CSX CEO: Higher first-quarter earnings reflect better customer service

Joe Hinrichs says the improved performance is “tied directly to how our employees feel.”

  • By
  • | 12:58 p.m. April 21, 2023
Joe Hinrichs is the CEO of CSX Corp.
Joe Hinrichs is the CEO of CSX Corp.
File image
  • Columnists
  • Basch Report
  • Share

CSX Corp. reported better-than-expected first-quarter earnings, with new CEO Joe Hinrichs saying the Jacksonville-based railroad company’s commitment to improving service is translating into tangible financial results.

“The customers are really responding to our improving service,” Hinrichs said in an April 21 telephone interview.

“We’ve had some (market) share gains over the last couple of months,” he said. “We’ve really separated ourselves.”

Late April 20, CSX reported first-quarter earnings of 48 cents a share, up from 39 cents in the first quarter of 2022, with revenue growing 9% to $3.71 billion.

The average forecast of analysts was for earnings of 43 cents a share and $3.58 billion in revenue, according to Yahoo Finance.

Hinrichs joined CSX in September and has been focusing on improving relations between management and employees and better service for its freight customers.

He has been traveling to meet with employees at CSX operations throughout the Eastern U.S. as the company also worked on new contracts with several labor unions.

“I believe strongly our improved performance is tied directly to how our employees feel,” he said.

“You’re seeing the benefits of that.”

CSX reports several metrics of rail service and the company highlighted two that showed significant improvement since last year: carload trip plan performance and intermodal trip plan performance.

The carload performance, the percentage of cars destined for a customer that arrive at or ahead of schedule, jumped from 64% to 86%.

The intermodal performance, which measures containers arriving at or ahead of schedule, rose from 87% to 96%.

One reason CSX’s performance is improving is the railroad is close to fully staffed after struggling to replace workers who left after the coronavirus pandemic.

The company reached its goal of 7,000 train and engine employees by the end of 2022 and is nearing 7,300 now.

“Our goal now is to get to about 7,400 before summer season hits,” when vacations could affect staffing, Hinrichs said.

He is confident CSX will be able to fill vacancies.

“We have several hundred employees out there in training,” he said.

Hinrichs said the company has reached the point where it is more targeted in its staffing, looking at specific locations in the network where it may be short of workers.

“We feel good about where we are,” he said.

CSX’s total employment was 22,634 at the end of the quarter.

One negative consequence of the increased staff was an increase in reported accidents and injuries.

The number of personal injuries per 200,000 man-hours rose from 0.82 in the first quarter of 2022 to 1.03 this year, and the number of accidents per million train miles rose from 2.88 to 3.47.

“That’s largely attributable to the significant increase in new employees,” Hinrichs said.

“That’s not an excuse,” he said. “We don’t take that as acceptable.”

Hinrichs said those metrics are trending back down in April.

Railroad safety has become a major issue in the U.S., particularly after significant derailments at CSX’s Eastern U.S. rival, Norfolk Southern Corp.

Hinrichs said he has been in discussions with regulators and federal legislators seeking new safety standards and CSX is a leader in safety technology.

“We don’t know exactly how it’s all going to play out,” he said.

“We think we’re ahead of the curve and in a great spot.”

CSX increased freight revenue in every merchandise category in the first quarter but its intermodal business declined.

Hinrichs has previously said that a decline in international shipments to the U.S., driven by lower demand and high inventory levels, is affecting the intermodal business. But the company is hoping for a rebound in the second half of the year.

Hinrichs sees the U.S. economic outlook as mixed, with several of its freight merchandise categories performing well to offset the decline in intermodal.

CSX reported double-digit percentage revenue gains from shipments of automobiles, minerals, metals and equipment, forest products and agricultural products in the first quarter.

“In total, the mix has been good for us,” Hinrichs said.