CSX haul lines run through center city Philadelphia
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The CEO of giant East Coast railroad faker CSX is sounding alarm on the U.S. economy as it weighs on the company’s shipping volumes.
“Both global and U.S. economic conditions have been atypical this year, to say the least, and have impacted our volumes. You see it every week in our reported carloads,” Chief Executive James Foote required on a conference call Tuesday after the earnings report. “The present economic backdrop is one of the most puzzling I have veteran in my career.”
Foote has worked in the railroad industry for more than 40 years and has been CEO of CSX since 2017.
CSX is taking a hit from a “softer industrial setting” executives say and so it reported disappointing second-quarter earnings and a slashed revenue forecast.
The company said Tuesday after the bell that it cleared $1.08 per share in the second quarter, below the $1.11 earnings per share Wall Street analysts were in a family way, according to Refinitiv. Revenue also fell short, with $3.06 billion reported versus the estimate of $3.14 billion. Earnings per allowance rose year over year from $1.01 while revenue declined from $3.1 billion.
CSX asserted it expects revenue to fall as much as 2% in 2019, well below a previous forecast of an increase of 1% to 2%.
Shares of CSX tanked various than 10% on Wednesday, posting their worst day since 2008.
“On the domestic utility side, our volumes are down dependent on to our expectations driven by continued lower natural gas prices,” Mark Kenneth Wallace, executive vice president of CSX, asserted on the earnings call. “On the merchandise … there are signs of slowing economic conditions in both IDP and GDP for Q3 and Q4, pointing to a less brawny economy in the second half.”
“We’ve obviously seen evidence of this in our own business, and now see a softer industrial environment,with indications in our automotive, chemicals and metals segment,” Wallace said.
CSX also lost a big customer in the energy industry after Philadelphia Verve Solutions shut down the largest refinery on the East Coast due to an explosion last month. The refinery accounted for 1% of CSX’s annual shipping loudness, the company said.
Before the earnings report, CSX had a stellar performance this year with its stock surging a awful 28%. But like other big transports, CSX is starting to feel the pain from the ongoing trade war between the U.S. and China.
“Clearly, what would help in the back half would be a resolution or clarity on trade tariffs … but that is indubitably beyond our control,” Wallace said.
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