Analyst Note| Matthew Young, CFA |
Eastern Class-I railroad CSX’ second-quarter revenue jumped 33% year over year (it was down 2% last quarter) driven by favorable comparisons (initial pandemic headwinds in second-quarter 2020), a solid underlying recovery in carloads, and yield improvement. Total carload volume was up 27%, versus 1% in the first quarter, which faced weather headwinds. Average revenue per carload rose 5% on highly favorable contract rate gains and rising fuel surcharges. In short, core pricing is benefitting from limited capacity across most transportation modes, which is lifting railroads’ pricing power. Management still expects double-digit revenue growth this year, excluding the Quality Carriers acquisition in July (which will add 6% annualized to the top line). This partly implies the firm has confidence in its ability to onboard sufficient train and engine headcount to support continued carload gains, despite an incredibly tight labor market.