Class I railroads set to report quarterly earnings beginning next week

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CSX Transportation and Canadian Pacific will kick off Class I railroad third-quarter earnings reports when they release their results on Oct. 17.

The big systems all reported year-over-year traffic gains as the quarter progressed. But the growth was muted — and in some cases reversed — due to the effect of hurricanes on U.S. railroads.

In September, Hurricane Harvey flooded portions of Texas’ and Louisiana’s Gulf Coast, shutting down BNSF Railway, Kansas City Southern, and Union Pacific lines and forcing customers to curtail or halt production. And in the East, Hurricane Irma was felt on CSX and Norfolk Southern when it struck Florida, Georgia, and South Carolina in September.

Executives from UP and KCS said they expected storm costs and lost revenue to dent earnings per share by about 5 cents for the quarter.

The most anticipated quarterly conference call with Wall Street analysts is CSX, which appears to be recovering from a summer of service problems caused by the rapid pace of its shift to CEO E. Hunter Harrison’s precision scheduled railroading operating plan.

In September, CSX executives revised full-year earnings guidance downward due to the service disruptions it experienced in July and August. Earnings growth is now expected to be in the 20- to 25-percent range, down from the 25-percent range. Operating ratio, which was projected to be in the mid-60-percent range, is now expected to be in the high mid-60-percent range. CSX remains on track to achieve record productivity savings this year amid cost-cutting and more efficient operations.

CSX traffic declined 0.5 percent in the quarter compared to a year ago, weekly carload reports show. Traffic was running slightly ahead of last year until Irma struck Florida, where CSX has extensive operations. Shippers also diverted some traffic off CSX and onto the highway and rival NS due to service disruptions.

CP’s traffic was up 3.5 percent for the quarter on a revenue ton-mile basis, or 2.8 percent on a carload basis, according to its weekly report to the Association of American Railroads. CEO Keith Creel, who took over in January, has a mandate to boost revenue and traffic volume.

KCS, the smallest of the Class I’s, is due to report its earnings on Oct. 20. The railroad has experienced robust growth in Mexico and in its cross-border traffic.

Next up is Canadian National, which reports its earnings on Oct. 24. CN led the Class I railroads in traffic growth during the quarter: The railway hauled 11 percent more carloads, while revenue ton-miles were up 10 percent, with intermodal growth leading the way.

NS, which reported traffic gains of nearly 4 percent, is scheduled to report earnings on Oct. 25. Analysts will want to know how much traffic NS gained as a result of CSX’s service problems and whether that business is likely to remain on NS rails or will eventually flow back to CSX.

UP traffic was flat during the quarter. The biggest railroad is scheduled to report earnings on Oct. 26.

BNSF’s traffic was up 3 percent for the quarter, led by strong intermodal growth. BNSF’s parent, Berkshire Hathaway, is expected to release its quarterly earnings report on Nov. 3. The railway typically makes its own quarterly regulatory filing on the same day.

NEWSWIRETrains News Wire

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