CSX Corp. reported strong revenue and earnings growth in the second quarter, and CEO Steve Angel said to expect results to continue improving the rest of the year.
The Jacksonville-based railroad company reported revenue rose 10% to $3.94 billion and earnings rose 21% to $1 billion, or 54 cents per share.
“Stronger demand led to volume growth across our business and we managed this growth while delivering strong safety and productivity outcomes,” Angel said in a July 23 conference call.
But Angel thinks CSX can do better.
“There are many areas across the business where we can improve performance, and network fluidity and service are among them,” he said.
“Plans are in place to address opportunities for improvement, and we expect to see steady progress throughout the quarter while maintaining our focus on profitable growth.”
Angel said CSX is now expecting full-year revenue growth by a mid-to-high-single digit percentage, operating margins to increase by at least 3.5 percentage points and free cash flow to grow by more than 80%.
That’s up from its forecast at the end of the first quarter of mid-single digit revenue growth, 2 to 3 percentage point gains in the operating margin and 60% growth in free cash flow.
“The updated outlook reflects strong volume growth, improved financial performance, and the continued focus on productivity and cost control that you’ve heard about in today’s call,” Angel told analysts on the call.
“We continue to see opportunities to strengthen service execution, improve productivity, and drive long-term efficiency across the railroad. Those efforts remain central to our goal of delivering sustainable improvement over time.”
CSX reported better safety metrics in the second quarter, with the personal injury rate falling by 19% and the train accident rate dropping by 30%
Chief Operating Officer Mike Cory said the company can improve its safety record.
“We see opportunities to build on these results through continued focus on risk awareness, field-level engagement and applied technology as we pursue best-in-class performance,” he said.
CSX, which operates its rail network throughout the eastern U.S., reported total employment at the company fell by 6% in the past year to 22,151 as of June 30.
Chief Financial Officer Kevin Boone said the company expects some new hiring to support the company’s growth.
“T&E (train and engine service) headcount will increase modestly in the coming months to support our service product with improved demand, while we expect to leverage process improvements and technology to absorb attrition in other areas of the business,” he said.
Angel said CSX is focused on improving profitability as it increases revenue.
“Our priority is achieving profitable growth, not gaining market share for its own sake,” he said.
“I believe that industries that become too focused on market share eventually drive out profitability. At CSX, what’s most important is that the business we add increases operating income, expands margins and delivers good returns on invested capital.”