NEW YORK/MONTREAL (Reuters) - Shares of railroad operator CSX Corp (CSX.O) soared more than 7 percent on Thursday to a record high, after the company reported better-than-expected quarterly earnings and its new chief executive officer outlined plans to improve margins and cut costs, including job reductions.
Jacksonville-headquartered CSX forecast a 25 percent rise in earnings per share for the year above $1.81 in 2016.
CEO Hunter Harrison told analysts he expects to see attrition between 8.5 percent and 9 percent, but did not give further details. He noted, however, that the plan includes employees, contractors, consultants, “all of the above.”
Harrison is an industry veteran who previously improved profits and the operating ratio, a key metric of efficiency, at the helm of Canada’s two largest railroads. He joined CSX in March, following a deal reached with investor and activist hedge fund Mantle Ridge LP.
CSX said on Wednesday its quarterly net profit gains were driven by rising freight, including a 3 percent increase in coal during the first three months of 2017 after two years of declining coal volumes.
But Harrison stressed in an interview on Thursday that CSX is not counting on improved economic conditions or a rebound in coal to achieve its guidance.
“These results don’t depend on some big bounce back in coal,” he said by phone from Jacksonville.
Harrison, who left Canadian Pacific Railroad Ltd (CP.TO) [CPLTD.UL] in January, said there could be “win-win” opportunities to improve service around the congested Chicago hub through collaboration with another railway, a message conveyed separately by CP’s current CEO Keith Creel on Wednesday evening.
Since taking the reins at CSX, Harrison said he has not “officially” discussed any potential opportunities for Chicago with Creel.
Earlier Thursday, Harrison told analysts that the No. 3 U.S. railroad also plans to bring 250 to 300 jobs it has in India to the United States.
CSX announced a new share repurchase program and said it expects record efficiency gains on its way to a full-year 2017 operating ratio in the mid-60s.
He also said an operating ratio in the low 60s by 2018 is possible, albeit not a formal target, for the Florida-headquartered company. The lower the ratio, which measures operating costs as a percentage of revenue, the more efficient the railroad.
The company’s stock hit a life high of $51.28 in early trading on Thursday and was up 5.8 percent at $49.67 in afternoon trading on Nasdaq.
Reporting by Luciana Lopez in New York, additional reporting by Allison Lampert in Montreal; editing by Dan Grebler and Lisa Shumaker