CSX reports record operating ratio and operating income in Q2 earnings

Class I railroad carrier CSX today reported second quarter net earnings of $553 million, including a company record high of $0.56 per share, which marked a 4.4 percent annual gain, with earnings per share topping Wall Street estimates that were in the $0.53-$0.54 range.

Quarterly operating income at $1.017 billion rose 2 percent, and quarterly revenue at roughly $3.06 billion was down 6 percent, and operating ratio for the quarter dropped to 66.8 for a new all-time record.

Total second quarter volume for the Jacksonville, Fla.-based railroad carrier was 1.795 million total units, representing a 1 percent annual decrease. CSX CFO Fredrik Eliasson said on an earnings call today that low commodity prices impacting coal and crude volumes and some of its merchandise markets, particularly metals, have challenged by the strong US dollar, while adding that core pricing continues to improve sequentially and for the quarter was up 3.5 percent overall and 3.9 percent excluding coal.

CSX noted that quarterly pricing gains were offset by the impact of lower fuel recovery, the 1 percent volume decline, and a changing business mix, adding that continued low prices and savings from efficiency initiatives dropped second quarter expenses by 9 percent to $2.047 billion.

“While we saw challenges in a number of markets, CSX employees delivered an even safer, more reliable and more differentiated service product this quarter,” said Michael J. Ward, chairman and chief executive officer, in a statement. “We expect the momentum in network performance we saw in the second quarter to accelerate, continuing to create value for our customers and shareholders.”

CFO Eliasson said that CSX expects volume to decline slightly in the third quarter and with a slight decline of the higher 2014 base he noted that the CSX portfolio remains balanced with several growth markets offset by challenging near-term market dynamics in others.

“We are projecting favorable conditions for 49 percent of our volume in the third quarter and stable to unfavorable conditions for the remaining 51 percent,” he said. “Strong intermodal performance will continue as our strategic network investments support highway-to-rail conversions and growth with existing customers. Increased infrastructure development projects continue to drive a favorable outlook for minerals. Agricultural is neutral as strength in domestic grain shipments closing out the prior harvest is offset by a weaker ethanol market as a result of higher inventory levels.”

The favorable 49 percent of volume includes food & consumer, intermodal, and minerals, with the 30 percent unfavorable volumes made up of domestic and export coal, forest products, metals, phosphate & fertilizer, and waste & equipment. And the company was neutral on 21 percent of volume, including agricultural products, automotive, and chemical.