Stay updated on news, articles and information for the rail industry
- Short Lines & Regionals
- Passenger Rail
- Legislative & Reg.
- Rail Industry Trends
- Supplier Spotlight
- High Speed Rail
Rail News: CSX Transportation
CSX expects significant decline in Q1 earnings
CSX Chief Financial Officer Frank Lonegro said yesterday the company expects this year's economy to be "challenging," as the Class I faces intensifying coal headwinds and other economic factors that will contribute to declining volumes.
In a press release, Lonegro said CSX expects first-quarter earnings to drop "significantly."
"Based on the trends so far this year, we expect volume to decline in the mid-high single digits this quarter and to gradually moderate as we move through the year," Lonegro said. "We expect first quarter earnings to decline significantly, reflecting both this volume environment and the fact that we are cycling more than $100 million in unique items from the first quarter of 2015."
He noted that over the past five years, CSX grew its merchandise and intermodal business faster than the economy and delivered strong pricing and efficiency gains in the face of a secular decline in coal and shifts in other energy markets. As a result, the company delivered compound annual growth in earnings per share of 4 percent during that period and an operating ratio below 70 percent for 2015.
But the challenges facing the coal market, the impact of the strong U.S. dollar and low global commodity prices that affected CSX in 2015 are expected to further challenge results this year. The Class I anticipates coal volume to drop more than 20 percent, and most other markets to continue posting year-over-year declines in 2016, he said.
The company will continue to target $200 million in productivity savings. It also will further reduce structural resources to match resources with volume declines, said Lonegro.
"As we look toward a future with significantly less coal, our strategy includes rationalizing and realigning the network to match decreased demand in some markets and adjust to increases in others, investing in clearance and terminal projects to leverage intermodal growth, and optimizing technology to serve the CSX of tomorrow as we continue to target a mid-60s operating ratio longer term," he said.
Contact Progressive Railroading editorial staff.