CSX Corp. led off first-quarter earnings reports for the Class I railroads Tuesday, April 14, and as expected reported a profit decline, down 30% from the first quarter of 2008. Revenue fell 17% to $2.25 billion. But CSX still beat Wall Street consensus estimates, logging earnings of $246 million, or 62 cents per share, for the quarter; analysts anticipated 51 cents per share on revenue of $2.26 billion.
CSX acknowledged that volume was down across all segments, as construction and consumer-related markets remained weak; auto and auto parts shipments were particularly hard hit, down 53% from the year-ago quarter.
The company said it cut its operating expenses by 17%, and also noted fuel costs fell by $250 million due to both lower fuel prices and shrinking volume.
“Freight revenues at the rail division (CSXT ) were down 16% to just under $2 billion as a 2.5% improvement in average revenue per carload was no match for 19% decline in volumes,” said Jason Seidl, director at Dahlman Rose & Co. (and a Railway Age contributing editor). “Operating profits fell just 12% as CSXT was able to improve its operating ratio by 130 basis points.” By contrast, CSX Intermodal suffered a 22% revenue decline for the first quarter. “This suggests to us that CSXI has had to resort to cutting rates in an attempt to remain competitive with the very aggressive trucking market,” Seidl said.
“With the rail industry trying to cope with the most drastic volume declines in recent history, we believe management will focus on how they are attempting to cut costs in its attempt to right-size the rail network,” Seidl said.
CSX Chairman, President, and CEO Michael Ward, in a statement, said, "In this economic downturn, CSX is focusing sharply on the things that are more within our control—safety, customer service and productivity.” He added, “We are taking tough actions to right-size our operations in this challenging environment."
In Wednesday morning trading, CSX shares rose 10%, to $31.23.