JACKSONVILLE, Fla. — CSX reported second-quarter financial results that were flat compared to a year ago as gains in intermodal and merchandise volume were not enough to offset declines in domestic coal shipments.
“Overall this was a good quarter that was right in line with our expectations,” CEO Joe Hinrichs told investors and analysts on the railroad’s earnings call on Monday afternoon.
Operating income decreased 1%, to $1.4 billion, on flat revenue of $3.7 billion. Earnings per share of 49 cents were unchanged compared to a year ago. CSX’s operating margin was 39.1%, a half point lower than last year’s second quarter.
Overall volume was up 2% for the quarter. Intermodal volume grew 5% thanks to international imports through East Coast ports, but domestic intermodal volume fell in the quarter due to excess trucking capacity. Merchandise traffic was up 1%, largely due to growth in chemicals volume. Coal traffic declined 3% due to a 14% drop in domestic shipments. Export coal volume increased 8% despite the collapse of the Key Bridge in Baltimore, which shut the railroad’s Curtis Bay export terminal for several weeks.
“The trucking market remains challenged, and industrial markets are mixed as we move into the second half of the year,” Chief Commercial Officer Kevin Boone says.
CSX’s key operational metrics were mixed. Average train velocity increased 3%, while terminal dwell increased 10%. Intermodal trip plan compliance declined 2 points to 94% compared to a year ago, while carload trip plan compliance dropped 4 points, to 80%. Customer switch performance declined a point, to 94%.
On-time train departures declined 4 points, to 74%, while on-time arrivals dropped to 64% from 71% a year ago.
Safety performance was mixed, as well: The train accident rate improved by 23%, but the personal injury rate increased by 37%. The railroad has begun an intensive three-year safety program designed to reduce risk and improve employee safety skills, Chief Operating Officer Mike Cory says.
One of the things I noted was, “On-time train departures declined 4 points, to 74%, while on-time arrivals dropped to 64% from 71% a year ago.”
In this day and age of JIT inventory control, missing one-third of your shipments is unacceptable. With an overabundance of truck capacity that can hit higher on-time performance, the prudent shipping and receiving manager will go with trucks every time, regardless of cost. The cost of having a plant or warehouse idle while waiting for materials or merchandise is much higher than the extra cost of trucking.
“Excess truck capacity continues to limit truck conversions in domestic intermodal and carload segments.”
Congratulations Bill, you finally got the story right. To coin an old phrase “It’s the trucking stupid!”