April 27, 2020 1:45 PM, EDT

CSX Reports Declines in First-Quarter Earnings, Revenue

CSX trainLuke Sharrett/Bloomberg

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CSX Corp. on April 22 announced a first-quarter earnings drop of 8% to $770 million, or $1 per share, compared with $834 million, or $1.02, in the same quarter of 2019.

However, the Jacksonville, Fla.-based railroad beat Wall Street expectations of 92 cents per share, according to Zacks Investment Research.

CSX said its operating ratio set a Class I railroad first-quarter record of 58.7, improving from 59.5 in the prior year.

Operating ratio, or operating expenses as a percentage of revenue, is used to measure efficiency. The lower the ratio, the higher the company’s ability to generate profit.

First-quarter revenue fell 5% to $2.85 billion compared with $3.01 billion in the same period a year ago. However, that figure missed the Wall Street consensus estimate that the company would generate $2.87 billion.

“I am incredibly proud of the men and women of CSX who are working on the front lines,” CEO James Foote said on a conference call with reporters and financial analysts. “They have once again shown what outstanding railroaders they are. CSX is running at peak condition, keeping the nation’s supply chain moving and delivering critical products to millions of Americans.”

CSX is one of several railroads that embraces precision-scheduled railroading, which is designed to lower costs and improve overall efficiency by increasing the number of freight cars that are moving in the system on fewer trains.

The amount the company spent on labor costs declined 10%, to $606 million from $672 million. CSX also spent 18% less on fuel at $192 million compared with $233 million, as the price of petroleum products has plunged because of a worldwide glut of oil caused by the coronavirus pandemic. The company also said it is using 60 million gallons a year less of diesel by operating more efficiently, adding to the savings.

“Total operating expenses were 7% lower in the first quarter, driven almost entirely by the strong gains in operating efficiency, we once again delivered,” Chief Financial Officer Kevin Boone said. “Labor and fringe expense was 10% lower versus the first quarter of 2019 as the average employee count was down 1,600 or 7%. Notably, even with volumes roughly flat year-over-year in the first quarter, we continue to find opportunities to tighten the train plan.”

Revenue increases across various sectors:

  • Chemical shipments: 7% to $178 million from $167 million.
  • Agriculture and food products: 6% to $121 million from $114 million.
  • Minerals: 6% to $74 million from $70 million.
  • Metals and equipment: 5% to $67 million from $64 million.
  • Forest products: 1% to $71 million from $70 million.

Intermodal business remained virtually flat at $660 million compared with $657 million. Automotive deliveries dropped 10% to $104 million from $115 million. Fertilizers fell 6% to $58 million from $62 million, and coal saw the most significant dropoff —15% — to $181 million from $212 million.

Still, company officials are monitoring developments concerning the coronavirus.

“This quarter marks three years since the transformation of CSX,” Boone said, “and while there remains considerable uncertainty around the severity and duration of the economic impact related to the pandemic, CSX has never been in a stronger position to take its unique challenge.”

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