CSX’s profits declined in the third quarter as intermodal growth could not offset an 11% decline in coal revenue.
But the railroad’s key operating metrics all improved, even amid detours related to a pair of major construction projects, the Howard Street Tunnel clearance project in Baltimore and the rebuilding of the hurricane-damaged Blue Ridge Subdivision.
“We’re encouraged by the progress made this quarter. Our team did a great job at working together, responding effectively to the tests faced earlier in the year,” new chief executive Steve Angel said on the railroad’s Thursday afternoon earnings call. “The railroad is running well, and we have a strong foundation to drive further improvements. While the underlying economy is mixed, our customer service is strong, and we have excellent relationships with those customers. We are working closely with numerous partners to help accelerate the build-out of industrial capacity on our network. And our commercial team is actively developing new solutions that will help us expand our reach and gain share.”
The quarterly earnings were complicated by one-time items, including a $164 million writedown of goodwill at Quality Carriers, the trucking company that CSX (NASDAQ: CSX) acquired in 2021.
Adjusted for one-time items, CSX’s operating income declined 8%, to $1.25 billion, as revenue declined 1%, to $3.58 billion. Earnings per share fell 4%, to 44 cents. The adjusted operating ratio was 65.1%, up 2.5 points from a year ago.
On an unadjusted basis, the goodwill hit dinged earnings per share by $0.07, reduced operating income 20%, and drove a 4.6-point increase in the operating ratio.
Overall quarterly volume increased 1%, with merchandise traffic down 1%, intermodal up 5%, and coal down 3%. The coal decline was driven entirely by an 11% drop in export coal tonnage. Domestic coal volume was up 8% for the quarter.
CSX still expects to see overall volume growth this year despite mixed business conditions. Customers face uncertainty and headwinds from shifting trade policies, global commodity prices, higher interest rates, and a stubbornly soft trucking market, Chief Commercial Officer Kevin Boone said.
The railroad’s key operating metrics improved during the quarter. Average train velocity inched up 2%, while terminal dwell was down 8%. Intermodal trip plan compliance increased one point to 93%. Merchandise trip plan compliance rose three points to 83%.
“It shows how disciplined the team has been in running a balanced, efficient network — even while major construction continued on the Howard Street Tunnel and Blue Ridge Subdivision,” Cory said of the two projects that were completed ahead of schedule in September.
The Blue Ridge Subdivision cost the railroad $440 million this year and likely will exceed $500 million in total before insurance reimbursements are factored in, Chief Financial Officer Sean Pelkey said.
CSX’s safety metrics improved for the quarter, with the personal injury rate down 7% and the train accident rate down by 21%. Cory says the improvements show that CSX is evolving into a more proactive, data-driven, and safety-focused daily operations culture.
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