CSX profit falls 10 percent amid continued traffic declines

Results beat Wall Street estimates by three cents
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JACKSONVILLE, Fla. — CSX Transportation’s third-quarter profit fell 10 percent amid the continued slump in virtually all types of rail traffic.

CSX reported net earnings of $455 million, or 48 cents per share, down from $507 million in the same period last year. The results beat Wall Street analyst expectations of 45 cents per share.

“CSX continues to drive strong cost performance and efficiency in this dynamic market environment while meeting or exceeding customer expectations,” CEO Michael Ward said in a statement.

The railroad’s quarterly revenue declined 8 percent. That’s in line with an 8 percent decline in overall traffic volume — the largest decline among the big Class I systems, according to a Trains News Wire review of weekly carload reports.

CSX’s volume decline was led by double-digit drops in coal (21 percent), metals and equipment (13 percent), and agricultural and food products (10 percent). The only segments to record gains were automotive, up 6 percent, and fertilizers, up 1 percent.

If there was any good news about coal, it’s that the volume decline is moderating. For the year, CSX’s coal traffic is down 29 percent amid high utility stockpiles, low natural gas prices, and a weak export market.

Overall intermodal volume declined 7 percent. Domestic was down 3 percent, driven by the loss of some short-haul traffic to Norfolk Southern. But CSX said the bulk of its domestic intermodal business remained strong, reflecting the success of the railroad’s highway-to-rail conversion program. International intermodal volume fell 12 percent due to the loss of a contract to NS as well as weaker global trade.

CSX expects fourth-quarter traffic volume to be about even with last year, Chief Financial Officer Frank Lonegro says.

Expenses improved 7 percent in the quarter. And the railroad now expects to see efficiency gains and cost savings of $400 million for the year, up from the $350 million target management provided during the second quarter.

CSX won’t be able to duplicate this “extraordinary” savings pace next year, Chief Operating Officer Cindy Sanborn said during the railroad’s earnings call on Thursday morning. “We’ll see a more normal year next year, but we’re not leaving anything on the table,” she said.

CSX expects efficiency gains of $150 million in 2017, suggesting that the heavy lifting has already been done to streamline the railroad’s coal network.

CSX’s operating ratio rose slightly during the quarter, to 69 percent versus 68.3 percent a year ago.

The railroad’s key operating metrics — including on-time performance, terminal dwell, and system velocity – all slipped slightly compared to the second quarter of this year.

NEWSWIRETrains News Wire

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