CSX yesterday posted record results for the first quarter, including an operating ratio (OR) that fell below 60 percent.
Net income during the quarter soared 20 percent to $834 million, or $1.02 per share, versus $695 million, or 78 cents per share a year ago.
The OR set a company first-quarter record of 59.5 percent — a significant improvement from 63.7 percent set in the year-ago period, CSX officials said in a press release.
Revenue climbed 5 percent to $3 billion, driven by merchandise volume growth and broad-based pricing gains. Expenses decreased 2 percent year over year to $1.79 billion, driven by continued efficiency gains. As a result, Q1 operating income climbed 17 percent to $1.22 billion versus $1.04 billion in the same period last year.
"The CSX team of exceptional railroaders continues to execute across all aspects of our business, delivering new all-time high service levels," said President and Chief Executive Officer James Foote. "These results reflect the strength of our company’s operating model and our commitment to providing a best-in-class service offering to our customers."
During a conference call with analysts, Foote said he was encouraged by the merchandise business segment's strong performance, with 6 percent overall revenue growth.
"Merchandise volume growth of 3 percent is the result of positive growth across every market with the exception of fertilizer, which was slower primarily due to the impact of difficult weather conditions, which delayed spring applications," said Foote, according to a Seeking Alpha transcript of the call.
"The continuing turnaround in our merchandise business is without a doubt the result of our improved service levels," he added.
Despite growth in international business, intermodal revenue fell by 5 percent on 5 percent lower volumes due to additional lane rationalizations implemented following the peak season, Foote said.
Coal revenue increased 7 percent during the quarter versus a year ago. Stronger domestic steel and industrial markets combined with growth in export coal to more than offset domestic utility declines, he said.
Looking ahead for the rest of the year, Foote said the company expects full-year growth in the low single-digits.
"We expect growth to come from merchandise, the core of our franchise," he said.
Intermodal revenue is expected to remain "muted," while the outlook for coal "looks softer later this year as thermal benchmark prices moderate and gas prices remain low," he said.
Additionally, CSX is maintaining its full-year OR guidance of below 60 percent.