CSX Corporation, a leading transportation and logistics company, faced challenges in the fourth quarter as its revenue and profits declined. Despite growth in merchandise and intermodal traffic, the company struggled to overcome sharp declines in coal and fuel surcharge revenue. Additionally, the impact of two hurricanes that affected traffic to and from Florida, the railroad’s highest-volume state, further weighed on CSX’s operations, service metrics, and quarterly results.
Chief Executive Joe Hinrichs acknowledged the difficult period and expressed dissatisfaction with the results during the earnings call with analysts and investors. He emphasized the company’s commitment to delivering on its vision for the benefit of customers, employees, and shareholders. Operating income for the fourth quarter declined by 16%, partly due to a $108 million goodwill impairment charge related to its Quality Carriers chemical trucking company. Excluding the impairment charge, operating income was down by 8%, while revenue decreased by 4% to $3.53 billion. Earnings per share also declined by 16% to 38 cents.
The operating ratio, which measures operating expenses as a percentage of revenue, was 68.7 for the quarter, representing a 4.4-point increase from the previous year. Despite these challenges, CSX is maintaining its three-year growth outlook outlined at its investor day in November. However, executives cautioned that the company will face $350 million in headwinds this year due to lower export coal and fuel surcharge revenue, particularly in the first half of the year.
CSX is also anticipating $10 million per month in higher operating costs related to the construction of the Howard Street Tunnel clearance work in Baltimore and the rebuilding of the Blue Ridge Subdivision. The company has started detouring traffic over Norfolk Southern ahead of the Howard Street project, which will enable the operation of double-stack intermodal trains through the Mid-Atlantic for the first time. The Blue Ridge Subdivision, which suffered $400 million in damages from Hurricane Helene, is undergoing rebuilding efforts, leading to rerouted traffic and increased costs.
Despite these challenges, CSX experienced a 2% increase in overall volume for the quarter, driven by a 4% rise in intermodal volume. Merchandise volume remained flat, while coal traffic declined by 7%. The company’s outlook for the year includes an anticipated overall volume growth of 3% to 6%, driven by intermodal and merchandise traffic.
Export metallurgical coal volumes are expected to face challenges this year due to mine production outages in the first half of the year. Domestic coal volumes will also be impacted by planned power plant retirements. CSX is focusing on growing domestic intermodal traffic by converting highway business to rail and developing the new Southeast-Mexico corridor with Canadian Pacific Kansas City via their interchange at Myrtlewood, Ala. Additionally, merchandise volume is expected to benefit from rail-served industrial development projects.
CSX plans to maintain steady capital spending this year, excluding costs associated with repairing the Blue Ridge Subdivision. Despite the challenges faced in the fourth quarter, operating and service metrics showed improvements in efficiency, fuel efficiency, and locomotive productivity. The company also saw a 1% improvement in the train accident rate for the year, although the personal injury rate increased by 27%. CSX remains committed to reducing significant injuries and accidents through hazard identification, exposure controls, and employee training.
In conclusion, while CSX experienced declines in revenue and profits in the fourth quarter, the company remains focused on its long-term growth outlook and commitment to delivering value to its stakeholders. Despite facing headwinds from lower revenue and increased operating costs, CSX is optimistic about the growth prospects for intermodal and merchandise traffic. By prioritizing safety, efficiency, and strategic investments, CSX aims to navigate through the challenges and achieve sustainable growth in the transportation and logistics industry.
