CSX’s revenues and profits declined in the fourth quarter because growth in cargo and intermodal traffic was not enough to offset sharp declines in coal and fuel revenues.
The impact of a pair of hurricanes—both of which affected interconnected traffic to and from Florida, a high for rail volume—also weighed on CSX’s (NYSE:CSX) operations, service metrics, and quarterly results.
Overall, we have executed well during a difficult period. “We are not satisfied with these results,” CEO Joe Heinrich told analysts and investors on the railroad’s earnings call Thursday. “We have a clear vision of what we want to achieve at CSX…and we are committed to delivering that vision for the benefit of our customers, employees and shareholders.”
Operating income in the fourth quarter decreased 16%, due in part to a $68 million goodwill impairment involving quality chemical carriers. Absent an impairment charge, operating income declined 8% for the quarter. Revenue fell 4%, to $3.53 billion. Earnings per share fell 16%, to 38 cents.
Operating ratio, or operating expenses as a percentage of revenue, was 68.7 for the quarter, up 4.4 points from a year ago.
CSX is maintaining the three-year growth forecast it made at its investor day in November.
This year CSX will also absorb $10 million per month in operating costs related to the construction of the Howard Street Tunnel Clearance Works in Baltimore, and the rebuilding of the Blue Ridge Subdivision.
CSX has begun diverting traffic on the Norfolk Southern ahead of the expected Feb. 1 start date for the Howard Street project, which will allow the railroad to run dual transatlantic intermodal trains for the first time. The long-awaited project should be completed by the end of the year.
The Blue Ridge Sub, which trails the rugged mountains of western North Carolina and eastern Tennessee, suffered $400 million in damage from Hurricane Helen. Traffic is rerouted, miles accumulate beyond disposal and additional crew costs, while the line is rebuilt.
For the quarter, total volume increased 2%, driven by a 4% increase in media equivalent volume. Cargo volume was flat, while coal traffic sank 7%.
The forecast for this year includes overall volume growth of 3% to 6%, driven by intermodal and cargo traffic.
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