Posts Tagged ‘CSX financial outlook’

Traffic Growth Not Propelling CSX

April 20, 2018

CSX this week posted some glittering first quarter financial numbers and service metrics, but were they based on fool’s gold?

An analysis by Railway Age noted that the record earnings and operating ratio was based almost entirely on cost-cutting measures, rate increases and stock buybacks rather than on traffic volume growth.

In short, CSX is trying to live up to the adage that less is more. In this case, that means operating fewer and longer trains with fewer employees.

In looking at CSX freight traffic numbers, the trade publication found that traffic volume was flat or declined in every category except export coal and international intermodal.

Railway Age quoted its Wall Street Contributing Editor Jason Seidl as saying that from a financial standpoint CSX exceeded expectations among financial analysts in terms of revenue and profits.

The managing director of financial firm Cowen and Company sees that as a positive.

“Early on in [CEO Jim Foote’s] tenure, the company is showing the ability to operate efficiently as a smaller railroad with fewer employees and assets.”

Seidl said investors are likely to have increased confidence in CSX’s goal of achieving a 60 percent operating ratio by 2020.

“We continue to expect that CSX will become a more nimble, dynamic railroad in the coming years, as many layers of management have been reduced,” he said. “The company has consolidated its structure into four operating regions from nine. The number of hump yards where railcars go to die has been cut by two-thirds to four, from 12. There could be more to go on that front. Decentralization of operational decision-making will likely prove to be a key component to customer service improvement and employee retention over time.”

CSX is expected to continue reducing its employment rolls, sell $300 million in real estate through 2020 and reduce the total mileage of track that it operates.

Seidl noted that in the first quarter of this year CSX reaped $32 million from real estate sales.

“We think CSX’s strategy could provide an opportunity for Genesee & Wyoming . . . to acquire complementary infrastructure,” Seidl said, adding that G&W is already a major interchange partner with CSX and has a history of looking for asset sales from Class 1 railroads.

Railroad economist Jim Blaze told Railway Age that most of the net earnings that CSX posted in the first quarter of $695 million was based buying back shares of its stock.

He attributed the 19.8 percent improvement in the operating ratio largely to cost cutting.

“Revenue was relatively flat, year over year. The biggest revenue growth appeared to be from price leveraging and fuel surcharge increases,” Blaze said.

“On the traffic side, my analysis is a bit more negative for those expecting a shift toward a larger rail vs. truck mode change. That’s not occurring for CSX.”

Blaze said CSX traffic unit growth has stalled despite traffic growth opportunities provided by truck driver shortages and electronic logging.

“Intermodal volume remained unchanged percentage-wise at just 1,000 intermodal units over the 90 days. That’s about 11 system-wide units per day as truckers struggle,” he said. “Who saw that competitive outcome? Domestic intermodal growth was negative. That outcome isn’t in any stated railroad plans, is it?”

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Cost Cutting Boosts CSX in 1st Quarter

April 19, 2018

CSX credited cost cutting and its scheduled railroading operating model for enabling it to post higher first quarter quarterly earnings when compared to last year.

During the first quarter of this year CSX said its profit was nearly double that of the first quarter of 2017.

For the first quarter of 2018 CSX had net earnings of $695 million, or 78 cents per share, compared with $362 million, or 39 cents per share in the same quarter last year.

The net earnings per share beat estimates by some Wall Street analysts of 65 to 66 cents per share.

The operating ratio for the quarter was 63.7 percent compared to 73.2 percent a year ago.

In a statement, CSX CEO James M. Foote said the performance came despite some challenging weather conditions.

Reducing expenses played a key role in the company’s first quarter performance.

Although revenue was flat at $2.88 billion, expenses fell 13 percent on a year over year or 8 percent when excluding prior year restructuring charges to $1.8 billion. Operating income rose 36 percent to $1.04 billion from $769 million a year ago.

Overall, CSX traffic fell 4 percent during the quarter but the railroad said that was offset by a 4-percent increase in revenue per unit.

CSX merchandise traffic was down 8 percent and coal declined 2 percent.

By commodity group, CSX said that chemicals declined 2 percent due to reduced fly ash, plastics and energy-related shipments.

Automotive was affected by lower North American vehicle production and dropped 4 percent.

Agricultural and food products fell 8 percent with much of the loss in ethanol and export grain. Fertilizer declined by 10 percent as a result of the effects of weather and the closing of a customer’s facility.

Domestic coal traffic fell by 4 percent decline but was somewhat offset by a favorable export coal market environment.

Intermodal traffic rose by 3 percent, helped by strong international service growth.

In terms of service metrics, yard productivity was up 20 percent in the first quarter of this year compared to a year ago when measured by cars processed per hour.

Train lengths were up 5 percent and road train starts were down 8 percent, which CSX officials attributed to a 20 percent gain in locomotive productivity when measured by gross ton-miles per available horsepower.

CSX has placed more than 800 locomotives in storage, thus cutting its active locomotive fleet by 23 percent when compared to this time last year.

During the first quarter, CSX reported average train speed rose 22 percent compared to the first quarter of 2017. Terminal dwell, meanwhile, fell 10 percent.

On-time departures were steady at 81 percent, while on-time arrivals improved to 57 percent, up from 52 percent a year ago.

In looking ahead, CSX said it expects revenue to be up slightly, with positive momentum heading into the second quarter. The railroad also expects to continue trimming it operating ratio.

CSX said that its performance has been adversely affected by unfavorable performance metrics at other Class I railroads.

Foote said CSX would not change its outlook for flat traffic volume this year. “We’re not going to chase volume,” he said.

Rather he said CSX is focusing on ensuring adequate rates and methodical, rational growth.

It might be willing to cut freight rates for Southern utilities in an effort to keep them from converting coal-fired power plants to natural gas.

During the first quarter, CSX spent more than twice as much on share buybacks ($836 million, a 224 percent increase) as it did on capital expenses ($368 million, a 17 percent decrease).

The company has said it is seeking to buy back $5 billion of its stock during the next three years.

Reading Between the Lines of How CSX Management Projects Itself to the World

March 7, 2018

CSX executives revealed last week at long last their vision for their company. They were supposed to have done it last fall, but three top-ranking vice presidents left during a management shakeup. Then CEO E. Hunter Harrison died.

But things have now stabilized. CEO James M. Foote and his management team put forth the most optimistic and rosy scenarios that they dared to spin.

Hovering over those presentations in New York City, though was Harrison.

A year ago Harrison and the hedge fund Mantle Ridge were closing in on their takeover of CSX, a feat they pulled off with a relatively small amount of money and in a short amount of time.

Harrison had great plans for the hidebound CSX. He brought the precision scheduled railroading model that he had implemented on the Illinois Central and then at Canadian National and Canadian Pacific.

Foote and his team went to great lengths to show that Harrison’s vision is their vision, too. Harrison received the reverence normally reserved for a company founder or elder statesman of much longer tenure.

Harrison had a lot of work to do. Independent railroad industry analyst Tony Hatch and Trains magazine columnist Fred Frailey have described CSX as long hindered by adherence to the practices of its  predecessor railroads, meaning it was  averse to change and rather bureaucratic.

Frailey said ormer CEO John Snow as uninspiring and his successor, Michael Ward, sought to move CSX forward but was bewildered as to how to get it out of its rut.

No wonder the CSX board of directors gave Harrison a chance even if, to quote his successor Foote, Harrison engaged in “carpet bombing” the railroad with fast-paced changes that led to widespread service failures that drew the ire of shippers and the attention of the U.S. Surface Transportation Board.

But all of that is behind CSX now, or so management wanted those attending or watching the presentations in New York to believe.

Some have bought it. Writing in Progressive Railroading, Hatch quoted an  investor as saying this was the best CSX meeting he had seen in a decade of watching the railroad.

The current management team laid out  goal of a 60 percent operating ratio by 2020, described a new intermodal business strategy, and pointed to the huge buckets of money it will fill from sales of unneeded real estate and rail lines.

Having a plan and making it work are not always, though, the same thing. Truth is every railroad company talks about growing traffic and all of them are facing challenges finding it.

Hatch said that if CSX is to increase its carload and intermodal business it will have to provide consistent and improving service.

Frailey didn’t comment directly on the New York conference, instead referring readers to articles written by the magazine’s writer covering the story, Bill Stephens.

Those articles, Frailey correctly observed, did well in showing how CSX seeks to project itself to the world.

Yet Frailey said some industry observers with whom he regularly corresponds have been debating the endgame that CSX management is seeking and it isn’t necessarily to grow traffic and become North America’s best railroad.

Those observers think CSX plans to eventually liquidate the company.

Frailey said the case for liquidation goes as follows: “The railroad borrows money to buy back an astounding $5 billion of stock, making every dollar of profit worth more to shareholders who stick around because the same amount of earnings is spread among many fewer shares . . . Freight rates are being jacked up to cover fully allocated costs, a direction I’m told only Union Pacific has gone up to now—milk the cow until it collapses, the saying goes. Its carload business has been steadily eroding since the turn of the century.”

The veteran journalist who has written about railroads since the 1960s said  he understands that CSX has reduced its marketing staff to a hard core operation.

That hardly sounds like a railroad that will be able to aggressively go to find new business. Perhaps CSX expects that by offering a superior product that shippers will come to it begging to do business.

The word “liquidate” that some of Frailey’s contacts used to describe CSX’s endgame is unfortunate because it conjures up selling assets and going away.

Perhaps a better description might have been to break up the railroad much as Illinois Central Gulf slimmed down in the 1970s and 1980s until it emerged as largely a Chicago-New Orleans core with a few arteries connecting to it.

Yes, some rail lines were abandoned, but most wound up in the hands of short line and regional railroads.

It was that railroad on which Harrison first implemented his precision scheduled railroading model.

Frailey isn’t sure what to make of what CSX is doing, but doesn’t believe Foote isn’t prepared to do the job thrust upon him following Harrison’s death.

Foote was in the right place at the right time and for now CSX and its shareholders will let him sit at the throttle and take the EHH train a little further down the line. But it is Harrison’s train orders that Foote is following and not those Foote wrote himself.

Shareholders can be a fickle lot. Just this week Canadian National, a railroad described in most circles as highly successful, pushed out CEO Luc Jobin after the company hit a rough patch.

What I see happening at CSX is that management is trying to walk a fine line between pleasing investors and shippers and keeping at bay a few interested bystanders who have the ability to make life easy or miserable for a company.

Cost cutting and asset sales will only take a company so far in that endeavor. Of course growing traffic makes everyone happy, but is CSX prepared to spend the time and money needed to make that happen. It is so much easier to sell property and lightly used rail routes.

In theory, a company exists to serve its customers because without them you don’t have a company. But theory also says that a company exists to make money for its shareholders.

The two objectives are not necessarily in opposition. Arguably, you can’t make money for shareholders unless you provide a product or service that someone is willing to buy.

But you can’t improve your product or seek to sell more of it without spending money on that, too.

Management has always existed to reconcile those sometimes opposing forces.

The history of the railroad industry is filled with tales of financiers milking companies and leaving them behind. There is reason to believe that CSX is tilting toward enabling the financiers to make a financial killing before moving on to something else.

To quote a line from the John Mellencamp song Peaceful World, “These are just words and words are OK. It’s what you do and not what you say, if you’re not part of the future then get out of the way.”

We will know in time what the future of CSX is but take with some healthy skepticism how CSX projects that to the world.

CSX Aims for 60% Operating Ratio by 2020

March 2, 2018

CSX executives told an investor’s conference in New York City this week that the carrier will continue paring its locomotive and rail car fleets, and reducing its employment ranks as it works toward reaching an operating ratio of 60 percent by 2020.

Along the way the railroad expects revenue to grow at a compound annual rate of 4 percent.

The carrier also expects to trim capital expenses over the next three years.

If all goes to plan, the higher revenue, lower costs, and reduced capital expenses will allow CSX to generate $8.5 billion in free cash flow, a $5-billion increase over the previous three-year period, and that cash will be put into the pockets of stockholders through a $5 billion stock buyback program and higher dividends.

“Today marks the beginning of a new chapter for CSX, and we’re confident we have the right plan and the right team in place to achieve our goal of becoming the best railroad in North America,” said CEO James M. Foote. “The foundation of scheduled railroading has been set, and we expect to identify real growth opportunities that will benefit shareholders as our changes take hold.”

CSX said that by offering faster, more dependable service it expects to better compete with trucks, charge higher rates, and grow intermodal and merchandise traffic over the next three years.

Nonetheless, Foot acknowledged that he has had to apologize to shippers for service failures last year that occurred as CSX made rapid changes in its transition to the precision scheduled railroading operating model.

But Foote said the carrier has rebounded and that trains are moving 30 percent faster and freight cars are spending 22 percent less time in yards.

Capital spending will be trimmed to an average of $1.6 billion a year where it had been $2.5 billion three years ago.

“We are not reducing the emphasis on infrastructure and maintenance,” Chief Financial Officer Frank Lonegro said.

He said the railroad will install more miles of rail, replace more ties, and add more ballast this year than in 2017. Most of the decline in capital spending comes from withdrawing from buying locomotives and rolling stock and the completion of installation of positive train control.

Although CSX doesn’t expect this year to make such big changes as converting hump yards to flat switching facilities, the company did not rule out closing additional humps.

CSX expects that operating fewer and longer trains daily will enable it to do more with less.

At the start of 2017, CSX had 3,781 active locomotives. That fell to 3,000 by late last year and is slated to tumble another 20 percent to 2,400 units by 2020.

The railroad will cut its freight car fleet to between 104,000 and 109,000 cars. Officials say that speeding up the network and reducing car cycle times will enable this.

With fewer trains, fewer locomotives, fewer cars, fewer shops and fewer yards, CSX will also get along with fewer workers.

The payroll will be slashed to 21,000 employes by 2020, a 23 percent reduction from the 27,000 workers CSX had in late 2017. The latter number is also significantly less than what the railroad had at the start of the year.

Over the next three years, CSX expects to reap $300 million from selling surplus real estate and $500 million from the sale of rail lines.

CSX Vice President of Strategic Planning Amy Rice described the line sales as a by-product of broader network evaluation but did not provide any information as to how many miles it plans to sell.

She only would say that all lines under review will not necessarily be put up for sale.

CSX plans to add 600,000 units of lift capacity at six intermodal terminals during the next two years as it focuses on point-to-point service.

Lower-density intermodal traffic will be consigned to merchandise trains as CSX implements a balanced train plan with daily service.

CSX does not see a change in the long-term decline of coal traffic, but will work to move its coal traffic faster, more reliably, and more efficiently.

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.”

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.