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Two Class I railroads are prepping to handle expected policy changes under the Trump administration, while another has already implemented contingency plans in anticipation of a work stoppage Tuesday.
For Union Pacific and CSX, the rail companies share concern, but remain hopeful about the end result of Trump’s imposition of tariffs, particularly on neighboring trading partners Canada and Mexico as Feb. 1.
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“We’ll deal with it, and we’re waiting to see what actually happens,” said Jim Vena, CEO of Union Pacific, in an earnings call on Thursday.
“I’m hoping that it’s a negotiating position by the president and because I don’t think anybody—the consumers in the U.S.—would love to have an increase in prices because of dispute, unless there’s some strategic reason that the president needs to do that for security of the country,” Vena said.
Kenny Rocker, executive vice president of marketing and sales at Union Pacific, acknowledged in the call that potential tariff changes could further impact volumes at the railroad, with revenue carloads increasing 5 percent in the fourth quarter to 2.16 million.
A month prior, at the UBS Global Industrials and Transportation Conference on Dec. 4, CSX chief financial officer Sean Pelkey sought to keep a maintain a positive outlook on the tariff situation as well.
“Within our business, when we talk about tariffs, there’s always going to be puts and takes,” said Pelkey during the event. “There’ll be some markets that benefit and others that maybe don’t. But in terms of exposure in terms of international trade, Mexico and Canada are probably the two largest countries that we do trade with, but it’s still a relatively small portion of our overall revenue base.”
Pelkey said the countries ranged between 10 percent and 15 percent of total revenue, with Canada’s share “being a little bit larger than Mexico, particularly on the merchandise side.”
In the fourth quarter, revenue at both railroads had low-single digit declines, with both saying that declines in fuel surcharges offset the benefits from increased volumes and higher price points. CSX saw sales decrease 4 percent year over year to $3.5 billion, while UP revenue declined 1 percent to $6.1 billion.
At CSX, the company earned $733 million, or 38 cents per share, in the quarter as volume increased 1 percent to 1.58 million units. Union Pacific generated $1.8 billion in net income, or $2.91 per diluted share.