CSX dealt with weather challenges and the closure of the Baltimore port as the railroad saw its first-quarter profit slip 10%, but it still managed to keep most of its customers happy with reliable service.
The Jacksonville, Florida-based railroad said Wednesday that it earned $893 million, or 46 cents per share, in the first three months of the year as it handled 3% more freight. That’s down from $987 million, or 48 cents per share, a year ago.
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The results were slightly better than Wall Street predicted. The analysts surveyed by FactSet Research expected CSX to report earnings per share of 45 cents.
CEO Joe Hinrichs said he was reminded again of one of the key lessons he's learned in his first 18 months on the railroad: “There never really is an easy quarter.”
Hinrichs said he was pleased the railroad was able to deliver consistent customer service that helped it attract more business. He said many of the markets CSX serves are seeing “favorable trends” and more customers are willing to give the railroad more of their business because CSX has delivered better service consistently.
Hinrichs said CSX is getting some of the highest marks ever in its surveys of customers, so he's optimistic about the rest of the year.
The railroad reiterated that it expects revenue and shipping volume to grow at low- to mid-single-digit rates this year.
Even in a quarter when the average speed of CSX's trains got a bit slower overall, Edward Jones analyst Jeff Windau said the railroad “continued to execute well and had a pretty solid quarter.”
And railroad officials said some things that slow down the trains — like forcing engineers to remain at the most efficient speed and increasing the length of trains — are also things that make CSX more efficient.
CSX said its revenue slipped 1% to $3.68 billion. Wall Street expected CSX to report revenue of $3.66 billion in the quarter.
After the bridge collapse in Baltimore last month forced that port to close, CSX scrambled to reroute traffic to other East Coast destinations. But given that Baltimore is the second largest coal export port, coal shipments will be hurt. The port disaster will be felt in the railroad's second-quarter revenue to the tune of a $25 million to $30 million a month hit until workers are able to clear the wreckage of the bridge so the port can reopen.
CSX is one of the nation’s largest railroads, operating trains on more than 20,000 miles (32,000 kilometers) of track in 23 Eastern states and two Canadian provinces.
Shares of CSX Corp. were up more than 2% in after-hours trading following the release of the earnings report.
Hinrichs still expects Congress to pass a package of rail-safety reforms later this year — likely after the NTSB issues its final report on Norfolk Southern's disastrous 2023 Ohio derailment at the end of June. He's focused on making sure the bill is “targeted and focused on actually improving rail safety.”
Also Wednesday, CSX announced that Hinrichs’ predecessor as CEO, Jim Foote, had died. Foote led the railroad through its transition to the precision scheduled railroading operating model after industry titan Hunter Harrison died in 2017 — less than a year after taking over CSX and beginning the reforms to streamline the railroad.
The model relies on using fewer, longer trains with a mix of freight on them, so railroads can operate with fewer locomotives and employees. Since CSX put it in place, the model has been adopted by other U.S. railroads. Collectively, the major U.S. railroads have used the model to cut nearly one-third of their workforce, prompting unions to complain they believe railroads have become riskier because employees are spread so thin and preventative maintenance and inspections are being neglected.