10-QPeriod: Q3 FY2019

CSX CORP Quarterly Report for Q3 Ended Sep 30, 2019

Filed October 17, 2019For Securities:CSX

Summary

CSX Corporation reported its third-quarter 2019 financial results, revealing a slight decrease in revenue but an improvement in earnings per diluted share compared to the same period in the prior year. While overall revenue saw a 5% decline primarily due to lower intermodal and coal volumes, the company managed expenses effectively, reducing them by 8% year-over-year. This operational efficiency, coupled with pricing gains, contributed to a slight increase in earnings per diluted share to $1.08. Key financial strengths include a significant increase in cash and cash equivalents, bolstered by strong operating cash flows and debt issuance, despite substantial share repurchases and dividend payments. The company maintained a solid liquidity position with substantial cash and access to a revolving credit facility. Management highlighted operational improvements, including record train velocity and improved safety metrics, underscoring a focus on efficiency and execution. Investors should note the ongoing strategic capital investments, particularly in Positive Train Control (PTC), which represents a significant, multi-year expenditure. The company's commitment to returning capital to shareholders through dividends and share repurchases remains evident, balanced with maintaining an investment-grade credit profile.

Financial Highlights

47 data points
Beta

Revenue

$2.98B

Net Income

$856.00M

28.7% Net Margin

EPS (Diluted)

$0.36

Total Assets

$38.80B

Cash & Equivalents

$1.52B

Free Cash Flow

$1.05B

Financial Statements
Beta
Revenue$2.98B
Operating Expenses$1.69B
Operating Income$1.29B
Net Income$856.00M
EPS (Basic)$0.36
EPS (Diluted)$0.36
Shares Outstanding (Basic)2.37B
Shares Outstanding (Diluted)2.38B

Key Highlights

  • 1Revenue decreased by 5% to $2.98 billion in Q3 2019 compared to Q3 2018, mainly due to lower intermodal and coal volumes.
  • 2Expenses decreased by 8% to $1.69 billion in Q3 2019, driven by efficiency gains, volume savings, and lower fuel prices.
  • 3Earnings per diluted share increased by 3% to $1.08 in Q3 2019 compared to $1.05 in Q3 2018.
  • 4Operating ratio improved to 56.8% in Q3 2019 from 58.7% in Q3 2018, indicating improved operational efficiency.
  • 5Cash and cash equivalents significantly increased to $1.52 billion as of September 30, 2019, from $0.86 billion at the end of 2018, due to strong operating cash flow and debt issuance.
  • 6The company repurchased shares totaling $1.11 billion in Q3 2019, continuing its commitment to returning capital to shareholders.
  • 7Positive Train Control (PTC) implementation remains a key capital investment, with significant progress made towards the estimated total cost of $2.4 billion.

Frequently Asked Questions

The primary drivers for the 5% revenue decrease in the third quarter of 2019 were lower volumes in the intermodal and coal segments, reduced other revenue, and a decrease in fuel recovery. These factors were partially offset by positive pricing gains across most markets and a favorable mix of shipments.

CSX achieved an 8% reduction in expenses year-over-year due to significant efficiency gains, volume-related savings, and lower fuel prices. Specific areas of improvement included labor costs (due to lower headcount and crew starts) and materials, supplies, and other expenses (related to operating support, terminal costs, and equipment maintenance).

CSX is committed to returning cash to shareholders through dividends and share repurchases, while also maintaining an investment-grade credit profile. The company has a significant share repurchase program in place and plans to fund capital investments, such as Positive Train Control (PTC), through cash generated from operations.

CSX continues to invest in the implementation of Positive Train Control (PTC). The estimated total multi-year cost for PTC implementation is approximately $2.4 billion, and significant spending had already occurred by September 2019. Capital investments for 2019 included approximately $100 million for PTC.