Railroad shipping: CSX kicks off 2Q earnings season with a solid performance

The rebound in market conditions for the freight railroad industry—due to an improving economy—is evident based on second quarter earnings results for Class I railroad carrier CSX.

By ·

The rebound in market conditions for the freight railroad industry—due to an improving economy—is evident based on second quarter earnings results for Class I railroad carrier CSX.

Following a first quarter in which the Jacksonville, Florida-based company reported solid earnings at $306 million and $0.78 per share, which was a 22 percent annual gain, the second quarter more than doubled that output. Second quarter earnings were $414 million—or $1.07 per share—a 51 percent year-over-year improvement, which beat the Wall Street estimate of $0.98 per share. 

CSX added that quarterly revenue was up 22 percent year-over-year to $2.663 billion, with revenue growth and continued operating leverage hitting record high levels for the company in the form of an operating income of $768 million—a 33 percent annual increase—and an operating ratio of 71.2 percent.

Like the first quarter, volumes in the second quarter were very strong for CSX at 1,598 million units for a 13 percent annual gain. Automotive loadings continued their strong momentum with a 63 percent increase, and metals were up 44 percent. Total merchandise was up 14 percent with 659,000 units, with coal (401,000 units) up 7 percent—marking a significant improvement from the first quarter and the first quarter of year-over-year growth since the fourth quarter of 2008—and intermodal (538,000 units) up 18 percent.

“These [quarterly] results were driven largely by volume improvement, a recovering marketplace, the ability to value-price our services, and overall safety, service, and productivity on our railroad,” said Michael J. Ward, CSX President and CEO on an earnings call this morning. “We took on higher levels of traffic profitably as our employees continued to find new ways to operate more efficiently. We are on the right path in creating value for our customers to help them compete in today’s economy…[and] we remain confident in our ability to grow, drive operating leverage, and produce strong operating results going forward.”

And Clarence Gooden, CSX executive vice president, sales and marketing said on the call that the manufacturing strength as evidenced by the Institute of Supply Management’s manufacturing index showing growth for the 11th straight month, coupled with inventory replenishment, continue to play a significant role in the economic recovery and CSX’ quarterly performance. This was reflected, he said, with inventory levels remaining below target levels in several markets.

Gooden also noted that along with volume growth the strong revenue performance in the second quarter could also be attributed to core pricing gains and the impact of higher fuel costs reflected in the CSX fuel surcharge program. CSX’ fuel expense increased $119 in the second quarter, due to higher prices and volume.

Looking ahead, Gooden said market conditions look favorable for CSX throughout the remainder of 2010.

“The macroeconomic recovery which began in late 2009 is expected to continue throughout this year,” said Gooden. “U.S. industrial production is expected to grow in excess of 3 percent in the second half of 2010. The outlook for third quarter volume and revenue is favorable, as linehaul revenue growth is expected across nearly all markets, including coal. Our network is well-positioned to handle volume growth, as we have handled these high volumes in the past.”

Avondale Partners analyst Donald Broughton wrote in a research note that CSX continues to benefit from a significant improvement in volumes as well as diligent cost containment, reinforcing his firm’s belief that CSX is a much better-run company than it was in the last cycle.


About the Author

Jeff Berman, Group News Editor
Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. Contact Jeff Berman

Subscribe to Modern Materials Handling Magazine!

Subscribe today. It's FREE!
Find out what the world’s most innovative companies are doing to improve productivity in their plants and distribution centers.
Start your FREE subscription today!

Article Topics

· All Topics
Latest Whitepaper
Your Guide to Voice for the Warehouse
Is voice a good fit for my operation? How would voice work in my warehouse? With the help of the Vitech Guide to Voice, you can find all the answers to your voice questions in one place.
Download Today!
From the October 2017 Modern Materials Handling Issue
An early adopter, Rochester Drug Cooperative is using robotic piece-picking technology to complement picking of slow-moving items. System report for Rochester Drug Cooperative, Robotic picking and inventory management, Innovative distribution center robotics solutions , IAM Robotics case study
This Month in Modern Materials Handling: Methodical steps into the future
The Warehousing Big Picture: Business as Unusual
View More From this Issue
Subscribe to Our Email Newsletter
Sign up today to receive our FREE, weekly email newsletter!
Latest Webcast
The State of the DC Voice Market
A lot has changed in the last 10 years, especially in voice technology. This webinar will cover the state of the voice market, review two leading voice solutions and help you gain a better understanding of the options and capabilities available today.
Register Today!
EDITORS' PICKS
Rochester Drug Cooperative: Robots ready for work
It’s still early stages, but Rochester Drug Cooperative is proving that mobile robotic piece...
Manufacturing Day: 2,716 events from Hawaii to Alaska to Puerto Rico
Events to be scheduled throughout the month, so the remaining 249,185 manufacturing firms in the...

System Report: Pouch sorter powers Stage’s fulfillment needs
How a hometown department store chain transformed its e-fulfillment processes with pouch sortation...
Cubing and Weighing Equipment: Measure Up
The use of cubing and weighing equipment is growing beyond dimensional weight applications.