CSX revenue and profits declined in the fourth quarter as growth in merchandise and intermodal traffic was not enough to overcome sharp declines in coal and fuel surcharge revenue.
The impact of a pair of hurricanes — both of which affected traffic bound 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. However, we are not satisfied with these results,” Chief Executive Joe Hinrichs told analysts and investors on the railroad’s earnings call Thursday. “We have a clear vision of what we want to achieve at CSX…and we are committed to delivering on that vision for the benefit of our customers, our employees, and our shareholders.”
Fourth-quarter operating income declined 16%, partly due to 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 year 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 worth of headwinds this year from lower export coal and fuel surcharge revenue, primarily in the first half of the year.
This year CSX also will absorb $10 million worth of higher operating costs per month 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 in advance of the anticipated Feb. 1 start date of the Howard Street project, which will allow the railroad to run double-stack intermodal trains through the Mid-Atlantic for the first time. The long-awaited project should be completed by the end of the year.
The Blue Ridge Sub, which threads its way through the rugged mountains of western North Carolina and eastern Tennessee, suffered $400 million worth of damage from Hurricane Helene. Traffic is being rerouted, racking up out-of-route miles and extra crew costs, while the line 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 year includes overall volume growth of 3% to 6%, driven by intermodal and merchandise traffic.