Posts Tagged ‘CSX financial results’

CSX Struggling to Hire New Conductors

July 22, 2021

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

April 28, 2021

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

April 21, 2021

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

April 21, 2021

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.

CSX Net Earnings Down in 4th Quarter

January 23, 2021

CSX reported this week that it had fourth quarter 2020 net earnings of $760 million or 99 cents per share, compared with $771 million or 99 cents per share in the same quarter in 2019.

For the last quarter of 2020, net income included a $48 million charge or 5 cents per share after taxes that was related to debt retirement.

Revenue during the quarter decreased 2 percent compared with the previous year to $2.83 billion.

In a news release CSX said intermodal growth was more than offset by lower fuel surcharge revenue and declines in coal traffic.

Expenses fell 7 percent in a year-over-year comparison to $1.61 billion, driven by fuel expenses and efficiency gains.

Operating income rose 5 percent to $1.22 billion from $1.15 billion compared with the fourth quarter of 2019.

CSX reported a fourth quarter operating ratio of 57 percent, which official said was a fourth quarter record.

In the fourth quarter of 2019 the operating ratio, which measures expenses as a percentage of revenue, was 60 percent.

CSX management expects traffic volume in 2021 to outpace gross domestic product growth, with merchandise volume growth exceeding industrial production.

Management expects intermodal volume to grown faster than merchandise and coal traffic to show some improvement over its 2020 levels.

The carrier is expected capital expenditures of $1.7 billion to $1.8 billion this year.

CSX Net Earnings Fell 14% in 3rd Quarter

October 23, 2020

CSX this week said that during the third quarter its net earnings declined 14 percent to $736 million, or 96 cents per share, compared with $856 million, or $1.08 per share, in the third quarter of 2019.

Revenue fell 11 percent to $2.65 billion. CSX officials said intermodal traffic growth was offset by declines in coal and merchandise volumes, as well as lower fuel surcharge revenue. Operating income fell 11 percent to $1.14 billion.

The operating ratio, which measures the percentage of revenue devoted to expenses, was 56.9 percent. A year ago the OR for the same quarter was 56.8 percent.

Expenses fell 11 percent to $1.51 billion, which CSX executives attributed to efficiency gains and volume-related reductions.

In a conference call with stock analysts, CSX CEO James Foote said that during the second quarter of this year the carrier experienced its largest and most rapid sequential volume declines in history.

But during the third quarter Foote said CSX was able to “efficiently absorb the record rebound in volumes, while maintaining high level of service,” particularly in intermodal markets.

“The last six months have truly been surreal,” he said. “Think about that: Volume declines and increases twice as steep as the largest swings we experienced in the Great Recession [of 2008] in the span of just a few months.”

Foote said fourth quarter traffic is up on a year-over-year basis. CSX still expects capital expenditures to be at the low end of a $1.6 billion to $1.7 billion range.

In tandem with announcing its quarterly earnings, CSX also announced that its board of directors had approved a new share repurchase program.

The company has been sitting on $2.9 billion in cash and the board authorized an additional $5 billion share buyback program, making the total share repurchase program worth $6 billion.

CSX executives acknowledged that on-time performance deteriorated in the third quarter when compared to the second quarter of this year and the third quarter of 2019.

But Foote said just a few years ago large volume swings would have gridlocked America’s railroads. 

“If you’d had this kind of traffic surge across the rail network in North America four or five years ago, we would be now talking about gridlock across all the major cities in the country. And we wouldn’t be doing anything,” Foote said.

“And now with the common mindset of how you run a railroad, we’re able to respond, we’re able to pivot, we’re nimble, we can add capacity, we can shrink capacity, we can right-size our business and we can do that much more effectively and much more logically and thoughtfully.” 

Overall, CSX traffic volume was down 3 percent for the quarter, with intermodal growth of 7 percent undercut by a 5 percent decline in merchandise traffic and a 27 percent drop in coal.

Volume has increased 3 percent when measured from March 1, before the onset of the pandemic, to the end of the third quarter.

CSX has longer and fewer trains, using 6 percent fewer crews and an active locomotive fleet that’s 8 percent smaller. Train starts have fallen by 11 percent.

During the third quarter, CSX set a record for the number of trains using distributed motive power, averaging 100 trains per day.

CSX Lost 20% of its Traffic in Second Quarter

July 23, 2020

CSX posted a decline of 20 percent in traffic volume during the second quarter of 2020 as the COVID-19 pandemic took hold accompanied by an economic recession.

It was the largest quarterly decline in company history and twice as severe as what it experienced during the Great Recession of 2008.

Operating income fell 37 percent to $828 million while revenue tumbled 26 percent to $2.25 billion. Earnings per share fell 40 percent to 65 cents.

Despite cutting costs by 19 percent, CSX saw its operating ratio rise 5.9 points, to 63.3 percent .

Operating ratio is the percentage of revenue devoted to expenses.

All traffic categories fell with coal volume plunging 44 percent, merchandise traffic off 22 percent and intermodal sinking 11 percent.

There was a bit of good news, though. Traffic has risen about 25 percent since the low point of the pandemic in May.

“Wow. Where do I start in talking about this quarter?” said CSX CEO James Foote during an earnings call.

“This was the most disruptive quarter I have experienced in my career, with both the fastest decline in volumes followed by one of the most rapid increases in volumes in the company’s history,” he said.

Foote expressed pleasure, through, at seeing traffic rebound from its May nadir, which he attributed to a strengthening economy marked by the reopening of North American auto assembly plants and their accompanying finished vehicle traffic.

Although Foote said the trends are encouraging, he said it’s still too early to predict the direction of the economic recovery due to lingering uncertainty over the durability of the economic rebound and the potential impact of the COVID-19 pandemic’s spread.

CSX said carload trip plan performance was 80.5 percent, a decline from the first quarter of 6.1 points above the second quarter a year ago.

Intermodal trip plan performance was 94 percent, down 2.2 points from the first quarter but up from 89.9 percent a year ago.

Most of the falloff in trip plan compliance came in in June as volume began rebuilding and there were delays in recalling furloughed employees.

CSX dropped road train starts in line with the steep volume declines that began in March. But in April the railroad began moving its tonnage on fewer but longer trains, which cut train starts more deeply than the volume decline.

Train starts came within 7 percent of pre-pandemic levels but road train starts remained 17 percent below March levels.

Jamie Boychuk, executive vice president of operations, indicated that fewer train starts are likely to be permanent.

“We are mixing the auto network with our manifest and in some areas with our intermodal network,” he said. “And reducing those train starts … is going to be a good lasting effect as we move forward.”

The CSX workforce, although regaining numbers was 12 percent lower in the second quarter than it was in the same period in 2019.

The railroad has recalled hundreds of train and engine employees from furlough.

Mark Wallace, executive vice president of sales and marketing, said domestic intermodal volume began snapping back in June as retailers restocked store shelves and e-commerce sales were strong.

With some canceled sailing from Asia and elsewhere being reinstated, the outlook for international intermodal has also improved.

Wallace said the future of carload traffic hinges on the recovery of the industrial economy, which is reviving more slowly. He said coal volumes will continue to be challenged.

CSX Income Fell in 1st Quarter 2020

April 23, 2020

The economic downturn triggered in part by the COVID-19 pandemic led to CSX posting lower earnings for the first quarter of 2020.

The railroad’s operating income fell 3 percent to $1.17 billion and revenue dipped 5 percent to $2.85 billion.

Earnings per share was down 2 percent to $1 but the operating ratio set a first quarter record by improving 0.8 points to 58.7 percent.

Operating ratio is the percentage of revenue that is devoted to expenses.

Traffic for the quarter fell by 1 percent, much of that due to a 15 percent slump in coal shipments.

Merchandise traffic rose 2 percent and intermodal volume held steady.

Although domestic intermodal traffic rose, international intermodal shipments fell due to factory closures in China triggered by the pandemic.

Automotive and fertilizers traffic also posted losses.

CSX declined to provide a projection for its finances for the remainder of the year due to the uncertainty of the course of the pandemic.

However, CSX executives emphasized that the company’s finances remain strong. Nonetheless, CSX will reduce capital spending this year.

It is now expected to be between $1.6 billion to $1.7 billion. CSX plans to install the same amount of new rail this year but increase the amount of ballast that it will lay.

“These are unprecedented times. I’ve been through a lot in my career, from Black Monday to the Great Recession and a lot of other unsettling events. But nothing like this,” said CSX CEO James Foote during a conference call.

Foote said strong companies adapt to changing conditions by altering course and becoming even stronger.

“I am incredibly proud of the men and women of CSX who are working on the front lines,” Foote said. “They have once again shown what outstanding railroaders they are.”

Schedule tightening in the first quarter meant that carload trip-plan compliance fell 1.9 points to 80.7 percent while intermodal rose 0.7 points to 96.2 percent. The comparisons are with the fourth quarter of 2019.

Foote cited improved trip compliance during the first two weeks of April in saying service is currently the best it has ever been.

April traffic was down 20 percent through April 18. The railroad has stored 400 locomotives since the end of March and now has fewer than 2,000 active locomotives.

Three years ago CSX had almost 4,000 active locomotives on its roster.

The carrier has eliminated 50 daily merchandise trains and cut road train starts by 23 percent.

CSX officials said the company will continue to adjust its network as demand dictates and is ready to respond to increased volumes whenever the economy begins to recover.

Such operating metrics as average train speed, terminal dwell time, and car-miles per day set first-quarter records.

Safety metrics improved, compared with the fourth quarter as well as the first quarter of 2019, and officials said they were among the best in CSX history.

CSX Net Earnings, Revenue Down in 4th Quarter 2019

January 18, 2020

Cost cutting can only take a company so far. That is one takeaway from the CSX announcement this week that its net earnings and revenue declined in the fourth quarter of 2019 due to a 7 percent drop in freight traffic volumes.

Net earnings fell 9 percent to $771 million, or 99 cents per share, from $843 million, or $1.01 per share in the fourth quarter of 2018.

Revenue fell 8 percent to $2.9 billion from $3.1 billion. CSX said in a news release that one bright spot was that fourth-quarter expenses were down 9 percent year over year to $1.73 billion due to efficiency gains and volume-related savings.

Operating income declined 8 percent to $1.15 billion compared to the fourth quarter of 2018.

The Class 1 carrier said the lower volumes were in part driven by loss of coal traffic.

CSX did post a 60 percent operating ratio, a fourth quarter record. The operating ratio is the percentage of revenue that is devoted to expenses.

In the fourth quarter of 2018 the operating ratio had been 60.3 percent.

For 2019 as a whole, CSX generated net earnings of $3.33 billion, or $4.17 per share, versus 3.31 billion, or $3.84 per share, in 2018, an increase of 1 percent and 9 percent, respectively.

It said its full-year 2019 operating ratio of 58.4 percent set a U.S. Class I record, improving from the 2018 record result of 60.3 percent.

For the year, CSX traffic volume was down 4 percent with merchandise traffic flat, coal traffic down 5 percent, and intermodal falling by 8 percent.

CSX said much of the 17 percent decline in coal traffic in the fourth quarter of 2019 was due to fewer shipments of coal used to generate electricity. That market has been hindered by competition from natural gas.

Export coal fell due to reduced international shipments of both thermal and metallurgical coal as global benchmark prices fell.

Also falling was domestic and international intermodal shipments. CSX attributed that 7 percent decline to the closing of some low-density service lanes.

As far as the 3 percent falloff in merchandise traffic, CSX said chemicals were down due to reduced natural gas liquids, fly ash and sand shipments.

Agriculture and food products increased due to gains in ethanol, sweeteners and oil.

Automotive traffic fell due to a reduction in North American production while minerals increased due to higher shipments for highway projects.

Forest products dipped due to fewer pulp board shipments while fertilizer volume gained on short-haul phosphate shipments that offset by declines in long-haul fertilizer shipments.

Metals and equipment were down due to reduced steel, construction and scrap shipments.

In a conference call, CSX CEO James Foote sought to put a positive spin on the report by saying, “our service is the best it’s ever been and getting better.”

Mark Wallace, CSX’s executive vice president of sale and marketing, insisted that the railroad is gaining market share every day from trucks as a result.

Nonetheless, he said CSX does not foresee a contraction in trucking industry capacity that would spark an increase in truck rates that could prompt diversion of highway loads to intermodal.

Wallace also said CSX will hold the line on intermodal rates and refuse to chase volume to cutting price.

He said most of CSX’s domestic intermodal business is under long-term contracts.

In speaking to investors, Foote said traffic was hindered by a strike against General Motors last summer and the closing an oil refinery in Philadelphia following an explosion and fire.

“These are truly great results considering the industrial economy’s second half performance,” Foote said.

CSX management expects freight volume to continue to lag over the next few months due to a lackluster industrial economy.

There is a reduced global demand for thermal and metallurgical coal and low natural gas prices will depress domestic demand for coal.

The railroad’s management team said it expects to post growth numbers in 2020 in intermodal and merchandise traffic, but those will enable the carrier to overcome an expected continued decline in coal traffic.

For the year ahead, CSX is projecting revenue to fall by 2 percent compared to 2019. It has an objective of an operating ratio of 59 percent.

Capital expenses are expected to range between $1.6 billion and $1.7 billion, which would be similar to what has spent in recent years.

Foote said the improvements in service quality have enabled CSX to offer service to shippers that is “truck-like in consistency.”

If CSX is to compete against truckers is must offer a reliable service. He also played up his contention that CSX is less expensive than service and more friendly to the environment due to better fuel efficiency.

Jamie Boychuk, executive vice president of operations, said improvements in velocity have enabled the carrier to tighten some of its train schedules, which might negatively affect on-time performance in the first quarter.

CSX said its train velocity has improved by 12 percent with terminal dwell down 9 percent and car miles per day up 6 percent.

During the fourth quarter, trip plan compliance was 82.6 percent for carload traffic and 95.5 percent for intermodal shipments.

The same figures for the fourth quarter of 2018 were 67.3 percent and 73.4 percent respectively.

CSX said 92 percent of its trains departed on time and 85 percent arrived on time.

Those are improvements of 18 percent and 15 percent respectively from the fourth quarter of 2018.

During the 2019 the personal injury rate for CSX employees fell by 15 percent while the train accident rate improved by 41 percent.

Despite falling traffic volume and revenue, Railway Age described CSX’s fourth quarter results as solid because the earnings per share performance exceeded that projected by Wall Street stock analysts.

“However, weak 2020 guidance and top-line outlook were the larger story, with 2020 revenue to be adversely affected by lower coal volumes and yields,” wrote Cowen and Company Managing Director and Railway Age Wall Street Contributing Editor Jason Seidl.

Seidl said his firm has lowered its 2020 and 2021 earnings per share estimates for CSX.

CSX reported earnings per share of 99 cents for the fourth quarter, which beat the 96 cents per share expected on Wall Street.

Analysts had projected CSX would have operating income of $1.18 billion while the actual figure was $1.15 billion. Revenue at  $2.89 billion was slightly below the projected $2.91 billion.

The diminishing coal market is important, Seidl noted, because it is a high-margin business. CSX management expects to lose $300 million coal revenue this year.

Cowen is projecting that 2020 and 2021 earnings per share estimates for CSX will be $4.10 and $4.50 to account for CSX management’s new outlook. The projections had been $4.40 and $4.75, respectively.

Wall Street Expects RR 4th Quarter Earnings to be Down

January 8, 2020

The financial report cards for the fourth quarter of 2019 will be released soon, but Wall Street analysts are already predicting that earnings will be down at four of the six publicly traded Class I railroads.

Wall Street doesn’t expect such steps as reducing expenses, raising freight rates and buying back stock will be enough to overcome declines in traffic volumes.

Analysts are estimating that earnings per share will be down by 1 percent.

CSX will be the first railroad to report its fourth quarter results when it announces them on Jan. 16.

Analysts expect CSX earnings to be down by 1.9 percent because its traffic has fallen by 6.5 percent during the quarter according to figures it has provided to the Association of American Railroads.

Norfolk Southern will give its fourth quarter report on Jan. 29. Its earnings are expected to decline by 8.5 percent in the face of a 9.1 percent fourth quarter falloff in traffic.

Canadian National will report earnings on Jan. 28 and they are expected to fall by 16 percent on the heels of a 7.8 percent drop in traffic in the fourth quarter.

The January earnings calls are expected to be a platform for management at Class 1 railroads to offer their financial outlooks for 2020 as well as discuss their capital spending plans.