CSX Corp. reported higher third-quarter earnings and revenue, despite disruptions to its operations from Hurricane Helene at the end of September.
The Jacksonville-based company, which operates a rail network through much of the Eastern U.S., also is seeing an impact from Hurricane Milton in Florida this month but not as severe as Helene, CEO Joe Hinrichs said in an Oct. 17 telephone interview.
“There were some washouts (from Milton), some small bridges, but we’ve got them rebuilt already,” Hinrichs said.
“We’re just getting the network up and running” after Milton-related power outages, he said.
CSX reported third-quarter revenue rose 1% to $3.62 billion, with earnings rising by 5 cents to 46 cents a share.
In a conference call with analysts after the earnings report, Chief Financial Officer Sean Pelkey said Helene cost CSX $10 million to $15 million in revenue in the quarter and a small amount in expenses.
“It appears the fourth quarter storm-related impacts will be larger than Q3 and with a current estimate of around $50 million. That includes storm recovery and rerouting costs near $20 million, as well as roughly $30 million of net revenue impacts,” Pelkey said.
He said the company is projecting capital expenditures to exceed $200 million from storm repairs, which will likely continue into 2025.
Most damage in Tennessee
Hinrichs said most of the damage to CSX’s operations occurred in eastern Tennessee, including a 500-foot bridge and another 50-foot bridge that were washed out.
CSX operates a north-south rail line from Kingsport, Tennessee, into Georgia that has been affected, he said.
Hinrichs also said the impact to CSX customers is affecting the railroad’s business, but the company is able to reach its customers as needed.
“We’ve been able to serve the customers. We’re re-routing for now to serve that corridor,” he said.
Hinrichs joined CSX in September 2022 but he said the company has experience in dealing with storms.
“Our team here has been around for a long time,” he said.
However, Helene was the second-worst storm to affect CSX in the last 35 years, after Hurricane Katrina in 2005, he said.
Earnings decrease projected
CSX is projecting a modest decrease in fourth-quarter revenue, and not just because of the storm impact.
A softer coal market and reduced fuel surcharge revenue are expected to reduce revenue by about $200 million.
Hinrichs said CSX continues to see strength from chemicals and agriculture product shipments, but other freight sectors are softening.
“The automotive market and the steel and metals market has slowed a bit,” he said.
During the third quarter, CSX announced new labor agreements with several of its unions in advance of the contracts expiring at the end of this year.
Hinrichs said the agreements with 11 different unions cover 56% of its union workforce.
“We’re still in discussions with a few more, three or four more,” he said.
Also, “we’ve had a couple that didn’t ratify so we’ll have to go forward with that together with our union partners.”
Hinrichs has focused on improving employee relations since joining CSX. He also is focusing on customer service, with a recent survey of CSX customers produced the highest satisfaction score since it began surveying them.
Tech disappointment
While Hinrichs is happy with CSX’s progress in many areas, he is disappointed in the railroad industry’s efforts to advance technology.
“One thing that’s disappointing is we haven’t gone faster in pushing technology to solve our problems,” he said.
Although the freight outlook is uncertain, Hinrichs said he is optimistic about the economy and about CSX’s outlook for the rest of this year and into 2025.
“There’s always more to do but I’m excited about the progress we’re making,” he said.
CSX’s stock opened $1.57 lower at $33.90 on Oct. 17 after its earnings report, which was released after the market closed Oct. 16.
“Third-quarter results came in below expectations as a challenging macro and unfavorable mix weighed on results,” BMO Capital Markets analyst Fadi Chamoun said in a research note.
Chamoun maintained an “outperform” rating on the stock but lowered his earnings estimates for the fourth quarter and for 2025 and lowered his price target for the stock from $40 to $39.
“While management is executing well, the overall environment remains difficult and visibility into a positive inflection point in demand continues to be pushed further out,” he said.