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Rail News: CSX Transportation

CSX set operating ratio record, ramped up revenue in Q4


By Jeff Stagl, Managing Editor

In the fourth quarter, CSX registered an operating ratio of 60.3, a 4.8 point improvement compared with its fourth-quarter 2017 ratio of 65.1 and a Q4 record, the Class I announced yesterday.

The railroad's 2018 operating ratio improved 7.1 points from 2017's level to 60.3, a U.S. Class I full-year record, said CSX President and Chief Executive Officer James Foote during an earnings conference held yesterday afternoon.

CSX reported Q4 results on an adjusted basis, excluding a tax reform benefit resulting from the Tax Cuts and Jobs Act of 2017 and a restructuring charge that were reported in fourth-quarter 2017.

Adjusted revenue rose 10 percent to $3.1 billion, earnings per share (EPS) jumped 58 percent to $1.01, net earnings soared 47 percent to $843 million and operating income climbed 25 percent to $1.2 billion on a year-over-year basis. Adjusted total expenses increased 2 percent to nearly $1.9 billion and volume rose 3 percent to 1.65 million units.

Divided by commodity groups, only fertilizers revenue posted a drop in Q4, falling 3 percent to $110 million. Revenue totals show forest products and metals/equipment both grew 15 percent to $217 million and $180 million, respectively; minerals climbed 13 percent to $130 million; chemicals and automotive both climbed 10 percent to $598 million and $333 million, respectively; and agricultural/food products and coal both rose 8 percent to $347 million and $586 million, respectively.

For the full year, CSX's revenue increased 7 percent to $12.2 billion, operating income soared 31 percent to $4.9 billion and total expenses rose 4 percent to $7.4 billion.

The financial results reflect efforts to provide better service with fewer assets, said Foote.

"We are entering 2019 on a new trajectory with a significant opportunity to improve across all aspects of our business,” he said.

For 2019, the railroad’s capital expenditures are projected to fall between $1.6 billion and $1.7 billion compared with $1.74 billion in 2018 and $2 billion in 2017. In terms of full-year financial performance, CSX expects annual revenue growth in the low single digits and an operating ratio of about 60 — the 2020 target that the railroad figures to achieve a full year early, said Foote.

"The bar is higher and it's our job to deliver," he said.

While a sub-60 operating ratio is possible in 2019, a mid-50 ratio is achievable longer term, although that isn’t necessarily the explicit target, said Benjamin Hartford, a senior research analyst for Robert W. Baird & Co. Inc., in an emailed report.

“Instead, management is focused on improving operational execution and service to customers, while expanding its addressable market, which should produce 10 percent-plus annual EPS growth in a stable macroeconomic environment,” he said.

Contact Progressive Railroading editorial staff.

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