Posts Tagged ‘CSX financial results’

CSX Had Lowest 1st Quarter Operating Ratio

May 10, 2018

CSX has the lowest operating ratio among Class 1 railroads in the first quarter of 2018.

The operating ratio of 63.7 percent compared to 69.4 percent during the first quarter of 2017 and was 0.9 points ahead of second-place Union Pacific.

A year ago, CSX was second-to-last among railroad operating ratios.

Chief Financial Officer Frank Lonegro said earlier this year that CSX is seeking to hit a 60 percent operating ratio by 2020.

To be sure, there are underlying factors that enabled CSX to post the performance that it did.

Indeed, CSX’s operating-ratio ranking led by the pack due to a number of factors, including an accounting rules change that disproportionately affected longtime industry leaders Canadian National and Canadian Pacific.

Both Canadian carriers also had to contend with higher operating costs due to harsh winter weather and congestion.

Likewise, first quarter operating ratios tend to fluctuate due to the effect of winter weather.

CSX also benefited from a 96 percent increase in “other revenues,” which included such things as demurrage, a $30 million-increase in real estate sales, and a doubling of equity earnings of affiliates such as the Indiana Rail Road, Conrail, and TTX.

Even CSX CEO James M. Foote cautioned not to read too much into the first quarter operating ratio.

“The plan recently laid out at our investor conference is a three-year plan,” Foote said. “We’re only one quarter in, one out of 12, and we still have a lot of work to do to achieve our goals.

“As we demonstrated in the first quarter, we expect a solid step-down each year in the operating ratio. There remains significant work ahead in order to deliver on our 2020 target.”

Foote told investors earlier this year that the railroads is handling about the same amount of volume that it hauled a year ago with eight fewer hump yards, 1,000 fewer locomotives, 4,000 fewer employees and 20,000 fewer railcars.

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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?”

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.

CSX Revenue Fell 6% in 4th Quarter of 2017

January 18, 2018

CSX said on Wednesday that during the fourth quarter of 2017 its revenue fell by 6 percent to $2.86 billion when compared with the same period of 2016.

However, quarterly net income soared 25 percent, largely due to cost-cutting measures that offset the revenue decline and slumping traffic volume

The carrier said it had net earnings of $4.1 billion, or $4.62 earnings per share, compared with $458 million, or 49 cents per share in 2016.

The 2017 earnings include a $3.6 billion net tax reform benefit under the recently passed Tax Cuts and Jobs Act of 2017, as well as a $10 million net restructuring charge.

In a news release, CSX said that excluding the tax reform benefit and restructuring charge, adjusted net earnings for the quarter were $573 million, or 64 cents per share.

Also affecting the fourth quarter revenue was an additional fiscal week in 2016 in the reporting calendar.

Expenses for the fourth quarter fell by 14 percent compared with the year-ago period. CSX posted fourth quarter 2017 operating income of $1.12 billion, a 12 percent increase over the fourth quarter of 2016.

The fourth quarter 2017 operation ratio was 64.8 percent compared with 67 percent a year ago.

For all of 2017, CSX reported earnings per share of $5.99, operating income of $3.7 billion and an operating ratio of 67.9 percent.

Adjusted for the effect of the new tax law and the company’s restructuring charge, adjusted earnings per share were $2.30, adjusted operating income was $3.9 billion and adjusted operating ratio was 66.3 percent for full-year 2017.

During the fourth quarter of 2017, traffic volume fell by 2 percent on a carload basis and by 10 percent when measured by revenue ton miles.

CSX said much of the lost traffic was related to service issues related to an accelerated implementation of the precision scheduled railroading operating model.

Merchandise traffic was down 5 percent; coal was flat; and intermodal volume was up 1 percent, due largely to international traffic growth. But domestic intermodal fell 7 percent as the railroad discontinued lower-volume intermodal service lanes.

Service metrics for the fourth quarter showed train velocity up 14 percent versus a year ago, while terminal dwell declined by 7 percent.

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 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 2016 4th Quarter Earnings Fell 2%, But Revenue Up 9% When Compared with 2015

January 19, 2017

CSX said this week that its 2016 fourth quarter net earnings fell by 2 percent to $458 million, or 49 cents per share.

CSX logo 1That compares to $466 million, or 48 cents per share that it earned in the fourth quarter of 2015.

Fourth quarter 2016 revenue was up by 9 percent to $3 billion compared with $2.78 billion a year ago.

CSX said that factors affecting its fourth quarter performance included an operating property sale and a debt refinancing charge, both of which were $0.08 per share and offset each other in the quarter.

The final quarter of 2016 also included an additional accounting week resulting from the company’s 52/53 week fiscal reporting calendar, which benefited earnings per share by $0.03 per share.

CSX said expenses increased 2 percent while operating income was $1 billion, which included the $115 million gain from the property sale and the $62 million benefit from the extra week.

During 2016, “the industry continued to face headwinds from low global commodity prices and strength of the U.S. dollar,” CSX said in a news release

For CSX this meant that it generated $11.1 billion in revenue as volume declined 5 percent overall with a 21 percent decline in its coal traffic.

Earning per share for 2016 were $1.81, operating income was $3.4 billion and the railroad posted an operating ratio of 69.4 percent.

“In an environment where the company lost almost $470 million of coal revenue and experienced weakness across most of its markets, CSX delivered nearly $430 million of productivity savings in 2016, while improving customer service,” said CEO Michael J. Ward in a statement. “With business conditions gradually improving and the ongoing transformation into the CSX of Tomorrow, we will continue to deliver sustainable shareholder value.”

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.