The surprise departure last month of CSX Corp.’s second-ranking executive hasn’t changed the outlook for the Jacksonville-based railroad company, but it has altered Michael Ward’s future.
“What has changed is I’m going to be around longer, at least three more, if not more years,” Ward said in an interview Wednesday after CSX reported its quarterly earnings.
Ward, who turned 65 last month, said he was likely to retire next year as chairman and CEO of CSX, with former President Oscar Munoz designated to succeed him.
However, Munoz left CSX last month to become CEO of United Continental Holdings Inc. after the sudden resignation of the airline’s previous CEO.
So Ward agreed to stay around as CSX’s board of directors comes up with a new succession plan.
Ward said there is no definitive successor in place now, but he said any one of three top CSX executives could be in line for the CEO spot: President Clarence Gooden, Chief Operating Officer Cindy Sanborn and Chief Sales and Marketing Officer Fredrik Eliasson.
As CSX makes long-term plans, it also is dealing with the short-term issue of reduced freight demand, which is affecting the entire railroad industry.
CSX late Tuesday reported third-quarter earnings of 52 cents a share, just a penny higher than the third quarter of 2014. Revenue fell 9 percent to $2.94 billion, slightly lower than analysts’ forecasts but not a big surprise.
“I’m pretty pleased with the results given the volume headwinds we were facing,” Ward said.
CSX has been dealing with a continued drop in shipments of coal, which has been its biggest business segment. However, the company also is experiencing lower demand for other commodities.
For example, Ward said the strong U.S. dollar has resulted in lower shipments of steel, as businesses turn away from domestic steel producers in favor of imported steel.
He also said U.S. farmers are growing less corn because of low prices, resulting in lower agricultural shipments on the railroad.
Low demand for certain freight shipments should continue in the fourth quarter, with industrial production forecast to fall by 0.8 percent, Ward said.
“Obviously we move a lot of things that are tied to industrial production,” he said.
However, he said the overall outlook is “mixed,” with better demand in the housing and automotive sectors.
Also, consumer sentiment about the economy remains positive.
“Our intermodal segment, which is consumer driven, is still strong,” Ward said.
CSX’s operating ratio — operating expenses divided by revenue — was 68.3 percent in the quarter, down from 69.7 percent in the 2014 third quarter but higher than the 66.8 percent ratio in the second quarter this year.
Ward said the increase from the second quarter was part of a normal seasonal trend.
“That (the operating ratio) usually tends to be not as robust in the third quarter,” he said, and he believes the company is still on track to reach its eventual goal of an operating ratio in the mid-60 percent range.
The operating ratio is considered a key metric in evaluating the efficiency of the railroad.
“We’re pretty pleased with where we’re heading,” Ward said.