LOS ANGELES (Reuters) - CSX Corp on Tuesday reported a quarterly profit that topped Wall Street’s target, after the No. 3 U.S. railroad operator pushed through price increases and contained labor and fuel costs by running fewer, but longer trains.
The results, which sent CSX shares up 4.1 percent to $79 in after-hours trading, come amid worries that severe winter weather took a bite out of U.S. transportation company profits at a time when the global economy is cooling. CSX is the largest railroad operator in Chicago, which was gripped by an Arctic “polar vortex” in January.
“It was a tough winter,” Chief Executive Jim Foote told Reuters in an interview.
Efficiency efforts helped insulate results at CSX, as did geographic location. CSX serves the eastern third of the United States and the Canadian provinces of Ontario and Quebec, and was not exposed to the devastating Midwestern floods that disrupted rail service from Union Pacific Corp and BNSF Railway Co.
Trucking firm J.B. Hunt Transport Services Inc on Monday reported first-quarter profit that fell short of Wall Street’s target, and it pinned part of the blame on Chicago-area weather disruptions.
CSX’s first-quarter net income rose 20 percent to $834 million, or $1.02 per share. Analysts had expected a profit of 91 cents per share, according to Refinitiv IBES data.
Revenue was up 5 percent to $3.01 billion, driven by merchandise volume growth and broad-based pricing gains, while expenses declined 2 percent from the year earlier to $1.79 billion.
CSX’s operating ratio, a measure of operating expenses as a percentage of revenue and a closely watched gauge of railroad performance, was 59.5 percent for the quarter - just below its 60 percent target for 2019.
Executives said they are monitoring business conditions, but do not see reasons for worry. “Generally, end-market demand remains stable,” Foote said.
Jacksonville, Florida-based CSX was the first large U.S. railroad to embrace “precision railroading” under the guidance of Hunter Harrison, an investor favorite for leading turnarounds of Canada’s two major railroads.
Harrison died in December 2017, just eight months into a restructuring campaign that included cutting jobs, shuttering multiple rail yards, mothballing locomotives and rail cars and running longer trains on strict schedules, rather than based on customer needs.
Foote, who worked for Harrison when he led a turnaround at Canadian National Railway Co, continued Harrison’s plan. Foote said that project is “still in the early stages.”
Reporting by Lisa Baertlein in Los Angeles; Editing by Susan Thomas, Peter Cooney and Leslie Adler