CSX Corp.’s earnings reports can be a bellwether for the economic outlook, as the Jacksonville-based railroad operator is always one of the first industrial companies to report results each quarter.
But after CSX reported slightly lower earnings and revenue for the second quarter, CEO Joe Hinrichs said in a July 21 telephone interview it is difficult to assess the outlook.
“I guess what we’d say is it’s a mixed message,” he said.
CSX reported gains in freight volume in several merchandise categories, including automobiles, metals and equipment and minerals.
However, that was offset by a decline in its intermodal shipments, caused mainly by a drop in international shipments to the U.S.
As a result, CSX reported earnings of 49 cents a share, down from 54 cents in the second quarter of 2022, with revenue falling 3% to $3.7 billion.
The 2022 earnings were helped by a 4-cent-a-share gain from a property sale in Virginia.
Hinrichs said CSX is seeing a pickup in domestic activity in its intermodal business but he is unsure when the import side of the business will turn around.
“We’re trying to figure out what’s going on as well,” he said.
One cause of the decline is destocking by retailers after they grew inventories too much after the coronavirus pandemic, he said.
“It looks like on the retail side there’s been softening by the consumer,” Hinrichs said.
“We believe it’s going to come back.”
While intermodal revenue fell 18% to $492 million, automobile shipment revenue grew 21% to $597 million.
CSX attributed the auto gains to increased North American vehicle production and new business wins.
Hinrichs joined CSX in September 2022 after nearly 20 years as an executive with Ford Motor Co., but he said that experience isn’t a big factor in winning new automobile business.
“Automotive companies are recognizing the substantial progress we’ve made in service,” he said.
Hinrichs’ experience in the auto industry does give him insight into alternative fuels, and he said CSX is working on initiatives to replace traditional diesel engines for railroad locomotives, to help the environment.
The company has recently announced plans to test biodiesel fuel blends and is also working with Canadian Pacific Kansas City railroad to develop hydrogen-powered locomotives.
“It’s a very important initiative,” Hinrichs said.
CSX had been struggling to maintain train staffing levels since the pandemic but Hinrichs said the company is close to being at full strength with 7,300 train and engine employees.
With new employees in training, he’s confident the company will soon reach its goal of 7,400.
“I think in the fall we’ll be in good shape,” he said.
Total employment at CSX was 22,743 at the end of the second quarter.
CSX is also close to finalizing agreements with all of its unions on paid sick leave, which has been a major initiative in improving employee relations.
The company in May announced a sick leave agreement with a 10th union and Hinrichs said there are two more remaining.
“We’re optimistic well reach agreements this year,” he said.
Since coming on board as CEO, Hinrichs has made a point of travelling to CSX sites throughout the Eastern U.S. to meet with employees and understand their concerns.
“It’s one of my favorite things to do, to get out and talk to people,” he said.
Hinrichs said he has visited about 50 CSX sites and he’s not finished meeting with employees.
“We’ll still continue to go out because it’s important to be out in the field on a regular basis,” he said.