JACKSONVILLE, Fla. — CSX Transportation reported record first-quarter earnings on Tuesday as a combination of cost-cutting and rate increases more than offset flat revenue and lower traffic volume. Net income nearly doubled, to $695 million, o...
http://trn.trains.com/news/news-wire/2018/04/18-csx-reports-record-earnings-thanks-to-cost-cutting-efficiency-gains
Brian Schmidt, Editor, Classic Trains magazine
To paraphrase Mark Twain -
"There are lies, damn lies and CSX Financials"
Never too old to have a happy childhood!
And chocolate rations have increased.
It's been fun. But it isn't much fun anymore. Signing off for now.
The opinions expressed here represent my own and not those of my employer, any other railroad, company, or person.t fun any
I'm sure the vultures are enjoying those improved earnings.
Larry Resident Microferroequinologist (at least at my house) Everyone goes home; Safety begins with you My Opinion. Standard Disclaimers Apply. No Expiration Date Come ride the rails with me! There's one thing about humility - the moment you think you've got it, you've lost it...
It doesn't take a genius to increase profitability by cutting here, there, and everywhere; property, inventory, people, and then pocketing the unspent cash.
The real question should be, what are they doing to grow the business?
zugmann And chocolate rations have increased.
The United States has always had a trade war with Eastasia China.
Greetings from Alberta
-an Articulate Malcontent
I know its everyone's favorite past time to kick CSX, especially now that Harrison is gone, but the results speak for themselves. Impressive.
The traffic and volume will come back. Whats the number of locomotives CSX is using now compared to pre-Harrison?
longhorn1969I know its everyone's favorite past time to kick CSX, especially now that Harrison is gone, but the results speak for themselves. Impressive.
"CSX Transportation reported record first-quarter earnings on Tuesday as a combination of cost-cutting and rate increases more than offset flat revenue and lower traffic volume." (from the OP)
Yeah, celebrating flat revenues and lower traffic volumes. Sure they saved money by cutting costs. But what do they do next? Then after that? Hell, they can save all costs by just closing down the railroad. Think of the savings! Of course the EHH fangirls would probably cheer that. Impressive? I think not.
zugmann Hell, they can save all costs by just closing down the railroad. Think of the savings!
Hell, they can save all costs by just closing down the railroad. Think of the savings!
Zug, Stop it. You're giving away their long term strategy.
Jeff
longhorn1969I know its everyone's favorite past time to kick CSX, especially now that Harrison is gone, but the results speak for themselves. Impressive. The traffic and volume will come back. Whats the number of locomotives CSX is using now compared to pre-Harrison?
Yes the results speak for themselves. The life blood of the company is being sucked out of it. Penn Central all over again, only this time from the starting point of a profitable well operating company. Now with the EHH plan it is drive away the customers and send all the 'profits' to Mantle Ridge and similar vultures.
By the title of the article referenced in the first post, I would conclude that author, Bill Stevens is intending to convey good news for the business of the CSX. And yet, nearly every reacting comment seems to believe that the CSX is actually in a worsening financial condition. To those with that view, I ask what the news would say if it were conveying that CSX was in an improving financial condition.
In other words, if this is bad news, what would good news sound like? If the metrics given with this and other similar articles show that CSX is collapsing, what would the same metrics say if CSX were experiencing business success?
Euclid what would the same metrics say if CSX were experiencing business success?
Oh, I don't know. Maybe increased revenue and higher traffic volume?
Euclid...what would the same metrics say if CSX were experiencing business success?
Methinks is less a matter of traffic, etc, than the fact the savings from all of the cost cutting, etc, is leaving the building, if you will, rather than being used to build the value of the company (ie, capital improvements and the like).
At some point there will be no savings to be had, and the vultures will move on to their next victim.
zugmann Euclid what would the same metrics say if CSX were experiencing business success? Oh, I don't know. Maybe increased revenue and higher traffic volume?
Business 101, Chapter 1: You're in business to make a profit.
Traffic/Sales and revenue mean NOTHING. You could make $500 Trillion in revenue on 1.5 Gintillion Sales but still pocket nothing if your costs are also $500 Trillion.
Point is, Hunter Harrison's Railroad stragety is to focus on the core of the business, not growing traffic. Because it is completely possible to grow your business into the ditch, see the Union Pacific meltdown of the 1990s.
Instead, the PSR mentality is one where the railroad focuses on the most profitable aspects of the business, while not going after marginal traffic which just ends up eating capacity. The railroad runs best just under capacity, so why would you want to haul hundreds of extra carloads for almost no profit gain?
That's why they scrapped the hub-and-spoke intermodal network: it required tons of people, equipment and capital but made almost no money.
Yes, it is possible to make twice as much money with 90% of the business and 75% of the capital. That is what Harrison brought about at CN, CP and now we're seeing it at CSX.
Never confuse units sold with profits made. Plenty of companies have ruined themselves by not thinking about their margins!
Yes CSX was profitable before, but now they're making twice as much money. Sounds like a winning strategy to me. It doesn't come without its risks or downsides, but this is business. Expecting it to be more than that is a fool's errand.
PSR as EHH and Mantle Ridge are implementing it is to set policys to grab every possible dollar NOW and after all the cash has been liberated - hit the bricks and dump the corpse. They care nothing about seeing that the company has the resources to go into the future as a viable transportation company.
Saturnalia Business 101, Chapter 1: You're in business to make a profit.
Thanks to Chris / CopCarSS for my avatar.
Murphy Siding Saturnalia Business 101, Chapter 1: You're in business to make a profit. Business 101, Chapter 2: You must plan for the future, or there will not be one. I read the above link as saying that traffic is in decline, but that's OK because they psuhed through some rate increases. It goes to say they are going to try lowering rates on some coal traffic. Yeah, that should help the old bottom line.To me, the press release is saying that profits are up because they fired a lot of people and shut down some hump yards and such. How do they keep up that momentum when they can't rely on just firing more people and closing more hump yards? What is the future plan? Won't investors dump the stock next year when CSX can't cost-cut itself into prosperity?
Business 101, Chapter 2: You must plan for the future, or there will not be one. I read the above link as saying that traffic is in decline, but that's OK because they psuhed through some rate increases. It goes to say they are going to try lowering rates on some coal traffic. Yeah, that should help the old bottom line.To me, the press release is saying that profits are up because they fired a lot of people and shut down some hump yards and such. How do they keep up that momentum when they can't rely on just firing more people and closing more hump yards? What is the future plan? Won't investors dump the stock next year when CSX can't cost-cut itself into prosperity?
Certainly! And they are planning for the future...by dumping the company's underperforming business units. That means getting rid of marginal lines, eliminating no-longer-required hump yards, and streamlining operations in general.
Sure if they were to continue to raise rates to shoo away more traffic, then we'd have a problem. But history tells us that they're probably just about done raising rates just to rid themselves of low-margin traffic. It's basic supply and demand...raise the rates until only your most profitable traffic mix remains while still running a full network.
Traffic is mostly flat...now if it was down 10-15% or more then sound the alarm bells, but again I just don't see why people like Trains, Railway Age and the railfan community in general looks past the business just to look at the traffic counts.
The EHH theory is to not allow yourself to become cluttered, and so yes that means cutting low-margin traffic and facilities. But this should come as a surprise to nobody.
And to some people's insistence, the whole "pump and dump" stragety, wherein the company is then "left for dead" is REALLY, REALLY hard to believe for any sane person who can go find out how EHH's previous railroads are doing: that the answer is great. CN and CP are industry leaders in profitability and traffic handling. Granted there are some operational issues brought out by CN's incredible traffic growth in particular right now - I'm not saying EHH's stragety was perfect in every way.
But just sitting on the argument that CSX is gonna just a corpse after this, you're really just joking to yourself. There are several posters on this board who basically chime in every time with "OMG they're just killing it eergh I hate capitalism" whilst looking straight past the actual meat of the issue. It's kinda silly, in reality, as I'm sure there could be a much better arguement by some if they actually tried to support their opinions.
Is it true that CSX paid out in dividends and stock buy backs more than its net profit ? If so where did the extra money come from ? Long term and short term debt ? If so how much interest ?
So that may mean that stock equity to debt ratio will not change much even with stock buy backs ? Then when the stock price tanks where will CSX get the capital to continue capital projects ?
Has that not been the record of other RRs in the past and what were the long term results ?
Murphy Siding Saturnalia Business 101, Chapter 1: You're in business to make a profit. Business 101, Chapter 2: You must plan for the future, or there will not be one. I read the above link as saying that traffic is in decline, but that's OK because they psuhed through some rate increases. It goes to say they are going to try lowering rates on some coal traffic. Yeah, that should help the old bottom line. To me, the press release is saying that profits are up because they fired a lot of people and shut down some hump yards and such. How do they keep up that momentum when they can't rely on just firing more people and closing more hump yards? What is the future plan? Won't investors dump the stock next year when CSX can't cost-cut itself into prosperity?
Business 101, Chapter 2: You must plan for the future, or there will not be one. I read the above link as saying that traffic is in decline, but that's OK because they psuhed through some rate increases. It goes to say they are going to try lowering rates on some coal traffic. Yeah, that should help the old bottom line. To me, the press release is saying that profits are up because they fired a lot of people and shut down some hump yards and such. How do they keep up that momentum when they can't rely on just firing more people and closing more hump yards? What is the future plan? Won't investors dump the stock next year when CSX can't cost-cut itself into prosperity?
Lowering the rates on coal traffic will add to the bottom line if, as the company anticipates, it makes coal more attractive to the power plants considering the switch to natural gas (Business 101, Chapter 3).
Why do you have to keep on firing people or closing hump yards in order to keep up the momentum? If the people or hump yards are not necessary other than to keep people employed, then closing those yards makes money every day they remain closed. That is your momentum.
SaturnaliaYes CSX was profitable before, but now they're making twice as much money. Sounds like a winning strategy to me. It doesn't come without its risks or downsides, but this is business. Expecting it to be more than that is a fool's errand.
Winning strategy? Nah. A winning few months does not a strategy make. Let's see where they are a few years down the road. Then we can talk strategy. And see if any of the screaming EHH fangirlz can still fit into their cheerleader outfits.
And I know you don't agree with that assemsment, and I don't agree with yours. So we'll have to leave it at that.
Murphy Siding To me, the press release is saying that profits are up because they fired a lot of people and shut down some hump yards and such. How do they keep up that momentum when they can't rely on just firing more people and closing more hump yards? What is the future plan? Won't investors dump the stock next year when CSX can't cost-cut itself into prosperity?
What's their next 10 word plan? Then the 10 after that? I don't think this is a stretegy; simply survival.
zugmann Saturnalia Yes CSX was profitable before, but now they're making twice as much money. Sounds like a winning strategy to me. It doesn't come without its risks or downsides, but this is business. Expecting it to be more than that is a fool's errand. Winning strategy? Nah. A winning few months does not a strategy make. Let's see where they are a few years down the road. Then we can talk strategy. And see if any of the screaming EHH fangirlz can still fit into their cheerleader outfits. And I know you don't agree with that assemsment, and I don't agree with yours. So we'll have to leave it at that.
Saturnalia Yes CSX was profitable before, but now they're making twice as much money. Sounds like a winning strategy to me. It doesn't come without its risks or downsides, but this is business. Expecting it to be more than that is a fool's errand.
Fair enough, but having already seen this flick twice, once with CN and again at CP, I'm fairly confident that 5-10 years from now CSX will be among the best-run and most profitable railroads, just like CN and CP are now. Laggards to leaders, you might not agree with the stragety but it has historically paid off in spades.
SaturnaliaFair enough, but having already seen this flick twice, once with CN and again at CP, I'm fairly confident that 5-10 years from now CSX will be among the best-run and most profitable railroads, just like CN and CP are now. Laggards to leaders, you might not agree with the stragety but it has historically paid off in spades.
True enough. We'll meet again in 10 years and see.
One should ask CN and CP's customers and employees what they think of the past 5-10 years before deeming EHH a success.
Oh right, shareholders first, everyone else last. I forgot how this works.
Euclid Murphy Siding Saturnalia Business 101, Chapter 1: You're in business to make a profit. Business 101, Chapter 2: You must plan for the future, or there will not be one. I read the above link as saying that traffic is in decline, but that's OK because they psuhed through some rate increases. It goes to say they are going to try lowering rates on some coal traffic. Yeah, that should help the old bottom line. To me, the press release is saying that profits are up because they fired a lot of people and shut down some hump yards and such. How do they keep up that momentum when they can't rely on just firing more people and closing more hump yards? What is the future plan? Won't investors dump the stock next year when CSX can't cost-cut itself into prosperity? Lowering the rates on coal traffic will add to the bottom line if, as the company anticipates, it makes coal more attractive to the power plants considering the switch to natural gas (Business 101, Chapter 3). Why do you have to keep on firing people or closing hump yards in order to keep up the momentum? If the people or hump yards are not necessary other than to keep people employed, then closing those yards makes money every day they remain closed. That is your momentum.
zugmann Murphy Siding To me, the press release is saying that profits are up because they fired a lot of people and shut down some hump yards and such. How do they keep up that momentum when they can't rely on just firing more people and closing more hump yards? What is the future plan? Won't investors dump the stock next year when CSX can't cost-cut itself into prosperity? What's their next 10 word plan? Then the 10 after that? I don't think this is a stretegy; simply survival.
Saturnalia Murphy Siding Saturnalia Business 101, Chapter 1: You're in business to make a profit. Business 101, Chapter 2: You must plan for the future, or there will not be one. I read the above link as saying that traffic is in decline, but that's OK because they psuhed through some rate increases. It goes to say they are going to try lowering rates on some coal traffic. Yeah, that should help the old bottom line.To me, the press release is saying that profits are up because they fired a lot of people and shut down some hump yards and such. How do they keep up that momentum when they can't rely on just firing more people and closing more hump yards? What is the future plan? Won't investors dump the stock next year when CSX can't cost-cut itself into prosperity? Certainly! And they are planning for the future...by dumping the company's underperforming business units. That means getting rid of marginal lines, eliminating no-longer-required hump yards, and streamlining operations in general. Sure if they were to continue to raise rates to shoo away more traffic, then we'd have a problem. But history tells us that they're probably just about done raising rates just to rid themselves of low-margin traffic. It's basic supply and demand...raise the rates until only your most profitable traffic mix remains while still running a full network. Traffic is mostly flat...now if it was down 10-15% or more then sound the alarm bells, but again I just don't see why people like Trains, Railway Age and the railfan community in general looks past the business just to look at the traffic counts. The EHH theory is to not allow yourself to become cluttered, and so yes that means cutting low-margin traffic and facilities. But this should come as a surprise to nobody. And to some people's insistence, the whole "pump and dump" stragety, wherein the company is then "left for dead" is REALLY, REALLY hard to believe for any sane person who can go find out how EHH's previous railroads are doing: that the answer is great. CN and CP are industry leaders in profitability and traffic handling. Granted there are some operational issues brought out by CN's incredible traffic growth in particular right now - I'm not saying EHH's stragety was perfect in every way. But just sitting on the argument that CSX is gonna just a corpse after this, you're really just joking to yourself. There are several posters on this board who basically chime in every time with "OMG they're just killing it eergh I hate capitalism" whilst looking straight past the actual meat of the issue. It's kinda silly, in reality, as I'm sure there could be a much better arguement by some if they actually tried to support their opinions.
Murphy Siding Euclid Murphy Siding Saturnalia Business 101, Chapter 1: You're in business to make a profit. Business 101, Chapter 2: You must plan for the future, or there will not be one. I read the above link as saying that traffic is in decline, but that's OK because they psuhed through some rate increases. It goes to say they are going to try lowering rates on some coal traffic. Yeah, that should help the old bottom line. To me, the press release is saying that profits are up because they fired a lot of people and shut down some hump yards and such. How do they keep up that momentum when they can't rely on just firing more people and closing more hump yards? What is the future plan? Won't investors dump the stock next year when CSX can't cost-cut itself into prosperity? Lowering the rates on coal traffic will add to the bottom line if, as the company anticipates, it makes coal more attractive to the power plants considering the switch to natural gas (Business 101, Chapter 3). Why do you have to keep on firing people or closing hump yards in order to keep up the momentum? If the people or hump yards are not necessary other than to keep people employed, then closing those yards makes money every day they remain closed. That is your momentum. No, I think you are reading that wrong. They are going to lower rates on coal business they already have in an effort to keep that business from going away. That will not improve the bottom line. It's simply a survival technique.
No, I think you are reading that wrong. They are going to lower rates on coal business they already have in an effort to keep that business from going away. That will not improve the bottom line. It's simply a survival technique.
Well if the bottom line is going to get worse because of the loss of coal traffic; and they can bolster the bottom line by preventing the loss of coal traffic by lowering the rate; doesn't that improve the bottom line? Keeping the bottom line from falling does help the bottom line, doesn't it? I think it does. If they did not lower the coal rates and just lost the coal traffic to alternative natural gas, would they not be in a worse off position?
Your comment, "Yeah, that should help the old bottom line" sounds sarcastic as if you are belittling CSX for making a mistake. Yet it is the best choice they can make compared to the alternative of just losing the coal hauling business.
My view is that CSX is being run for short term gains for investors in both dividends and stock prices, but in the long term there will be a reconning where CSX will be a minor, even if still profitable, player in the overall freight transportation scene. There is a lot of business that can return to railroads that plan to grab it and have the capacity to handle it, with trucking being increasingly more expensive. If NS is careful and astute, they can end up having far more business than CSX, perhaps with not quite as low an OR as CSX, but larger profits from much larger business.
And they will be doing the USA a great deak if servue by taking more trucs off the highways.
There will continue to be some coal-hauling business for many decades, but just not at the same magnitude that it used to be. There are many relatively new coal-fired units that are low-cost and clean baseload units and still have many decades of economical life left. There will continue to be export coal business and existing export terminals will continue to be busy for many decades.
The challenge is to first make up for the diminished coal loads with other business and then have loads of other business increase to grow the railroad.
Watch BNSF.
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