Posts Tagged ‘CSX financial results’

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.

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.

CSX Profits Fell 10% in 3rd Quarter

October 20, 2016

Falling traffic led to CSX posting a 10 percent decline in profits for the third quarter of 2016.

CSX logo 1CSX reported net earnings of $455 million, or 48 cents per share, down from $507 million in the third quarter of 2015.

However, the results still exceeded Wall Street analyst expectations of 45 cents per share. Revenue for the quarter fell 8 percent, the same as its decline in overall traffic volume.

Trains magazine said CSX experienced the largest traffic decline among Class I railroads.

The carrier saw a 21 percent decline in coal, a 13 percent drop in metals and equipment, and a 10 percent decline in agricultural and food products. CSX realized gains in automotive (6 percent) and fertilizers (1 percent).

Although intermodal volume fell by 7 percent, CSX said the bulk of its domestic intermodal business remained strong, reflecting the success of the railroad’s highway-to-rail conversion program. International intermodal volume fell 12 percent due to the loss of a contract to NS as well as weaker global trade.

The operating ratio was up a tick at 69 percent compared with 68.3 percent in the third quarter of 2015.

“CSX continues to drive strong cost performance and efficiency in this dynamic market environment while meeting or exceeding customer expectations,” CEO Michael Ward said in a statement.

The railroad expects fourth-quarter traffic volume to be about even with last year, Chief Financial Officer Frank Lonegro said during a conference call.

During the third quarter this year, CSX said its expenses improved 7 percent and that it expects efficiency gains and cost savings of $400 million for the year, up from the $350 million target management provided during the second quarter.

However, Chief Operating Officer Cindy Sanborn said CSX won’t be able to duplicate this “extraordinary” savings pace next year.

“We’ll see a more normal year next year, but we’re not leaving anything on the table,” she said.
CSX expects efficiency gains of $150 million in 2017.

On-time performance, terminal dwell time and system velocity all fell slightly compared with the second quarter of this year.

CSX Expects 3rd Quarter Earnings to Fall

September 9, 2016

A CSX executive said this week that the railroad expects its third-quarter earnings per share to decline from what it posted during the second quarter.

CSX logo 1Executive Vice President and Chief Financial Officer Frank Lonegro said this week that volume will decline by single digits year-over-year.

Lonegro spoke during the Cowen and Company’s annual Global Transportation Conference in Boston.

“Third quarter earnings per share are expected to decline slightly from second quarter levels, based on high single-digit volume reductions that are partially offset by improving efficiency benefits and strong pricing gains that reflect a service product that meets and exceeds customer expectations,” Lonegro, said in a statement.

An improving global market for coal is expected to result in some better results for CSX coal traffic.

Lonegro noted that coal traffic has posted some modest improvement in recent months leading company officials to project that for the year coal tonnage will decline between 20 percent and 25 percent.
CSX plans to focus on high-density routes serving merchandise and intermodal growth.

As part of its “CSX of Tomorrow” strategy, it is extending sidings on key routes and running longer trains.

Lonegro said CSX also is investing in intermodal terminals and double-stack clearance projects to capture a greater share of the 9 million truckload market in the East.

CSX Says 2nd Quarter Profits Fell 20%

July 16, 2016

A 34 percent decline in coal traffic played a major role in CSX seeing its second quarter profit drop by 20 percent.

Earnings per share for the quarter declined 16 percent to 47 cents on revenue of $2.7 billion. The net earnings of $445 million is a 20 percent decline from the second quarter of 2015.

CSX logo 3“This continues to be a challenging environment,” CEO Michael Ward said during the company’s earnings call.

CSX saw a 9 percent decline in overall traffic volume with every traffic category posting losses except for minerals and automotive, which were up 13 percent and 1 percent respectively.

CSX did manage to reduce expenses by 9 percent during the second quarter, but its revenue fell by 12 percent.

The railroad said it had efficiency gains of $96 million for the period, lower volume-related costs of $86 million, and $56 million from reduced fuel prices.

The operating ratio was 68.9 percent compared with 66.8 percent for the second quarter of 2015.

Chief Financial Officer Frank Lonegro said during the call that CSX expects to produce nearly $350 million of efficiency savings this year, which is an improvement of the original target of more $250 million.

Lonegro said CSX will continue to “turn over every rock” in an effort to bring expenses in line with revenue.

Among the measures CSX has taken to cut costs are mothballing 350 locomotives.

It still plans to take delivery of 65 new locomotives this year, which means additional active engines are likely to be placed in storage. The new locomotives were ordered in 2014.

CSX Chief Operating Officer Cindy Sanborn said the CSX active locomotive fleet has been reduced by 10 percent, which she said is in line with the decline in gross ton miles.

“I doubt you would see us in the market for new locomotives” in 2017 and 2018, Lonegro said.

Lonegro said CSX will probably rebuild some of its four-axle units used for switching and local service.

The employee head count for the quarter was on average 4,489 less than it was in 2015 for the same period.

Railroad executives said operational performance improved with on-time originations hitting 88 percent during the second quarter, which they said is a 33 percent improvement. On-time arrivals were 69 percent, a 44 percent improvement.

Ward said that “service continued to meet and exceed customer expectations.”

Fredrik Eliasson, chief sales and marketing officer, said that in a lower volume business climate improving service is critical to maintaining strong pricing.

Sanborn said CSX is trying to strike a balance between maintaining service levels and cutting costs by implementing such measures as running longer trains and using variable scheduling, Sanborn said.

“We are making the right tradeoffs between productivity and service,” Eliasson said.

CSX expects to see full-year volume and earnings declines with the third quarter presenting major challenges.

CSX Makes Traffic Gains, Still Faces Challenges

February 18, 2016

A CSX executive told a financial conference on Wednesday that falling coal traffic, the effects of a strong U.S. dollar and low global commodity prices challenged the railroad in 2015 and continue to offer strong headwinds as it navigates through 2016.

Chief Financial Officer Frank Lonegro told the Barclays Industrial Select Conference in Miami that in the past five years CSX has grown its merchandise and intermodal business faster than the economy and delivered strong pricing and efficiency gains.

Lonegro said that has enabled CSX to produce earnings per share of 4 percent and post an operating ratio below 70 percent in 2015.

CSX logo 1He said CSX expects its coal volume to fall more than 20 percent and most other markets to continue posting year-over-year declines in 2016.

“Based on the trends so far this year, we expect volume to decline in the mid-high single digits this quarter and to gradually moderate as we move through the year,” Lonegro said. “We expect first quarter earnings to decline significantly, reflecting both this volume environment and the fact that we are cycling more than $100 million in unique items from the first quarter of 2015.”

Lonegro told conference attendees that in 2016 CSX plans to reap $200 million in productivity savings.

The railroad expects to further reduce structural resources and match resources with volume declines near term while also remaining well-positioned to serve demand shifts once the economic challenges begin to subside.

“In this environment, we continue to focus on the things most in our control, including delivering safe, reliable service that increases operational efficiency and supports strong pricing for the value we provide to customers,” Lonegro said. “As we look toward a future with significantly less coal, our strategy includes rationalizing and realigning the network to match decreased demand in some markets and adjust to increases in others, investing in clearance and terminal projects to leverage intermodal growth, and optimizing technology to serve the CSX of tomorrow as we continue to target a mid-60s operating ratio longer term.”