CSX said on Thursday that its first quarter 2017 net income rose 2 percent to $362 million, or 39 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.