expenses, and reduce transit time by a day.

Average train length has increased 7 percent since July 1 and fuel consumption has fallen by 6 percent. More than 300 crew starts per week have been cut and employment is down 2,700. CSX has also eliminated about 1,000 outside contractors.

The nine operating divisions of CSX have been reduced to five regions.

Although it has yet to undertake a line-by-line analysis, CSX is willing to consider bids to buy its lighter-density routes. “Everything’s for sale at the right price,” Lonegro said.

CSX Extolls Benefits of Precision Scheduled Railroading Even as the Benefits of it Have Not Helped All Shippers

July 20, 2017

Even as CSX CEO E. Hunter Harrison was extolling the virtues of his precision scheduled railroading model in an earnings call with investors and analysts, the railroad’s management was acknowledging that it was having some service issues.

Harrison said there would be some inevitable pain and suffering before operations are running smoothly.

“I thought we had a hell of a quarter,” Harrison said in the wake of the railroad’s announcement earlier this week that during the second quarter of this year profits rose, the operating ratio improved, and traffic and revenue were on the rise.

CSX Chief Marketing Officer Fredrik Eliasson said that such important service metrics as terminal dwell time, average train speed, and on-time performance were better during the second quarter.

Eliasson conceded that service improvements have not been felt everywhere on the railroad. “There are certain places where we are not there yet,” he said while declining to provide customer satisfaction metrics.

A report published on the Trains magazine website said that not all shippers have felt those benefits.

“A large number of our members have said they are experiencing serious problems with their service from CSX,” Scott Jensen, a spokesman for the American Chemistry Council, told the magazine. “Some have even reported that it has caused their customers to temporarily shut down operations.”

Trains reported that the scope of the service problems appear to be growing and quoted an unnamed chemical shipper as saying that transit times have increased by 48 hours in several key lanes.

Jay Roman, president of Escalation Consultants, a Maryland-based firm that helps merchandise and bulk shippers negotiate contracts with railroads, told Trains that what the CSX metrics show is not what he has been hearing from shippers.

“There seems to be a disconnect between the data and what shippers are running into,” he said, noting that some shippers have experienced a reduction in local service and report having problems with car supply.

A survey of rail shippers conducted by Cowen & Company this month found that 24 percent of them ranked CSX service as “poor.”

Nonetheless, another unidentified shipper told Trains that there has been significant transit time improvement  and that his company’s car cycle times dropped by eight days over the span of a month.

“We are asking our customers to hang with us,” Ellison said. He said that he talks with shippers every day to assure them that conditions will improve.

CSX managers contend that no shippers have taken their business to Norfolk Southern or put it on the highway due to service issues.

“This service disruption has been way overplayed,” Harrison said. He said approximately 500 customers account for 90 percent of CSX’s traffic and two could make a case that they have experienced a “major disruption.”

In one of those cases, Harrison said service slid back to previous levels, which he attributed to a labor slowdown that he described as “pushback by some of the troops.”

CSX has stored nearly 900 locomotives and expects to put another 100 units in mothballs. The active car fleet has been reduced by 60,000 as CSX seeks to move the same level of tonnage on fewer trains.

Train length has averaged 6,500 feet and most trains now operate daily rather than five or six days a week as had been the case before Harrison arrived.

Chief Financial Officer Frank Lonegro said train length will continue to grow as CSX continues to move unit train traffic into its merchandise train network.

During the second quarter, terminal dwell time improved 2 percent to 24.4 hours, although dwell time is up significantly at some terminals since CSX ceased humping operations at seven yards.

CSX management is studying why dwell time has increased to 40 or 50 hours at some yards.

Train velocity improved 3 percent, to 21.7 mph and and fuel efficiency improved 5 percent as the railroad stored older, less-efficient locomotives.

In response to a question, Harrison said CSX will shift from a cost-cutting mode to a growth strategy if it continues to control its costs.

“A lot of this will happen in the post-Harrison era. If we do our job today in laying the foundation, there will be a lot of opportunity for growth,” he said.

Harrison described what CSX is doing as balancing cost and service. The railroad will need to bring in more revenue and not just cut costs.

The CSX head also said that just because the railroad is closing hump operations doesn’t mean it plans to sell the land they use.

“We’re not having a garage sale here,” Harrison said. If traffic continue to grow, that yard capacity may be needed again.

As for the short-term future, CSX management expressed a favorable third-quarter outlook for two-thirds of its traffic, including export coal, intermodal, agriculture and food, metals and equipment, and minerals.

CSX managers have a neutral outlook for fertilizers and forest products, which account for 8 percent of the railroad’s traffic.

The outlook is seen as unfavorable for 26 percent of traffic, including automotive, chemicals, and domestic coal.

CSX plans to discuss its long-term strategy and outlook during an investor conference scheduled for Oct. 29 and 30 in Palm Beach, Florida.

CSX Reports 2nd Quarter Net Income Up

July 19, 2017

CSX reported this week that its net profit rose nearly 33 percent in the second quarter.

However, when controlling for the effects of $122 million in restructuring charges, the net profit was up just 15 percent.

Most of those charges involved reimbursing CEO E. Hunter Harrison and hedge fund Mantle Ridge for salary and benefits that Harrison gave up because his left his job as head of Canadian Pacific five months early.

Discounting the restructuring charges, CSX posted an operating ratio of 63.2 percent for the second quarter of 2017. Taking the restructuring charges into account, the operating ratio was 67.4 percent compared to 68.9 percent compared with the second quarter of 2016.

An operating ratio is a measure of company efficiency that compares operating expenses to net sales. The smaller the ratio, the greater a company’s ability to generate profit if its revenues fall.

Adjusting for restructuring charges, CSX expects a full-year operating ratio in the mid-60s,  with earnings per share growth of around 25 percent off the 2016 reported base of $1.81, and free cash flow before dividends of around $1.5 billion.

CSX reported revenue of $2.9 billion, an increase of 8 percent from $2.7 billion in the 2016 second quarter. Expenses fell 6 percent, led by a 15-percent drop in fuel costs.

The restructuring charges also included $22 million for management layoffs. The CSX management ranks have fallen by 951 employees this year.

CSX said that during the quarter its train velocity was up 3 percent compared with the same period in 2016.

Terminal dwell time was down 2 percent. On-time originations were 88 percent and on-time arrivals were 79 percent, a 14-percent gain over 2016.

During the second quarter of this year, CSX said it had an 8 percent increase in revenue following a 2 percent traffic increase. Freight rates were up nearly 4 percent.

CSX said its pricing and volume gains were led by export coal. Merchandise and intermodal pricing gains were 2.2 percent, which CSX said reflected the continued “challenging freight marketplace.”

Coal traffic was up 7 percent while intermodal rose 3 percent. Merchandise traffic fell 2 percent, which the railroad attributed to across-the-board declines in virtually every category.

For the quarter, CSX reported net earnings of $510 million, or 55 cents per share, up from $445 million, or 47 cents per share, a year ago. Excluding the restructuring charges, CSX reported earnings of 64 cents per share.

CSX Declares 11% Dividend for 1st Quarter

April 25, 2017

CSX last week declared an 11 percent increase in its quarterly dividend while also announcing that it will spend $1 billion to buy back shares of its stock.

The railroad expects to issue financial guidance as it applies the precision railroading model to its operations.

The quarterly dividend, which increased from 18 cents to 20 cents, is payable on June 15 to shareholders of record as of May 31.

“Although we are just in the beginning phase of making changes to our network, we are off to a great start,” said President and Chief Executive Officer E. Hunter Harrison in a news release. “These changes are critical to driving strong, sustainable service for our customers and superior value for our shareholders.”

During 2017, CSX said that it expects to achieve record gains in efficiency and a step-function improvement in its key financial measures this year given continued economic growth and stable coal markets.

It predicted that its operating ratio for the year will fall in the mid-60s and earnings-per-share will grow 25 percent off the 2016 reported base of $1.81.

CSX said that the stock buyback program should be completed by the end of the first quarter of 2018.

CSX 1st Quarter Net Income up 2%

April 21, 2017

CSX said on Thursday that its first quarter 2017 net income rose 2 percent to $362 million, or 39 cents per share.

In a news release, CSX said that discounting a $173 million restructuring charge, the adjusted earnings were 51 cents per share.

Those numbers compare with net income of $356 million, or 37 cents per share in the first quarter of 2016.

During the first quarter of this year revenue was up 10 percent to $2.87 billion compared with $2.6 billion in 2016.

CSX attributed the revenue growth to volume growth across most markets, overall core pricing gains and increased fuel recovery.

The railroad believes that its second quarter outlook is favorable because of anticipated growth in most markets, including agriculture and food, export coal, fertilizers, forest products, intermodal and minerals.

The business outlook is neutral outlook for automotive, chemicals, metals and equipment. The domestic coal market has an unfavorable outlook for domestic coal.

CEO E. Hunter Harrison said during a conference call that CSX expects to have an operating ratio in 2017 in the mid-60s, earnings per share growth of around 25 percent off the 2016 reported base of $1.81, and free cash flow before dividends of around $1.5 billion.

The CSX board of directors have approved a $1 billion share repurchase program, which management expects to complete by the end of the first quarter of 2018.

CSX began buying back shares of its stock in April 2015 and has spent $2 billion on that to date.

As for capital spending, CSX now expects to invest $2.1 billion in 2017, including approximately $270 million for Positive Train Control.

More than half of the 2017 capital spending will be used to sustain core infrastructure with the balance allocated to projects supporting profitable growth, efficiency initiatives and service improvements.

CSX trimmed its capital budget for this year by $100 million. Some planned capital projects are being paused as management continues to study its terminal and operating plans.

As expected, CSX plans to continue creating longer passing sidings, particularly in the Chicago-Florida corridor where train lengths are limited by 6,500-foot sidings.

Under the Michael Ward administration, CSX had announced plans to extending or add 27 sidings in that corridor. Harrison expects to move some sidings to create a longer siding elsewhere.

“If we have sidings that are too short for the longer trains, we’re certainly not going to leave those sitting in the ground and not being utilized,” he said. “We’ll pick up one 6,500-foot siding and move it 15 miles down the railroad and put it with another 6,500. We’ve got a 13,000-foot siding.”

Since Harrison took over as CEO last month, CSX has laid off 765 employees – about 3 percent of its workforce – and further announcements are expected of continued cost cutting initiatives.

CSX chopped a record $420 million of expenses in 2016 and expects to top that this year.

Among the expected moves will be consolidating the railroad’s nine divisions. Also likely to be consolidated are the nine dispatching centers CSX now operates.

The streamlining of operations will result in 550 of the railroad’s 4,400 locomotives being removed from service and stored by the end of the summer. CSX has already mothballed another 550 locomotives.  About 25,000 freight cars will be stored.

CSX wants to impose a balance of operations over seven days a week and reduce the average terminal dwell time from 26 hours to somewhere in the high teens.

During the conference call, Harrison suggested that he does not expect any mergers or acquisitions to occur during the four-year life of his contract.

CSX VP Lonegro Projects ‘Flat to Slightly up’ Earnings Per Share for 4th Quarter of 2016

December 1, 2016

CSX projects that its earnings per share for the fourth quarter of 2016 will be flat to slightly up.

CSX logo 3Executive Vice President and Chief Financial Officer Frank Lonegro delivered that assessment to investors and analysts attending a conference on Thursday.

Although some of the factors that have worked against the carrier’s financial health are moderating, Lonegro said, “At the same time, a recent operating property sale will now offset the impact of a debt refinancing charge announced earlier in the quarter.”

In a news release, CSX said that quarter-to-date volume has declined 3 percent overall, and many markets are showing more moderate declines than in previous quarters.

In particular, coal traffic is showing sequential volume stabilization and is essentially flat to date.

Volume is now expected to decline in the low-to-mid single digit range on a comparable 13-week basis.

CSX Expects to See Earnings of 8 Cents Per Share in 4th Quarter 2016, Sanborn Tells Conference

November 11, 2016

CSX expects its earnings per share in the fourth quarter of 2016 to be eight cents.

CSX logo 1“While we now expect fourth-quarter earnings per share to be down, absent the eight-cent impact, the company’s earnings remain consistent with its prior guidance of flat to slightly down from the prior year,” said Executive Vice President and Chief Operating Officer Cindy Sanborn.

She gave that assessment to analysts attending the Baird’s 2016 Industrial Conference in Chicago on Nov. 9.

Sanborn said volume will be roughly flat on a reported basis, which includes an extra accounting week in the fourth quarter this year.

However, management expects strong cost performance to help offset that and result in a solid financial performance throughout the year.

Sanborn said that through the third quarter CSX has posted about $550 million in cost savings through efficiency initiatives and volume-variable savings.

Cost cutting has been undertaken in labor, fuel and assets expenses through gains achieved with train length and crew savings, record fuel efficiency, and improved locomotive productivity and asset reliability.

In the long term, CSX expects to transition away from coal traffic and toward more service-sensitive merchandise and intermodal markets.

CSX expects to have an operating ratio in the mid-60s.