As CSX Corp. continues to deal with customer service issues under its new CEO, the Jacksonville-based railroad last week changed the methodology of its service metrics to more accurately reflect its performance.
We’ll have to take the company’s word that this data is more accurate because for most of us not in the railroad industry, the metrics are difficult to assess.
To make it even harder, CSX said its metrics are different than the ones reported by other major railroads, so we can’t compare them.
However, one of the metrics (which was not revised) in CSX’s latest service report was easy to decipher: Customer complaints are way up.
The average daily “customer inquiries” during the week of Aug. 12-18, Week 33 of the year, were 567.
That’s up from 354 inquiries in Week 25.
The number of inquiries, which mostly involve delayed freight cars, jumped to 570 in Week 30 and remained well above 500 over each of the last four reported weeks.
It was in July that reports of service issues began surfacing at CSX as CEO Hunter Harrison began implementing his “Precision Scheduled Railroading” plan, which he says will improve operations once fully implemented.
The U.S. Surface Transportation Board has expressed its concerns over the service problems. The agency Friday announced it will hold a “public listening session” on the issue Sept. 12.
CSX will be given an opportunity to discuss the problems and its efforts to resolve them, and freight shippers and other stakeholders will be allowed to explain how the problems have affected them.
One other unrevised metric may show why customer inquiries are rising.
The number of on-time arrivals of CSX trains ranged from 50 percent to 60 percent on a daily basis during Week 33. That’s down from 75 percent in Week 25.
The revised metrics may give some indication why trains are arriving late.
One of the measurements is “terminal dwell,” representing the average time a rail car sits at a terminal.
CSX had previously reported dwell for freight cars that were switched from one train to another, but its new metric includes cars that remain on the same train but sit in the terminal while work is performed on the train.
CSX also changed the way it measures “train velocity,” which shows the speed of a train from origin to destination.
The new measurement includes dwell time, which had previously been omitted, giving a better indication of the full time of a trip.
Under the new metrics, dwell was 12.5 hours in Week 33, up from 11.8 in Week 25.
Not surprisingly, with trains sitting idle for a longer time, average velocity for the full trip dropped from 15.6 miles per hour in Week 25 to 13.1 in Week 33.
“These new measures better reflect end-to-end railroad performance,” Harrison said in a news release.
“We remain committed to meeting our customers’ business requirements throughout the transition to Precision Scheduled Railroading and into the future.”
While we can’t compare CSX’s metrics with other railroads, the data does detail a decline in service. CSX is hoping those numbers will start to show better service in the weeks ahead.
Medtronic drops on revenue miss
Medtronic plc last week reported earnings that were higher than expected, but its stock dropped as revenue was below analysts’ forecasts.
The medical device company’s adjusted earnings of $1.12 a share for the first quarter ended July 28 were 9 cents higher than last year and 4 cents higher than the average analyst’s forecast, according to Yahoo Finance.
However, revenue of $7.39 billion, up 3 percent from last year, was lower than the average forecast of $7.45 billion.
Medtronic’s stock fell $1.76 to $81.76 Wednesday after the earnings report and dropped another $2.01 Thursday to $79.75.
The company said a “global IT system disruption” and supply constraints for its diabetes sensor impacted revenue growth in the quarter.
Medtronic said its Jacksonville division, which makes surgical instruments for ear, nose and throat doctors, grew revenue by a “mid-single digit” percentage, but it did not give figures. Total revenue in its specialty therapies division, which includes the ENT business, rose 4 percent to $369 million.
Sales, costs rise at Dick’s Wings
ARC Group Inc., operator of the Dick’s Wings & Grill restaurant chain, more than tripled second-quarter revenue to $1.09 million after acquiring two Dick’s restaurants that were previously run by franchisees.
However, because of the increased costs of operating those two restaurants, the Jacksonville-based company reported a net loss of $118,313, or 2 cents a share, for the quarter.
Before taking ownership of those two restaurants last December, all 22 Dick’s restaurants were run by franchisees.
Michaels Companies beats forecasts
The Michaels Companies Inc. rose Thursday after the arts and crafts retailer reported higher-than-expected earnings for the second quarter ended July 29.
Earnings per share of 19 cents were 2 cents higher than last year and 3 cents higher than the average analyst’s forecast, according to Yahoo.
Michaels’ stock rose $1.66 to $21.27 Thursday.
Total sales rose 1.2 percent to $1.07 billion and comparable-store sales (sales at stores open for more than one year) rose 0.6 percent.
Michaels forecast third-quarter earnings of 41 cents to 43 cents a share, in line with analysts’ forecasts. Third-quarter results benefit from seasonal events such as back-to-school and Halloween spending.
Texas-based Michaels, which has a distribution center in Jacksonville, operates 1,230 Michaels, 101 Aaron Brothers and 35 Pat Catan’s stores.
Fidelity spinoff is controlling J. Alexander’s
Two years after Fidelity National Financial Inc. spun off the J. Alexander’s Holdings Inc. restaurant business as a separate public company, another Fidelity spinoff will end up as majority owner of J. Alexander’s.
Cannae Holdings Inc. will control 52.5 percent of J. Alexander’s stock once a series of transactions are completed, according to a Securities and Exchange Commission filing.
Jacksonville-based Fidelity, which is mainly a title insurance company, is spinning off its investment subsidiary into a new company called Cannae. That deal is expected to be completed within a month.
Cannae’s investments include a 55 percent stake in American Blue Ribbon Holdings, operator of several restaurant chains.
J. Alexander’s three weeks ago agreed to buy one of those chains, 99 Restaurant & Pub. As part of the deal, Cannae will receive shares of J. Alexander’s and end up with the majority stake.
The SEC filing shows the sale of 99 will actually increase Cannae’s revenue because it can include revenue from its majority ownership of J. Alexander’s. Cannae’s revenue would have been $689 million in the first half of this year.
Cannae will be headquartered in Las Vegas, the home of Fidelity and Cannae Chairman Bill Foley.
Analyst likes FIS
Speaking of Fidelity spinoffs, Robert W. Baird analyst David Koning is optimistic about Fidelity National Information Services Inc., or FIS.
Koning said in a research report he recently met with CEO Gary Norcross and other FIS executives.
“Meetings were upbeat with a message of clean/stable revenue growth and margin expansion, following recent divestitures,” he said.
“We continue to view the stock as a solid grinder higher, with a likely drift toward about $96-$100 by the end of the year.”
FIS has risen 21 percent this year, trading at $91.45 at the time of Koning’s report.
FIS, which provides technology for banks, was spun off from Fidelity National Financial in 2006.
Fidelity gets stake in Foley company
Meanwhile, Fidelity soon will own an 11.1 percent stake in a different Las Vegas investment company controlled by Foley.
Foley founded a company called CF Corp. last year with former Blackstone Group dealmaker Chinh Chu.
CF, which had no other operating businesses, agreed in May to buy an annuities and life insurance company called Fidelity & Guaranty Life, which has no connection to Fidelity National Financial. However, Fidelity National Financial agreed to invest in FGL as part of the transaction.
According to a proxy statement for the $1.8 billion deal filed by CF, Fidelity will end up with an 11.1 percent stake in CF when the deal is completed later this year.
CF will change its name to FGL Holdings when the deal closes. Foley will continue as co-executive chairman of the company, along with Chu.