CSX reports record third quarter earnings

While the topic of the reported merger attempt of Jacksonville, Fla.-based CSX by Canadian Pacific Railway was not up for discussion, CSX had plenty to say about its strong third quarter earnings performance today.

CSX reported it had record third quarter earnings of $509 million or $0.51 per share, which was up 10.6 percent annually over $455 million and $0.45 per share and ahead of Wall Street estimates of $0.48 per share.

Quarterly revenue was up 8 percent at $3.2 billion, with operating income up 16 percent to $976 million. The company’s operating ratio came in at 69.7 CSX cited a high demand level and stable operations as the drivers for these strong metrics.

“These results represent CSX’ ability to capitalize on the continued economic momentum that is driving broad based growth across nearly all markets,” said Michael Ward, CSX president, chairman, and CEO on the company’s earnings call today. “Even with a high level of demand, CSX operations have remained stable, and we continue to work with our customers to meet their current and future needs by adding crews, investing in locomotives and infrastructure, and increasing capacity.”

Total third quarter volume was roughly 1.758 million total units, representing a 7 percent annual gain, with strong growth in merchandise, intermodal, and coal.

The revenue gains for the quarter, according to Clarence Gooden, CSX executive vice president and chief marketing officer, reflected over all volume growth and increased pricing across most markets, with merchandise and intermodal accounting for more than 75 percent of the company’s revenue.

On the pricing side, the average revenue per unit saw a slight gain, with core pricing gains for the merchandise and intermodal segments offsetting the impact of mix and lower coal revenue per unit.

Pricing for same-store sales, which CSX defines as shipments with the same customer, commodity and car type, and the same origin and destination, represented 75 percent of CSX’ traffic base for the quarter. On this basis, Gooden said all-in pricing for the quarter was up 0.2 percent annually, which, he said, reflects continued rate pressure in the export coal market and the impact of fixed variable contracts in the plastic utility market, where volumes are now increasing.

Average revenue-per-unit was $1,832 for the 0.2 percent increase, with merchandise, coal, and intermodal coming in at $2,576, $2,280, and $658, respectively. Combined same-store prices for merchandise and intermodal was up 2.5 percent annually, which is down from the 3.0 percent gain a year ago and sequentially flat, while still representing a small spread over rail inflation.

“We remain confident that the value we create for our customers combined with increasing demand for our service product provides a solid foundation for growth and sustained pricing over rail inflation,” said Gooden. “Looking forward, we expect a positive demand in the fourth quarter with stable to favorable conditions for 96 percent of our markets and unfavorable conditions for the remaining four percent. Looking at some of the key markets, chemicals is favorable as we continue to capture opportunities created by the expanding domestic oil and gas industry. For metals, we saw production increase in the third quarter, and we expect this trend to continue with demand in the automotive and energy markets being the key drivers. Strong intermodal growth will continue as our strategic network investments support highway to rail conversions. We expect strong coal volume growth…as utilities continue to build inventories.”