CSX Operating Income Up 8% in 2022

CSX said this week that for 2022, its operating income was $6 billion an increase of 8 percent compared with 2021,

This included $144 million in gains from what management described as “property sales recognized from the 2021 agreement with the Commonwealth of Virginia.”

Full-year 2021 operating income included $349 million in gains from this same transaction, CSX said in a news release.

Net earnings for 2022 were $4.17 billion, or $1.95 per share, compared to $3.78 billion, or $1.68 per share, in 2021. Revenue reached $14.9 billion for 2022, increasing 19 percent compared with 2021.

The operating ratio was 59.5 percent while diluted earnings per share were $1.95, an increase of 16 percent from $1.68 for the full year 2021.

During the fourth quarter of 2022, CSX posted operating income of $1.46 billion compared to $1.37 billion in the same period of 2021.

Net earnings were $1.02 billion, or $0.49 per share, compared to $934 million, or $0.42 per share in the same period of 2021.

Other fourth quarter highlights included revenue of $3.73 billion, a 9 percent year-over-year, increase that officials said was driven by “higher fuel surcharge, pricing gains, and an increase in storage and other revenues.”

Severe winter weather in late December modestly reduced volumes and revenue for the quarter.

The diluted earnings per share of $0.49 increased 17 percent from $0.42 for the fourth quarter of 2021.

During an investors call on Wednesday, CSX executives said the strong fourth earnings occurred despite signs of an economic downtown.

CSX management expected to gain traffic volume this year thanks to ongoing service improvements.

CEO Joseph Hinrichs said service metrics continued to show improvement through the fourth quarter after starting a clear upward trend in the early fall.

“As we anticipated, our hiring successes have allowed us to deliver better customer service that will allow us to capture more business with more volume over time,” Hinrichs said.

He noted that this has meant on-time performance has reached pre-COVID-19 pandemic levels. For the quarter, intermodal trip plan compliance was 94 percent, while merchandise traffic reached 77 percent, a 20-point improvement compared to the third quarter of 2022.

During the earnings call, CSX management said it was unable to meet shipper demand in 2022 due to service problems related to crew shortages.

CSX executives said merchandise and coal volume continues to grow, which they expect will enable the Jacksonville-based Class 1 railroad to achieve faster business growth than the economy this year.

Hinrichs said CSX is still not meeting the demand that it has to move carload freight.

However, intermodal traffic is expected to decline due to a decline in import activity as retailers work down high inventories they amassed earlier.

CSX management declined to release earnings projections for 2023, citing economic uncertainty. Management also declined to set an operating-ratio goal.

Chief Operating Officer Jamie Boychuk said operations should continue to improve as additional conductors complete training.

CSX is still hiring conductors due to attrition and a low retention rate for new conductors.

“We’re looking at continuing to build our numbers up so we can get to a point where we can cover vacation time and make sure that our employees get time off,” Boychuk said. Consequently, CSX management said it won’t furlough train crews if traffic volume slows.

CSX plans to $2.13 billion on capital projects this year, up from $1.79 billion in 2022.

CSX Posts Gains in 3rd Quarter Financial Results

CSX released its third quarter financial results on Thursday showing revenue was up 18 percent over the same quarter of 2021.

Quarterly revenue was $3.90 billion, which CSX management said was “driven by higher fuel surcharge, pricing gains, a 2 percent increase in volumes, and an increase in storage and other revenues.”

Operating income was $1.58 billion, a 10 percent increase over the prior-year period’s $1.44 billion.

Management said those results reflect additional labor and fringe expense related to tentative labor contracts with $42 million set aside for wage, bonus, and other benefit costs incurred in previous quarters.

Those additional costs resulted in an increase in the operating ratio to 59.5 percent.

Net earnings were $1.11 billion (or $0.52 per share), a 15 percent increase over the $968 million (or $0.43 per share) at the same point last year.

Duluted earnings per share were $0.52 up 21 percent from $0.43 in third quarter of 2021.

CSX said it expects full-year double digit revenue and operating income growth, excluding the effects of real estate transactions in Virginia.

The Class 1 carrier said it expects to continue hiring additional workers in train and engine service and to continue focusing on improving relationships with customers, employees, and CSX stakeholders.

CSX management said it is confident of increasing traffic volume as service improves, which would help offset a potential decline in freight demand.

New CSX CEO Joseph Hinrichs said during an earnings call he’s talked with the railroad’s eight largest customers.

“Almost every single one of them has told me directly . . . that when you deliver better service, and more reliable, more predictable service, we want to do more business with you,” he said. “So we don’t have to chase growth.”

Hinrichs said growing freight volume growth is the key to maintaining profit margins by controlling costs and making the most of the railroad’s assets.

CSX said it is seeking to have 7,000 active train crew members. It now has 6,819 with 730 conductors in training.

Jamie Boychuk, executive vice president of operations, acknowledged CSX service is not where it should be but is improving as crew levels rise.

The service issues were reflected in third quarter operating metrics. On-time departures fell to 58 percent from 71 percent a year ago, while on-time arrivals fell to 46 percent versus 62 percent last year.

Carload trip plan compliance fell to 57 percent compared to 68 percent a year ago. Intermodal trip plan compliance was 90 percent for the quarter, up from 88 percent a year ago.

Boychuk said during the earnings call that if CSX faces an economic downturn and/or a loss of traffic that it will not furlough crew members as it did at the beginning of the COVID-19 pandemic in spring 2020 when the economy went into a recession.

He said CSX wants to protect its active train and engine workforce and will rely on attrition and reducing conductor training class sizes before resorting to furloughs.

“We are going to be prepared to handle all the traffic that comes back at us,” Boychuk said.

Hinrichs said he has directed management “to look at things from a customer perspective to make sure that we are holding ourselves to a higher standard of service and accountability.”

CSX Earnings, Income up in 2nd Quarter

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

CSX Net Earnings Up 21% in 1st Quarter

CSX said on Wednesday its net earnings in the first quarter rose 21 percent in diluted earnings per share.

Those net earnings were $859 million, or $0.39 per share, compared to $706 million, or $0.31 per share, in the first quarter of 2021.

Operating income was up 16 percent to $1.28 billion compared to $1.10 billion in the same quarter of 2021.

Revenue reached $3.41 billion for the quarter, increasing 21 percent year-over-year, as an overall revenue-per-unit increase of 24 percent more than offset a 2 percent decline in volume.

CSX said that first quarter operating income included $17 million of expenses related to increases in environmental reserves and a $20 million gain from property sales with the Commonwealth of Virginia.

The operating ratio increased from 60.9 percent in the prior-year period by 150 basis points to 62.4 percent.

The company attributed revenue gains in eight of its 10 traffic categories to “strong pricing and higher fuel surcharge.”

Chemicals were up 16 percent; Agricultural & Food Products increased 11 percent; Forest Products increased 4 percent as higher revenue per unit more than offset lower shipments, primarily of building products; Automotive decreased 4 percent; Metals and quipment increased 6 percent; Minerals increased 15 percent; Fertilizers decreased 2 percent; Intermodal increased 13 percent; Coal increased 39 percent; and other revenue increased 41 percent.

During the first quarter the CSX train and engine workforce averaged 6,629 workers compared to 6,432 in the first quarter of 2021. CSX had an average of 561 conductors in training.

Intermodal trip plan compliance was 87 percent, a two-point improvement, but carload trip compliance was just 64 percent, a three-point decline.

“We are pleased with our results this quarter, though we’re not yet satisfied with our service performance,” Foote said during the earnings call with investors.

He said operations showed improvements in March and those trends have continued into April.

However, Jamie Boychuk, CSX executive vice president of operations, said it was too early to say the railroad has reached the bottom of the crew shortage problem.

Nonetheless, he said CSX expects its train and engine ranks to reach full strength by summer.

Crew shortages meant that CSX could not handle all of the traffic it sought during the quarter.

Average train speed was down 15 percent compared to the first quarter of 2021, while terminal dwell time rose 4 percent.

On-time train originations dropped to 65 percent from 79 percent a year ago, while on-time train arrival declined 12 points to 57 percent.

CSX Reports 4th Quarter 2021 Financial Results

CSX said on Thursday that its net earnings in the fourth quarter of 2021 were $934 million, which works out to 42 cents per share.

This was a 22 percent rise over the same quarter in 2020 of $760 million or 33 cents per share.

Revenue for the fourth quarter of 2021 was $3.427 billion, up 21 percent from $2.825 billion in fourth-quarter 2020.

Operating income was $1.366 billion, a gain of 12 percent over the $1.215 billion posted in the same period in 2020. The operating ratio was 60.1 percent, a 310 bps increase over the 2020 period’s 57.0 percent.

In a statement, CSX officials said growth occurred across all major lines of business. increases in other revenue, and the inclusion of financial results for the Quality Carriers program.

Leading traffic growth during the quarter were coal, up 39 percent, and intermodal, up 16 percent.

CSX expects continued traffic volume growth this year that’s “driven by economic expansion and supply chain recovery.”

The company expects to spend $2 billion this year on capital projects. That is an increase of $200 million over last year.

Much of the capital will be spent on adding siding capacity to former Louisville & Nashville lines, where CSX has experienced strong traffic growth.

During the quarterly earnings call, CSX CEO James Foote acknowledged that although profits and revenue rose, crew shortages kept CSX from moving even more freight.

A presentation for investors noted that CSX doubled the number of conductor trainees in the fourth quarter and moved 150 trainees into active service.

Jamie Boychuk, CSX’s executive vice president of operations, said the railroad expects to have 350 new conductors on the job by the end of the third month of this year.

The railroad continues to seek to hire additional operating personnel, he said.

The crew shortage issue has been exacerbated by high levels of workers who have had to quarantine after exposure to or contraction of the COVID-19 virus.

Compliance with trip plans in the fourth quarter dipped to 71 percent for carload traffic but intermodal trip plan compliance improved to 88 percent.

On time train departures fell 13 percent to 72 percent and on-time train arrivals slipped to 65 percent.

For more information visit https://www.csx.com/index.cfm/about-us/media/press-releases/csx-corp-announces-fourth-quarter-2021-financial-results/

Further financial information  can be found at the CSX investor’s pages at https://investors.csx.com/overview/default.aspx

CSX Revenue up 24% in Third Quarter

CSX said Wednesday that during the third quarter of 2021 it had revenue of $3.29 billion, an increase of 24 percent compared with the same period in 2020.

The railroad said it posted a third quarter increase of 3 percent in volume. Coal traffic increased 16 percent while intermodal was up 4 percent.

Merchandise traffic fell 2 percent, which CSX officials attributed largely to a 26 percent plunge in automotive traffic.

Auto production in North America has slowed in recent months due to computer chip shortages.

CSX said net earnings for the quarter were $928 million (or $0.43 per share), a gain of 32 percent compared with the same quarter in 2020 ($736 million or $0.32 per share).

Operating income rose 26 percent to $1.44 billion. The operating ratio was 56.4 percent compared with 56.9 percent in 2020. 

“We are committed to helping our customers overcome current supply chain constraints and will continue to take action in order to keep our network fluid and design new solutions that enable the delivery of critical goods to millions of Americans,” CSX CEO James M. Foote said during an earnings announcement.

Officials said CSX is increasing overflow capacity at 13 container yards including in Cleveland, Cincinnati, Detroit, Indianapolis and Louisville. The program is designed to create additional storage and capacity.

They said this would free truck capacity and reduce port terminal congestion.

Since July, CSX said it has increasing hiring of train and engine operating personnel by 300 percent.

The carrier has created incentive programs to increase existing employee availability and hired additional workers at intermodal terminals to maintain fluidity.

During the earnings announcement, CSX said it expects double-digit revenue growth and plans to spend on capital programs between $1.7 billion to $1.8 billion.

More information is available at https://investors.csx.com/overview/default.aspx

CSX Struggling to Hire New Conductors

The second quarter financial picture for CSX had many positives but also one large negative.

On one hand the railroad’s traffic volume an earnings have recovered nicely from the downturn introduced last year by the COVID-19 pandemic.

Taking into account adjustments for the effects of one-time items, operating income grew 62 percent, while revenue jumped 33 percent, to $3 billion.

Earnings per share were up 82 percent, to 40 cents. The adjusted operating ratio fell to 55.1 percent compared with 63.3 percent a year ago in the second quarter of 2020.

As for traffic volume, it grew in every category, although that comes with an asterisk because the comparisons are with a period of 2020 when rail traffic fell due to the pandemic.

Nonetheless, CSX set a record for intermodal volume and merchandise traffic rose by 21 percent. Even coal traffic showed a 44 percent increase.

Yet hanging over all of this is a challenge that CEO James Foote said won’t be easily resolved.

CSX won’t be able to reach pre-pandemic levels with its merchandise traffic until it hires more train and engine crews to handle strong volume growth.

Foote said the labor market is tight and the railroad has struggled to hire conductors.

“It is an enormous challenge for us to go out and to find people that want to be conductors on the railroad, just like it’s hard to find people who want to be baristas or anything else,” he said during an earnings call. “It’s very, very difficult.”

Last January CSX projected having 500 new conductors on the job by mid summer. Instead it has hired just 200 new conductors and crew attrition has been higher than expected in the first half of the year.

CSX management also acknowledged during the earnings call that its earnings received a boost from from the $349 million gain on the sale of property rights in Virginia for new passenger operations.

Also hindering rail operations were declines in operating metrics, which CSX executives said reflects significantly higher volume than a year ago and crew shortages.

Train velocity in the second quarter fell 16 percent while dwell time was up 18 percent.

On-time train originations slipped by 11 percent to 78 percent, while on-time arrivals fell 20 by percent to 67 percent.

Carload trip-plan compliance declined  to 69 percent from 81 percent a year ago, while intermodal trip-plan compliance was 89 percent, down from 94 percent a year ago.

Although intermodal performance is improving, carload service lags. “On the carload side the reliability isn’t where we need it to be,” said Jamie Boychuk, executive vice president of operations.

Foote said getting merchandise service back to an 85 percent on-time performance by the end of the year will be tough unless the hiring situation changes dramatically.

In the meantime, CSX has reached a new conductor availability agreement with the SMART-TD union that has increased the availability of conductors.

It also is offering incentives to current employees to refer applicants to the railroad.

Boychuk said those in railroad families understand job its lifestyle.

That includes working nights, weekends and holidays in all kinds of weather. Foote said many would-be railroaders don’t want to do those things.

He said those incentives have increased the application pool from a few hundred to more than 1,000.

CSX management is still seeking to figure out how to make train operating jobs more attractive but said, “throwing money at people these days is not the answer.”

Other changes at CSX during the quarter included a 39 percent increase in the use of distributed power.

Autonomous track inspection miles rose by 27 percent and the use of drones to inspect the infrastructure increased by 80 percent.

The personal injury frequency index improved 13 percent, while the train accident rate improved 34 percent to a new record low for the second quarter.

CSX distributed 9,000 tablets to employees to help them share information in real time.

CN Net Income Fell in 1st Quarter

Canadian National executives said this week that they expect freight volume growth in the high single digit percentage range this year.

They made the assessment when announcing first quarter financial results that showed a drop in net income.

At the same time CN said it experienced during the quarter record intermodal and grain traffic.

Management expects an improving economy to boost merchandise traffic.

For the first quarter, CN said  net income fell 3.7 percent to CA$974 million, or $1.37 per diluted share, from CA$1.01 billion, or $1.42 per diluted share, in the same period a year ago.

The total revenue of CA$3.5 billion for the quarter was “in line” with the same quarter in 2020, CN said in a news release.

Operating income rose 9 percent to CA$1.3 billion, but adjusted operating income of CA$1.2 billion was down 2 percent.

The statement described the first quarter results as “solid,” and included a year-over-year increase in traffic volume of 5 percent.

During a conference call to discuss the first quarter results, CN executives said they expect double-digit growth in earnings per share, up from between 7 percent and 9 percent.

CN’s first quarter volume was up 7 percent based on carloads or 5 percent based on revenue ton-miles, the preferred metric of the Canadian railways.

“Here at CN, we’re off to a good strong running start,” CN CEO JJ Ruest said during the earnings call.

Intermodal revenue ton-miles was up 19 percent while grain and fertilizers shipments rose 26 percent.

First quarter volume, based on gross ton miles, was a record.

At the same time, average train speed dipped 1 percent. Terminal dwell times held steady and car miles per day were up 5 percent.

During the period train length rose 5 percent, leading to a fuel efficiency improvement of 4 percent.

The operating ratio of was 62.5 percent with an adjusted OR of 66.3 percent for the quarter. A year ago, CN had an operating ratio or adjusted operating ratio of 65.7 percent.

CSX Optimistic About Traffic Growth

In taking a closer look at the financial performance of CSX in the first quarter of 2021, it becomes apparent that profits and revenue fell because declines in merchandise and coal traffic overwhelmed intermodal growth.

Nonetheless, during a conference call on Tuesday, company executives expressed optimism that traffic will grow overall this year due to a recovering economy shaking off the effects of the COVID-19 pandemic.

“We entered the year projecting volume growth in excess of GDP and still expect to achieve this target,” CEO James Foote said.

“We will continue to attract demand throughout the year, and based on the combination of the strengthening economic outlook and our focus on converting additional volumes off the highway, we now expect to achieve double-digit full year revenue growth.”

Quarterly operating income fell 7 percent to $1.1 billion while revenue declined 1 percent to $2.81 billion. Earnings per share slid 7 percent to 93 cents.

The operating ratio crept up by 2.2 points to 60.9 percent as expenses rose 2 percent.

CSX executives attributed the latter to the effects of employee COVID-19 infections, harsh winter weather, and a fuel surcharge lag.

Overall volume was up 1 percent for the quarter with intermodal traffic growing 10 percent on the strength of an increase in imports at East Coast ports.

Yet merchandise traffic fell 6 percent, largely driven by a 16 percent decline in automotive traffic and an 8 percent decline in chemicals traffic.

A global shortage of computer chips has hamstrung auto production in North American. The chips are placed in new vehicles.

Declines in chemical traffic were prompted by falling crude oil and frac sand shipments.

Coal traffic was down 5 percent, which CSX attributed to fewer exports.

Foote said going forward CSX is focused on improving its train velocity performance, noting that the pandemic and winter weather adversely affected crew availability.

Train velocity was down 11 percent while terminal dwell time was up 30 percent.

On-time performance, based on trip-plan compliance, fell for both intermodal and carload traffic.

Figures released by the company showed 85 percent of intermodal shipments arrived on time, down from 96 percent a year ago.

Merchandise carloads fulfilled their trip plans 67 percent of the time, down from 81 percent a year ago.

CSX operated a record 101 trains per day with distributed power and continued its trend of operating more freight on fewer but longer trains.

During the first quarter train length was up 13 percent and employment down 7 percent due to reduced need for train crews.

CSX Earnings Dip in 1st Quarter

CSX said Tuesday that during the first quarter of this year it earned $706 million, or $0.93 per share.

That was a decline of 8.31 percent from the same period in 2020 when it posted earnings of  $770 million, or $1.00 per share.

The Class 1 carrier said first-quarter revenue of $2.813 billion was down 1.47 percent from the $2.855 billion recorded in the quarter last year.

Intermodal and other revenue growth “was more than offset by declines in merchandise, coal and fuel surcharge revenues,” CSX officials said in a news release.

Expenses rose 2.09 percent on a year-over-year comparison to $1.712 billion and operating income declined 6.54 percent for the quarter to $1.101 billion.

The operating ratio of 60.9 percent was an increase over the 58.7 percent posted in first-quarter 2020.

CSX management expects to achieve “double-digit full-year revenue growth,” this year and that it projects “full-year volume growth in excess of GDP.”

Capital expenses in 2021 have been set at $1.7 billion to $1.8 billion.

 “Looking forward, the strengthening economic momentum is providing added visibility into volume growth, and we are taking the necessary steps to ensure we are ready to handle these volumes and provide our customers with an industry-leading service product,” said CEO James M. Foote in a statement.