CSX 1Q profit jumps 22% on higher rates despite service issues
CSX Railroad struggled to keep up with demand in the first three months of the year, but still managed to generate 22% more profit from higher shipping rates, offsetting a slight decline in the number of shipments processed.
The Jacksonville, Fla.-based railroad said Wednesday it earned $859 million, or 39 cents a share, in the first quarter. That’s up from $706 million, or 31 cents per share, a year ago.
The results exceeded Wall Street expectations. The average estimate from seven analysts polled by Zacks Investment Research was for earnings of 38 cents per share in the latest quarter.
In recent weeks, several rail shipper groups have complained to regulators about rail delays that have forced grain mills, ethanol plants and food producers to sometimes shut down their factories while waiting for trains. Federal regulators plan to hold a hearing on the issues next week.
But the problems predate these complaints. The railroad has struggled for some time to hire the workers it needs as the economy recovers from the pandemic.
“No matter where you go, there’s a labor shortage,” said CSX CEO Jim Foote. “I don’t care if you go to fast food or wherever you go – the lines are longer, there aren’t as many people working as they used to be, and we’re no different.”
Foote said the key to improving service is hiring more workers, and the railroad has made incremental progress in that regard this year. And staffing has improved since the omicron wave of the pandemic peaked in January.
At the start of the year, CSX had only about 6,218 daily active employees on average at the height of the omicron wave in January. That figure rose to 6,459 in February and continued to grow to an average of 6,629 in April as more new employees completed their training.
Foote said demand for the railroad’s services remains strong, but volume was down 2% in the quarter as CSX struggled to handle all shipments. He expects rail operations to continue to gradually improve as more workers board.
Revenue for the freight railroad jumped 21% to $3.41 billion during the period, also beating Street’s forecast. Five analysts polled by Zacks expected $3.29 billion.
Edward Jones analyst Jeff Windau said CSX posted solid profit growth despite hiring and service challenges as it was able to raise fares and charge fuel surcharges higher as diesel prices soar.
CSX said it now expects revenue and operating profit to grow at a double-digit rate this year because demand remains so strong.
CSX Corp. is one of the nation’s largest railroads and operates more than 21,000 miles (34,000 kilometers) of track in 23 eastern states and two Canadian provinces. It recently won approval to add approximately 1,200 miles of track and three additional states to its network later this year when it acquires Pan-Am Railways in the northeastern United States.
Elements of this story were generated by Automated Insights (http://automatedinsights.com/ap) using data from Zacks Investment Research. Access a Zacks stock report on CSX at https://www.zacks.com/ap/CSX