News / New CSX chief upbeat after a positive first quarter with the US railroad

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US rail operator CSX has rebounded after a dismal fourth quarter, with revenue climbing and volumes remaining steady.

The performance will likely buoy the rail operator, which in December announced the shock death of its chief, Hunter Harrison.

Intermodal revenue for the first three months of 2018 climbed 3% year on year to $449m, with revenue per unit also up 3%, and while volumes remained flat, chief executive James Foote said this indicated new business.

“We started to transition from the hub-and-spoke model in intermodal, closing lanes [which] took about 7% of the intermodal traffic off the railroad,” Mr Foote told analysts. “And we’re getting close to getting intermodal volumes back to flat with prior years, so we’re replacing a large percentage of that business.”

Mr Foote, reporting on his first quarter at the helm, seemed generally pleased by the performance of the intermodal segment. And he agreed that tight capacity within US trucking and service issues at Norfolk Southern could bode well for CSX.

“Intermodal this year has a big hole to climb out of, but as we move forward, I think there is a lot of opportunity, both internationally and domestically,” he said.

“But we have specific goals, so just because there may be a lot of business available right now, I’m not going out chasing it to put volume on the railroad.”

Alongside improving overall efficiency, Mr Foote said the carrier would look to concentrate on key corridors, while also focusing on profitability.

He warned investors CSX would move ahead with “a logical and methodical rollout of growth plans” and would not be looking for a “major upside” in terms of improving volumes.

“Just taking a truck off the highway and putting it on the railroad – if it’s not priced right, and it’s not moving in the right and specific corridor, it adds no value to me,” said Mr Foote. “And at the end of the day, it adds no value to the customer because we probably won’t do a very good job for him.”

On the domestic front, the carrier reported declining volumes, noting a reduction in “low density lanes”, but the picture was rosier on international intermodal services. New customers alongside improving performance with existing clients increased volumes, and more than offset any reduction in low-density lanes, he repoprted.

“The whole objective here is to go to the customer and say, ‘I can provide you with value’,” added Mr Foote. “Whether it’s a merchandise or intermodal customer who wants to take advantage of rail connections with his over-the-whole trucking – over-the-road trucking operation.

“I need to provide value to him and make sure that I get paid for it, and if the two don’t align, if the guy wants me to add value and expects me to give him a discount at the same time, then we don’t – the stars don’t align, and he probably goes someplace else.”

You can see the full earnings call at Seeking Alpha, and CSX full results here.