By Arunima Banerjee

(Reuters) - CSX Corp (CSX.O) reported a bigger-than-expected drop in fourth-quarter revenue on Tuesday as the third-largest U.S. railroad lost some business due to service issues caused by former chief executive Hunter Harrison's turnaround plan.

Harrison, a veteran railroader cherished by investors for leading turnarounds of Canadian railroads, died in December, just eight months into his restructuring campaign at CSX that includes a strategy to run trains on tight schedules rather than on customer needs.

Investors have been searching for clarity on how new CEO Jim Foote will handle the turnaround plan that also includes deep job cuts and rail yard closures and has triggered persistent service disruptions, customer complaints and federal scrutiny.

"I see no reason to believe we can't deliver the results that Hunter thought we could," Foote said on a post-earnings call.

Foote said he did not expect the disruptions this year and that some of the customers CSX had lost were already returning.

The company's stock, which hit a record high in regular trading before closing down 1.9 percent, dropped a further 1 percent after the bell.

The shares are in a "show me" position, given the new CEO and the restructuring plan, said Edward Jones analyst Daniel Sherman, who has a "buy" rating on the stock.

CSX said freight volumes dropped 8 percent in the quarter ended Dec. 31, hurt by lower shipments of some hauls, such as those of vehicles and chemicals.

The Jacksonville, Florida-based company said revenue fell 6 percent to $2.86 billion, missing analysts average estimate of $2.89 billion, according to Thomson Reuters I/B/E/S.

Foote said CSX will continue to implement Harrison's scheduled railroading model – a strategy to streamline operations and improve efficiency that includes running trains on tight schedules rather than on customer needs.

CSX's operating ratio, a closely watched measure of operating costs as a percentage of revenue, fell to 60.9 percent from 67 percent. A lower ratio implies higher profitability.

Foote said he expects a "solid step-down" in the operating ratio every year for the next three years.

Net income jumped to $4.14 billion, or $4.62 per share, from $458 million, or 49 cents per share, boosted by benefits from the recently enacted U.S. tax overhaul.

On an adjusted basis, CSX earned 64 cents per share, beating analysts' estimate of 56 cents on better prices and cost controls.

(Reporting by Arunima Banerjee in Bengaluru and Eric M. Johnson in Seattle; Editing by Savio D'Souza)