JACKSONVILLE, Fla. — CSX faces more than $200 million in reconstruction costs as a result of Hurricanes Helene and Milton, and the income impacts of the storms will be felt in both the third and fourth quarters, executives said during the company’s quarterly earnings call today (Wednesday, Oct. 16).
Chief Financial Officer Sean Pelkey said projections are the storms will cost the company $10 million to $15 million in lost revenue in the quarter ending in September, with another $50 million in projected losses in the fourth quarter. The latter figure, he said, include storm recovery and rerouting costs near $20 million, as well as roughly $30 million in net revenue impacts.
Significant rebuilding is already underway, Pelkey said, on the railroad’s Blue Ridge Subdivision, the former Clinchfield Railroad route between Erwin, Tenn., and Spartanburg, S.C.
“While we’re still evaluating the scale and timing of these capital expenditures,” Pelkey said, “our early read is that rebuild costs will likely exceed a total of $200 million and the construction will take us into next year.”
CEO Joe Hinrichs said he had been told by people who had been with the company for 30-plus years that Helene was “the second-most impactful hurricane” on the CSX network they had seen, behind only 2005’s Hurricane Katrina — the storm that devastated New Orleans and much of the Gulf Coast.
But the railroad has “largely recovered,” Hinrichs said, “and we have made sure that CSX has been there to support our railroaders who have needed assistance for ourselves and their families.
“Stepping back and looking at this entire quarter, I’m proud of what we accomplished,” Hinrichs said. “Our aim was to grow volume, revenue, and operating margin compared to last year, and that is exactly what we delivered.”
Earnings results announced today included a 1% increase in revenue over the third quarter of 2023, from $3.57 billion to $3.62 billion. Operating income was up by 7%, from $1.27 billion to $1.35 billion, while earnings per share increased by 12% over the same quarter a year ago, from $0.41 to $0.46.
CSX stopped reporting operating ratio this year in favor of operating margin, and for the third quarter, that figure was 37.4%, an increase of 180 basis points over the same quarter in 2023.
Lower coal revenue and low trucking costs were among factors impacting the revenue growth, Pelkey said.
The storms took a toll on some of the railroad’s operating metrics. While train velocity increased from 17.6 mph in the third quarter of 2023 to 18.6 mph in the most recent quarter, terminal dwell was also up, from 9.6 to 10.3 hours. Carload and intermodal trip-plan performance also fell slightly, from 82.2% to 80% and from 93.6% to 92.2%, respectively.
Revenue and volume figures by business type were mixed. Merchandise revenue of $2.23 billion represented a year-over-year increase of 6%, while merchandise volume rose from 649,000 to 670,000 carloads, a 3% gain. Intermodal revenue was down by 2%, from $517 million to $509 million, while intermodal volume was up 3% to 730,000 units. The effects of the brief strike by the International Longshoremen’s Association at East and Gulf Coast ports was not material to the overall intermodal business, the railroad said.
Coal revenue was down 7% at $553 million, with volume down 2% at 190,000 carloads. Benchmark coal prices for metallurgical coal have declined, and natural gas prices remain low, affecting the utility market for coal.
In the remainder of the year, Hinrichs said the railroad expects modest volume growth, as business in the metal and automotive segments has softened while the chemical and agriculture markets are more favorable. The railroad now expects a slight decrease in total revenue for the fourth quarter, with Hinrichs saying that a lower fuel surcharge and the softer coal market will, on their own, account for approximately $200 million in revenue effects compared to 2023. And while the railroad is still aiming for $2.5 billion in total capital expenditures in 2024, there will likely be some additional capital needs to address hurricane rebuilding.
“There is some near-term uncertainty in the market and we are rebuilding after two major hurricanes,” Hinrichs said, “so we have had to adjust our short-term solutions in response. All that said, the bottom line is that CSX is running very well and we are building momentum across the railroad.”
Coal revenue down 7% with coal volume down 2% seems to indicate that coal is being hauled shorter distances. IMO that would indicate that operating expenses per load also increased.