NEW YORK -- Railroad operator CSX Corp. said Wednesday (April 15) it predicts double-digit declines in shipping volume to continue through the second quarter, and expects to furlough more employees as a result, according to the Associated Press.
The Jacksonville, Fla.-based company said Wednesday in a conference call with analysts that sales will continue to be hurt as demand to ship goods by rail plummets. Railroads face stiff competition from trucking companies that have slashed rates to remain competitive, as well as overall economic weakness.
CSX Corp. reported on Tuesday its first-quarter earnings dropped 30 percent, as slowdowns in the housing, construction and automotive markets continued. The railroad transports everything from cars to toys, and its performance -- like that of its competitors -- is considered an indicator of the nation's overall economic health.
CSX has already furloughed about 2,300 employees in the last year, but executives said that more "rightsizing" will be needed as business slows further. At the end of March, CSX had about 30,000 employees.
CSX cut about 9 percent of its rail yard crews and 13 percent of its local crews -- the workers that connect trains for customers -- in the first quarter.
The railroad expects sales in nine out of its 10 business segments to fall in the April-to-June period compared with the same time last year. Shipments of agricultural products should not lose ground year-over-year, CSX said.
According to the Association of American Railroads, shipping volume is down 16.7 percent so far this year compared with the same period in 2008.
CSX said it might see some demand improvement as stimulus dollars are used for new infrastructure projects, but it expects weak volume to continue. And segments that have been strong points for the last year -- such as coal -- should decline as utilities use less coal to run power plants with lower demand and steel production falls.
But despite falling earnings and a murky outlook for the next few months, analysts cheered CSX's cost-cutting and improved productivity.
In a note to clients, Deutsche Bank analyst Marcelo Choi suggested that CSX's first-quarter results -- which beat Wall Street's expectations -- bode well for the rest of the railroad group. He suggests that analysts may have underestimated the railroads' ability to focus on cost-cutting.
CSX said about half of its reduced operating expenses came from lower fuel costs. Furloughs, faster train speeds and less time spent in the station accounted for the rest. CSX shares jumped $2.20, or 7.8 percent, to $30.59 in Wednesday trading.
(The preceding article by Samantha Bomkamp was distributed April 15, 2009, by the Associated Press.)
