CSX revenue and profits declined within the fourth quarter as growth in merchandise and intermodal traffic was not enough to beat sharp declines in coal and fuel surcharge revenue.
The impact of a pair of hurricanes — each of which affected traffic certain to and from Florida, the railroad’s highest-volume state — also weighed on CSX’s (NYSE: CSX) operations, service metrics, and quarterly results.
“Overall, we executed well through a difficult period. Nevertheless, we will not be satisfied with these results,” Chief Executive Joe Hinrichs told analysts and investors on the railroad’s earnings call Thursday. “Now we have a transparent vision of what we would like to attain at CSX…and we’re committed to delivering on that vision for the advantage of our customers, our employees, and our shareholders.”
Fourth-quarter operating income declined 16%, partly resulting from a $108 million goodwill impairment charge involving its Quality Carriers chemical trucking company. Absent the impairment charge, operating income was down 8% for the quarter. Revenue declined 4%, to $3.53 billion. Earnings per share declined 16%, to 38 cents.
The operating ratio, or operating expenses as a percentage of revenue, was 68.7 for the quarter, 4.4 points higher than a 12 months ago.
CSX is maintaining the three-year growth outlook it laid out at its investor day in November, but executives warned that the railroad will face $350 million value of headwinds this 12 months from lower export coal and fuel surcharge revenue, primarily in the primary half of the 12 months.
This 12 months CSX also will absorb $10 million value of upper operating costs monthly related to construction of the Howard Street Tunnel clearance work in Baltimore, and the rebuilding of the Blue Ridge Subdivision.
CSX has begun detouring traffic over Norfolk Southern upfront of the anticipated Feb. 1 start date of the Howard Street project, which is able to allow the railroad to run double-stack intermodal trains through the Mid-Atlantic for the primary time. The long-awaited project needs to be accomplished by the top of the 12 months.
The Blue Ridge Sub, which threads its way through the rugged mountains of western North Carolina and eastern Tennessee, suffered $400 million value of harm from Hurricane Helene. Traffic is being rerouted, racking up out-of-route miles and additional crew costs, while the road is being rebuilt.
For the quarter, overall volume was up 2%, driven by a 4% increase in intermodal volume. Merchandise volume was flat, while coal traffic sank 7%.
The outlook for this 12 months includes overall volume growth of three% to six%, driven by intermodal and merchandise traffic.