For the fourth quarter, CSX’s operating income fell 8%, to $1.1 billion, on revenue of $2.9 billion, an 8% decline. The railroad reported earnings per share of 99 cents, a 2% decline that matched analyst estimates. The quarterly operating ratio was a fourth quarter record 60%, a slight improvement over last year’s fourth quarter.
For the full year, CSX reported operating income increased 2%, to $4.9 billion, even as revenue declined 3%, to $11.9 billion. Earnings per share grew 9% to $4.17. The railroad’s operating ratio was a U.S. record 58.4%, a 1.9-point improvement over 2018.
“Our service is the best it’s ever been and getting better,” CEO Jim Foote says.
Overall volume fell 7% in the fourth quarter, thanks largely to a 17% decline in coal traffic. Intermodal volume was down 7%, due to the impact of rationalization of low-volume lanes, while merchandise volume fell 3%. Carload traffic would have been flat, Foote says, if not for the General Motors strike and the summertime closure of a Philadelphia oil refinery after an explosion and fire.
“We are winning share every day from trucks,” says Mark Wallace, the railroad’s executive vice president of sales and marketing.
For the year, the railroad’s volume was down 4%. Merchandise was flat, coal declined 5%, and intermodal was down 8%.
“These are truly great results considering the industrial economy’s second half performance,” Foote told investors and analysts on the railroad’s earnings call. Manufacturing output fell for five straight months and in December was at its lowest level since the Great Recession in 2009.
Railroad executives expect the freight doldrums to continue for the next few months as the industrial economy, which supports the carload network, remains sluggish. Coal volumes will remain challenged, as well, amid continued low natural gas prices and reduced global demand for thermal and metallurgical coal.
Truck capacity remains loose, and CSX does not foresee a contraction that would raise trucking rates and help divert highway loads to intermodal, Wallace says.
CSX will hold the line on intermodal pricing.
“We’re not going to be cutting prices to grow the business,” Wallace says, noting that the vast majority of domestic intermodal moves under long-term contracts.
Overall, CSX expects to see growth this year in intermodal and merchandise traffic, but not enough to overcome a continued decline in coal traffic.
CSX expects its 2020 revenue to be flat to down 2% compared to 2019. The railroad’s full year operating ratio target is 59%. CSX expects to spend between $1.6 billion and $1.7 billion this year on capital expenses, which is in line with last year.
CSX’s key operating metrics improved, with train velocity up 12%, terminal dwell down 9%, and car miles per day up 6%. Trip plan compliance, which measures on-time performance, also increased. For the fourth quarter, carload performance rose to 82.6% from 67.3% a year ago, while intermodal trip plan compliance hit 95.5%, up from 73.4% a year ago.
Some 92% of the railroad’s trains departed on time, with 85% arriving on time, improvements of 18% and 15% respectively versus a year ago.
“Our service is the best it has ever been and getting better,” Foote says. “The key here is reliability. By operating a simpler, more efficient network we are able to offer rail users a service that is trucklike in consistency.”
But CSX is less expensive than trucks and is more environmentally friendly due to better fuel efficiency, Foote says.
As transit times improve, CSX is tightening some of its train schedules, says Jamie Boychuk, executive vice president of operations. That may have a slightly negative impact on the railroad’s on-time performance in the first quarter, he adds.
CSX continued its string of safety improvements for the year. The full-year personal injury rate declined by 15%, while the train accident rate improved by 41%, with fourth-quarter results setting a company record. Personal injuries for the quarter increased 12%, however.
