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.
Actually CNR is now struggling in Western Canada. The congestion due to lack of forward thinking by a past leadership team is costing them some business. Fortunately if you have an effective monopoly for a lot of the business the consequences are not as severe. But the sacred operating ratio is going the wrong way, so profits are not maximized.
CPR is not struggling that much, but more because EHH shrunk the traffic base and hadn't finished shrinking the plant. They have been able to regain some of the lost traffic simply because of CN's problems.
Certainly it seems to have paid off in spades, especially in stock price though not in dividends. It may be too soon to write the final chapter in the history books. The tech bubble was a sure thing, until the bottom fell out as the stock analysts stampeded in the opposite direction.
Brian SchmidtJACKSONVILLE, 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...
Who is cutting rates?
Never too old to have a happy childhood!
EuclidIt goes up relative to not having a job. And that is the pertinient, and current status of the the bottom line. The paycheck goes down, but the bottom line inreases from zero to half of what it was prior to the decision to choose half pay in exchange for not giving up the job. In the case of CSX cutting rates on coal to cause shippers to not switch from coal to gas: I assume that CSX is not doing that at a loss, but just less revenue. So you seem to be saying that it would be better for CSX to just hold the rates and lose the coal business. You seem to be saying that CSX is pretending to achieve some benefit when they are not actually doings so. You act like it is a ruse perpetrated by the legacy of Harrision.
Thanks to Chris / CopCarSS for my avatar.
Murphy Siding Euclid The net result is more $ to the bottom line in the relative terms of adding revenue to an otherwise shrinking bottom line. The shrinking bottom line is a given. The less the bottom line shrinks, the better off the company is in terms of generating revenue. The revenue brought in by reducing coal rates is revenue that would be lost if rates were kept the same during falling demand for coal shipping. So if that revenue is saved by lowering coal rates, it adds to the bottom line. It makes no difference whether the bottom line is rising, falling, or stationary. The more revenue it gets, the better it is. No, let's go through this again. Decreasing the rates on existing business in order to keep that business is not the same as increasing business. The net result is less $ to the bottom line, not more. If your boss says he’s going to cut your pay in lieu of firing you, does your paycheck go up or down?
Euclid The net result is more $ to the bottom line in the relative terms of adding revenue to an otherwise shrinking bottom line. The shrinking bottom line is a given. The less the bottom line shrinks, the better off the company is in terms of generating revenue. The revenue brought in by reducing coal rates is revenue that would be lost if rates were kept the same during falling demand for coal shipping. So if that revenue is saved by lowering coal rates, it adds to the bottom line. It makes no difference whether the bottom line is rising, falling, or stationary. The more revenue it gets, the better it is.
No, let's go through this again. Decreasing the rates on existing business in order to keep that business is not the same as increasing business. The net result is less $ to the bottom line, not more.
If your boss says he’s going to cut your pay in lieu of firing you, does your paycheck go up or down?
It goes up relative to not having a job. And that is the pertinient, and current status of the the bottom line. The paycheck goes down, but the bottom line inreases from zero to half of what it was prior to the decision to choose half pay in exchange for not giving up the job.
In the case of CSX cutting rates on coal to cause shippers to not switch from coal to gas: I assume that CSX is not doing that at a loss, but just less revenue. So you seem to be saying that it would be better for CSX to just hold the rates and lose the coal business. You seem to be saying that CSX is pretending to achieve some benefit when they are not actually doings so. You act like it is a ruse perpetrated by the legacy of Harrision.
EuclidThe net result is more $ to the bottom line in the relative terms of adding revenue to an otherwise shrinking bottom line. The shrinking bottom line is a given. The less the bottom line shrinks, the better off the company is in terms of generating revenue. The revenue brought in by reducing coal rates is revenue that would be lost if rates were kept the same during falling demand for coal shipping. So if that revenue is saved by lowering coal rates, it adds to the bottom line. It makes no difference whether the bottom line is rising, falling, or stationary. The more revenue it gets, the better it is.
The revenue brought in by reducing coal rates is revenue that would be lost if rates were kept the same during falling demand for coal shipping. So if that revenue is saved by lowering coal rates, it adds to the bottom line. It makes no difference whether the bottom line is rising, falling, or stationary. The more revenue it gets, the better it is.
We lose money on every unit sold - we'll make a profit by selling a higher number of units.
Murphy Siding Euclid They are not just framing the rate decrease as being something positive. It is positive. It brings in revenue that would be lost otherwise. Preventing revenue from being lost has the same benefit as producing new revenue. No, let's go through this again. Decreasing the rates on existing business in order to keep that business is not the same as increasing business. The net result is less $ to the bottom line, not more.
Euclid They are not just framing the rate decrease as being something positive. It is positive. It brings in revenue that would be lost otherwise. Preventing revenue from being lost has the same benefit as producing new revenue.
The net result is more $ to the bottom line in the relative terms of adding revenue to an otherwise shrinking bottom line. The shrinking bottom line is a given. The less the bottom line shrinks, the better off the company is in terms of generating revenue.
EuclidThey are not just framing the rate decrease as being something positive. It is positive. It brings in revenue that would be lost otherwise. Preventing revenue from being lost has the same benefit as producing new revenue.
Murphy Siding Euclid 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. Improving the bottom line and trying to keep it from deteriorating are certainly two different things. Thank you for recognizing sarcasm for once. Maybe I was making a point about the rate decrease being framed as something positive. Who was the general who wasn't retreating, he was advancing in a rearward direction? Same theory. (Yes- sarcasm.)
Euclid 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.
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.
Improving the bottom line and trying to keep it from deteriorating are certainly two different things. Thank you for recognizing sarcasm for once.
Maybe I was making a point about the rate decrease being framed as something positive. Who was the general who wasn't retreating, he was advancing in a rearward direction? Same theory. (Yes- sarcasm.)
They are not just framing the rate decrease as being something positive. It is positive. It brings in revenue that would be lost otherwise. Preventing revenue from being lost has the same benefit as producing new revenue.
Lean & Mean vs. Starving & Stupid will be resolved in the future when it all pans out. Already seeing what damage HHH did to CSX in the loss of people on the technical side along with the damage at the previous two roads plus NS (everyone forgets that fiasco). It just amazes me that finance, accounting and way-upper operating management that never gets its boots dirty or really understand how to railroad get to skate along even though they created the soon to be experienced implosion. (odd that Rob Krebs had his epiphany [a little too late] over what looks like peanuts in Mantle Ridge's cuthroat/ shortsighted world)
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.
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.
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.
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.
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?
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.
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 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.
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.
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.
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.
Greetings from Alberta
-an Articulate Malcontent
True enough. We'll meet again in 10 years and see.
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
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.
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.
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.
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.
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 ?
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.
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?
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.
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.
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...
Our community is FREE to join. To participate you must either login or register for an account.