Dow Jones Transportation Average component, CSX, (CSX 79.63, +3.79, +4.9%) trades at a fresh record high after delivering solid results for the first quarter.
The rail carrier reported above-consensus EPS of $1.02 on revenue of $3.01 bln, which matched expectations. Q1 performance was driven by volume growth in almost all segments with overall merchandise volume increasing 3.1%. Higher pricing in most segments resulted in a 2.4% increase in merchandise revenue per unit.
CSX CEO, James Foote, stressed that the company's main goal is to continue improving its reliability, which helps CSX win business from other rail carriers and trucking companies. On-time arrivals increased to 64% in Q1 from 57% one year ago while on-time originations remained at 81%. The company intends to make continued improvements in reliability in order to convince more customers to use rail instead of other means of transportation.
Lower expenses helped the company reduce its operating ratio to 59.5% from 63.7% one year ago. This puts the company's operating ratio slightly ahead of its target of 60%. The company reported an increase in average train velocity while downtime was reduced. Fuel expense decreased on a yr/yr basis in Q1, due in part to fewer locomotives used.
Mr. Foote stressed that CSX is the leader in operating ratio, adding that the company can also be an industry leader in growth. If true, this would imply that results from other rail carriers like Kansas City Southern (KSU 122.27, +4.28, +3.6%) and Union Pacific (UNP 169.23, +1.25, +0.8%) may not live up to the high standard set by CSX.
CSX reiterated guidance for FY19 revenue growth in the low single digits, and the CEO noted that he has not seen anything in near-term indicators that was surprising to him.
The company reported strong results that were underpinned by volume growth in most segments and efficiency improvements. However, its leadership position in the industry should temper expectations for even better results from other rail companies.