Earnings
CSX posts record $4.02 billion quarter and a 60.9% operating ratio, but its service metrics slip
The railroad's third-quarter margin widened by 880 basis points on volume, pricing and a doubling of fuel surcharge revenue, even as dwell times rose and trip-plan performance fell.
HedgeWeekly News Desk ·
CSX reported third-quarter revenue of $4.02 billion after the US close on Wednesday, up 12% from a year earlier and a quarterly record for the railroad. Operating income rose 44% to $1.57 billion, and diluted earnings per share climbed to $0.57 from $0.37. Last year's quarter carried a $164 million non-cash goodwill impairment; stripping that out, operating income grew 25% and EPS rose 30% from an adjusted $0.44.
The operating ratio, the share of revenue consumed by expenses, improved to 60.9% from 65.1% on an adjusted basis a year ago. Total volume rose 5% to 1.69 million units, led by a 7% gain in intermodal, where revenue jumped 20% to $634 million. Merchandise revenue increased 11% to $2.45 billion and coal revenue 10% to $537 million. Fuel surcharge revenue roughly doubled to $466 million from $234 million as the price CSX paid per gallon of locomotive fuel rose to $4.24 from $2.54.
Cost control did much of the work. Headcount fell 6% to 21,870, and purchased services and other expenses dropped 10%. But the company's own operating figures show the network running slower: terminal dwell rose 12% to 10.6 hours, train velocity eased to 18.6 mph from 18.9, and carload trip-plan performance fell to 73% from 83%. CSX also stepped up buybacks, repurchasing 11 million shares for $543 million in the quarter against $112 million a year earlier.
For investors, the quarter shows margin gains outrunning service quality, a trade-off that shippers and regulators tend to scrutinise and that has tripped up railroads in the past. CSX gave no numerical outlook, saying only that it expects continued progress toward best-in-class performance in 2027. Nine-month free cash flow of $2.65 billion, up from $1.07 billion, gives it room to keep buying back stock. The next quarterly report will show whether dwell and trip-plan figures recover while margins hold.