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July 21, 2022 3:24 PM, EDT

CSX Reports Q2 Earnings That Beat Expectations

CSX locomotiveCSX's revenue increased 28% to $3.81 billion compared with $2.99 billion in the 2021 period. (Tom Biery/Trans Pix)

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Class I freight railroad CSX Corp. reported strong second-quarter results July 20, bolstered by automotive shipments, but said challenges to hiring and retention are ongoing.

The Jacksonville, Fla-based carrier beat Wall Street analysts’ expectations. Net income increased to $1.178 billion, or 54 cents per share, compared with $1.173 billion, 52 cents, a year ago.

Revenue jumped 28% to $3.81 billion compared with $2.99 billion the previous year.

James Foote

Foote

“Our second-quarter results were solid as we continue to benefit from strong customer demand and firm pricing,” President and CEO James Foote said on a conference call with reporters and analysts after the earnings announcement. “But our ability to hire and retain new workers, which is vital to improving our service and growing our business, remains challenged. We are not alone facing this problem. The labor market is tight, prospective recruits have many job options and the pandemic has had a profound effect on employees’ work and lifestyle preferences.”

The railroad saw higher revenue in nearly all of its markets, driven in part by pricing gains, its fuel surcharge, and business from its Quality Carriers unit — a bulk liquid chemicals company with 2,500 trucks and 6,400 trailers.

CSX said its quarterly operating ratio worsened to 55.4 from 43.4 a year ago in part due to the effects of lower real estate gains and higher fuel prices. (Operating ratio measures expenses as a percentage of revenue and determines efficiency.)

Jeff Windau

Windau

Jeff Windau, a transportation analyst at Edward Jones, told Transport Topics, “The railroad’s operating ratio of just above 55% is a very good result in a period of turbulence. There continues to be volatility in the network and I think management is very focused on improving efficiencies and that’s what we’re looking forward to in the next several quarters.”

Analysts polled by Investing.com expected CSX would earn 47 cents per share and revenue of $3.65 billion in the quarter.

Across its seven business lines CSX saw revenue growth in six.

“As we have seen this entire year, there is more demand for rail service than what we are able to satisfy,” Foote said. “We believe that increasing our train and engine employee headcount is the key factor for improved service and network performance and our hiring efforts will continue. Our aim is still to reach an active transportation headcount of 7,000 as soon as possible.”

CSX 2022 QFR Final Draft by Transport Topics on Scribd

Chemical shipment revenue increased by 10% to $666 million compared with $606 million last year.

Agricultural and food products jumped by 11% to $412 million from $370 million last year.

Minerals notched a 12% increase to $170 million from $152 million.

Automotive shipments rocketed by 24% to $268 million from $216 million last year.

Forest products were up 8% to $251 million from $233 million.

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There are many reasons for trucking's ongoing labor shortage. We recap discussions from the first half of this year in this "roundabout" episode. Tune in above or by going to RoadSigns.TTNews.com.

Metals and equipment increased 6% to $216 million from $204 million a year ago.

Fertilizer shipments dropped 3% to $118 million from $122 million a year ago.

CSX is one of the six Class I railroads involved in contentious negotiations with the more than 115,000 unionized employees who are part of the Coordinated Bargaining Coalition now at the negotiating table with the National Carriers’ Conference Committee of the National Railway Labor Conference.

On July 18, President Joe Biden announced he was appointing a three-person Presidential Emergency Board that will investigate the dispute between the nation’s largest rail carriers and rail unions. The two sides have 60 days to reach a labor agreement and avoid a nationwide strike, which could have a devastating impact on the economy.

“We’re glad that the emergency board was appointed,” Foote said. “It’s a win-win for both sides.”

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