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CSX’ Q2 Merchandise Carloads Recover Nicely; Cost Inflation Abounds, but Margins Outstanding

Matthew Young, CFA Equity Analyst

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.

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Company Profile

Business Description

Operating in the Eastern United States, Class I railroad CSX generated revenue near $11 billion in 2020. On its more than 21,000 miles of track, CSX hauls shipments of coal (13% of consolidated revenue), chemicals (22%), intermodal containers (16%), automotive cargo (9%), and a diverse mix of other bulk and industrial merchandise.

Contact
500 Water Street, 15th Floor
Jacksonville, FL, 32202
T +1 904 359-3200
Sector Industrials
Industry Railroads
Most Recent Earnings Jun 30, 2021
Fiscal Year End Dec 31, 2021
Stock Type Cyclical
Employees 19,000

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