CSX Expects Continued Subdued Shipping Trends


Railroad giant CSX Corp. announced on Thursday that it anticipates the subdued shipping trends it experienced in the third quarter to persist for the remainder of the year. Retailers are taking a cautious approach when it comes to the items they have transported to their warehouses and stores.

During discussions about the company’s mixed third-quarter results, executives reiterated what one analyst referred to as “low expectations” for the rail industry. Higher prices for essential goods have left less room for consumer spending on other merchandise that is typically shipped by rail.

CSX’s Chief Commercial Officer, Kevin Boone, stated that retailers remain concerned about the health of the consumer. While destocking may have slowed, there has not been a noticeable increase in order rates or imports. However, Boone did express optimism about the gradual strengthening of the company’s domestic business for the remainder of the year.

Last year, there was a shift in demand towards basic goods, which resulted in retailers having excess inventory of items like clothing, TVs, and electronics that were difficult to sell without reducing prices. As a result, stores have become more conservative in their ordering and shipping practices.

Transportation provider J.B. Hunt Transport Inc. also acknowledged positive signs but cautioned that they have not yet reached a point where they can confidently say that they are out of the freight recession.

CSX reported third-quarter net income of $846 million, or 42 cents a share, compared with $1.11 billion, or 52 cents a share, during the same period last year. Revenue decreased to $3.57 billion from $3.89 billion in the prior-year quarter.

The decline in sales can be attributed to fewer connections with other modes of transportation used to transport goods to different locations. These connections, known as “intermodal” shipments, continue to face challenges, according to Chief Executive Joe Hinrichs.

Although CSX shipped more coal, the company saw a decrease in coal prices during the third quarter.

CSX Reports “Solid Gains in Merchandise Pricing” during Q3

Shares of CSX, a leading railroad company, experienced a slight dip of 0.9% in after-hours trade following its recent quarterly report. The company highlighted its success in converting highway traffic and discussed the challenges faced by the trucking industry, which has seen a downturn in demand and prices.

CSX’s report came after Union Pacific Corp., its western U.S. counterpart, announced better-than-expected third-quarter profits despite a decrease in railcar shipments and ongoing inflationary pressures. Analysts have praised Union Pacific’s results as a promising start to rail earnings.

The rail industry has been striving to rebound from the supply-chain disruptions caused by the pandemic. The surge in online buying during this time caught distribution networks off-guard, resulting in higher prices and profits. However, these disruptions also raised concerns regarding rail safety and service quality. Recent incidents, such as Norfolk Southern’s derailment in Ohio, have intensified these concerns.

To address labor tensions and improve service, major rail operators are making efforts to increase staffing levels. Last year, a rail-worker strike was avoided, but differences between rail operators and unions persist, particularly regarding time off and sick leave, an issue many workers believe is not adequately addressed.

Ahead of the earnings announcement, CSX reached an agreement on paid sick leave with a railroad signalmen union, benefiting almost 400 employees. This development was well-received by analysts at BofA, who recently upgraded CSX shares to a buy rating. The appointment of Mike Cory as the company’s chief operating officer further boosted analyst confidence in CSX. Cory, a seasoned industry veteran and protégé of Hunter Harrison, known for his turnaround strategies, brings valuable expertise to CSX.

Despite the challenges faced by the rail industry, CSX shares have shown resilience, with a 2% increase year-to-date.

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