CSX (NASDAQ: CSX) is not only eyeing a volume recovery in 2021 but also a recovery from the coronavirus among its workforce. As COVID-19 cases spiked after Thanksgiving across the U.S., so too did the number of CSX employees contracting the virus.
The railroad didn’t say during its fourth-quarter 2020 earnings call how many employees have been infected or are in quarantine, but that number is in the “hundreds,” according to CSX President and CEO Jim Foote.
One reason why the outbreak has been challenging for CSX is because there are “pockets” of coronavirus cases on its network, and the railroad is trying to ensure adequate staffing in areas where an outbreak occurred. In some situations, a terminal sees as much as a 40% reduction in staffing for an extended period of time due to employees being sick or quarantining, executives said.
As COVID-19 cases grew on the network in the fourth quarter, service metrics slipped, with dwell time rising 21% to 10.2 hours, up from 8.4 hours in the fourth quarter of 2019, and train velocity falling 11% to 18.9 mph from 21.3 mph.
“This phenomena with everyone trying to keep up with this unprecedented volume is creating issues, whether it be in foreign ports, whether it be in ocean vessels, whether it be in the West Coast ports, the East Coast ports, the railroads, the trucks, logistics service providers, you name it. Everybody is dealing with a situation where volumes are unprecedented and volatile,” Foote told investors.
He continued, “At the same time, we have hundreds — literally hundreds — of employees [who] are in quarantine. In one day, it’s on the west side of the railroad. The next day, it’s on the east side of the rail. The next day, it’s on the north side of the rail, next day it’s in Florida. And so, for us to be doing the job from a service standpoint right now, I don’t think anybody is saying they’re having problems because the railroads are screwed up. We’re doing a really, really, really good job of managing our way through this.”
Jamie Boychuk, the executive vice president for operations, said CSX could get “some bumps and bruises” over the next quarter or so as it navigates the pandemic.
“We’ve got a great team that moves into there, helps out. We work ourselves through it. We work around it, which is great about the network we have as we can do that, and continue to move the product,” Boychuk said. “Look, we will see our numbers continue to improve as we move forward. But … sometimes it’s a daily exercise depending on where we’re having our COVID issues.”
Looking ahead, CSX said it wants to make sure it has the employees and workforce needed to manage an anticipated market rebound this year.
“We don’t want to miss out on something if it comes along,” Foote said.
Said CSX CFO Kevin Boone, “We will hopefully begin to see improvement from current levels. We continue to focus on crew availability and are currently accelerating our first-half hiring efforts to be prepared in the event of stronger demand.”
The company expects its capital expenditures budget to total between $1.7 billion and $1.8 billion, which reflects ongoing investments in core infrastructure, combined with high-growth investments for technology and sales and marketing initiatives.
CSX has also been seeking to take market share away from trucks by asking existing customers whether they can move their business transported by truck onto rail instead.
“Maybe it’s the easy way, but let’s go to our customers that we already know and do business with and shake the tree there. And there is a ton of opportunity for us,” Foote said, referring to CSX’s merchandise and intermodal customers.
Fourth-quarter financial results
Fourth-quarter net income slipped 1% amid a 2% decline in revenue, the Eastern U.S. railroad reported Thursday.
|CSX||2020 Value||2019 Value||Y/Y Gross Change||Y/Y % Change|
|Freight revenue (millions)||$2,825.0||$2,885.0||($60.0)||-2.1%|
|Carloads (thousands) (incl. intermodal)||1,599||1,539||60||3.9%|
|Revenue per carload||$1,767||$1,875||-$108||-5.8%|
|Intermodal shipments (thousands)||757||682||75||11.0%|
|Intermodal revenue per carload||$629||$658||-$29||-4.4%|
|Gross ton-miles (billions)||95.7||94.7||1||1.1%|
|Revenue per tonmile (billions)||$48.7||$47.6||$1||2.3%|
|Fuel Expense (millions)||$139||$216||-$77||-35.6%|
|Employee counts (average)||19,240||20,912||-1,672||-8.0%|
|Train velocity (mph)||18.9||21.3||-2||-11.3%|
|Dwell time (hours)||10.2||8.4||-1.80||21.4%|
Fourth-quarter 2020 net profit was $760 million, or 99 cents per share, compared with $771 million, or 99 cents per share, in the fourth quarter of 2019.
For more on CSX’s financial results, click here.