CSX railroad's 1Q profit jumps 15% on higher rates

CSX locomotives sit at CSX North Framingham Yard, on Jan. 24, 2023, in Framingham, Mass. CSX reports earnings on Thursday, April 20, 2023.(AP Photo/Steven Senne, File)

OMAHA, Neb. (AP) — CSX hauled in 15% more profit in the first quarter as the railroad's higher rates and fuel surcharges offset its higher costs.

The Jacksonville, Florida-based railroad said Thursday that it earned $987 million, or 48 cents per share. That's up from $859 million, or 39 cents per share, a year ago.

That topped Wall Street expectations of 43 cents per share, according to FactSet.

CEO Joe Hinrichs said the railroad's service improved in the quarter as CSX cut down on the number of delays many shippers had complained about over the past year. But volume was down about 1%.

“Our network is running well," he said. “We intend to do even better and show that CSX can sustain reliable service over time.”

Safety has been a key focus for railroads ever since a fiery Norfolk Southern derailment in Ohio in February. Hinrichs emphasized that railroads are very safe compared to other forms of transportation, but he vowed CSX wouldn't be complacent about safety.

“I think the data supports that railroads are by far the safest way to transport materials and goods over long distances,” Hinrichs said.

CSX officials highlighted some of the steps the railroad is taking to improve safety, including installing 53 more trackside detectors to help find equipment problems before they cause a derailment. After that, CSX will have hot-bearing detectors 14.9 miles (24 kilometers) apart on average across its network.

Edward Jones analyst Jeff Windau said that's likely to be a common theme all the major railroads will discuss this quarter as they respond to pressure to improve safety after the recent derailments. The industry may well see additional requirements later this year, but it's not yet clear what might come out of Congress and regulators.

CSX's revenue grew 9% to $3.71 billion in the quarter, ahead of analysts' expectations of $3.58 billion.

The railroad's expenses were up about 5% to $2.24 billion as the cost of fuel and wages continued to grow, with CSX hiring more employees and starting paying its employees the raises it promised during last fall's contract fight. Windau said CSX did “a really nice job managing expenses.”

The railroad has nearly 1,700 more employees for a total of 22,634 now after hiring aggressively over the past year as part of its efforts to improve service.

Hinrichs said he's proud of what CSX has done to address workers' quality-of-life concerns this year by agreeing to provide paid sick time to more than 10,000 employees.

Hinrichs has been working to repair relationships with CSX's unions since he took over the railroad last fall, and he says he's been encouraged by the conversations he's had.

“Our union leaders want the same thing we want, which is a safe, well-run railroad that provides very competitive compensation and great long-term benefits to our employees. We do that by serving our customers better,” he said.

Hinrichs said it might be hard for CSX to meet its previous target of seeing volume grow faster than the U.S. ecomomy, but revenue should still be up this year because of strength in some higher-priced markets like coal and automotive shipments. The weakest part of the railroad's business so far this year has been in deliveries of shipping containers filled with imported goods.