CSX’s Q2 2017 Earnings Preview: Top Line Growth And Productivity Improvement Initiatives To Boost Earnings

July 13th, 2017 by Trefis Team
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CSX will release its second quarter earnings results on July 18 and conduct a conference call with analysts the next day. [1] We expect the company to report a considerable improvement in its Q2 earnings driven by top line growth and gains from the company’s productivity improvement initiatives.

CSX has reported a 1% increase in shipments in Q2, driven by higher shipments of coal. The demand for coal from utilities has recovered sharply this year as a result of higher natural gas prices, which are expected to average over 20% higher in 2017 on a year-over-year basis, and a favorable regulatory environment under the Trump administration. [2] In addition, intermodal shipment volumes (the shipments of containerized cargo both for domestic consumption and the international markets) registered healthy growth in Q2 as a result of steady growth in the domestic economy as well as exports. Besides higher shipments, higher oil prices are expected to boost the company’s fuel surcharge revenue and further prop up the top line.

In addition to higher top line growth, CSX’s productivity improvement initiatives will also help drive an improvement in the company’s earnings. A combination of workforce rationalization, higher capacity utilization as a result of better matching train length to demand, and reductions in various support costs allowed the company to realize $123 million worth of productivity savings in Q1. We expect the company’s ongoing productivity improvement initiatives to support earnings growth in Q2, as well. The following table summarizes our expectations from CSX’s Q2 earnings results.

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Have more questions about CSX? See the links below.

Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for CSX

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Notes:
  1. CSX Corporation Announces Dates For Second-Quarter Earnings Release and Earnings Call, CSX News Release [↩]
  2. Short Term Energy Outlook, EIA [↩]