CSX Q1 2017 profits flat despite increased revenues

The Jacksonville, Fla.-based Class I railway saw net earnings tick up 1.6 percent to $362 million for the quarter even as revenues jumped 9.6 percent to $2.87 billion compared with the same 2016 period.    CSX Corp. reported relatively flat profits in the first quarter of 2017, posting net earnings of $362 million, an increase of just 1.6 percent from the previous year, despite a sizable increase in revenues, according to the company’s most recent financial statements.
   The Jacksonville, Fla.-based Class I railway reported diluted earnings per share (EPS) of $0.39 for the quarter, compared with $0.37 per share in Q1 2016, even as revenues jumped 9.6 percent year-over-year to $2.87 billion.
   Overall cargo volumes were up 2.6 percent from the previous year to 1.59 million carloads and intermodal units, thanks in part to a 3 percent increase in coal shipments, which plummeted to historic lows in early 2016 due to new, stricter environmental regulations and an abundance of cheap alternatives like natural gas. Intermodal container volumes rose 1.5 percent to 688,000 units.
   CSX attributed the muted earnings growth primarily to a $173 million restructuring charge related to an involuntary separation program under which the company reduced it’s management workforce by 765 employees. Around $90 million of the restructuring costs came from severance packages for these employees, with the remainder coming from other post-retirement benefits curtailment, employee and executive equity awards proration, and advisory fees related to shareholder matters.
   Absent the one-time restructuring costs, CSX said its first quarter 2017 net earnings would have totaled $470 million ($0.51 per share).
   Part of those equity awards proration costs were related to the departure of longtime President and CEO Michael Ward, who retired from his post amid a highly public and somewhat bizarre boardroom battle to install former Canadian Pacific CEO E. Hunter Harrison.
   Harrison is well known throughout the freight railroad industry for leading dramatic turnarounds at both CP and east coast counterpart Canadian National, and is expected to bring his “Precision Railroading” philosophy to CSX, aggressively cutting costs to improve the company’s operating ratio.
   “I am pleased to join the CSX team, and working together, we are going to make this company the best North American railroad, capable of consistently meeting and exceeding the expectations of our customers and our shareholders,” Harrison said in a statement following the release of his first quarterly earnings report. “As the business environment continues to improve and we implement Precision Scheduled Railroading, CSX will realize these objectives while driving volume growth and achieving a new level of financial performance.”