Despite declines in coal and agriculture, US class I railroads report positive revenue growth

First quarter earnings for US Class I railroads ended on a positive note as CSX, Kansas City Southern, Norfolk Southern and Union Pacific all reported gains in revenue. It should be noted however, increases in revenue were mainly attributed to rate increases.

For CSX, quarterly revenue increased 5.6% to $2.9bn; Kansas City Southern’s revenue increased 12.1% to $547.5m; Norfolk Southern’s revenue increased 6.5% to $2.8bn; and Union Pacific’s quarterly revenue increased 13.9% to $5.1bn.

A recurring theme for the Class I railroads was declining coal and agricultural goods volumes.  Declining volumes of coal was due, in part, to low natural gas prices and environmental regulations; whereas agricultural goods were negatively affected by severe drought conditions.

Meanwhile, the US oil boom has resulted in increases in chemical volumes for all carriers. Norfolk Southern reported a 10% in chemical volumes, while CSX reported an 11% increase and Union Pacific reported a 12% increase.

Finally, intermodal volumes were also strong for the railroad providers.  CSX noted a 2.5% increase in volumes due mostly to a 5% increase in domestic intermodal, while Norfolk Southern’s intermodal volumes were up 9% as domestic intermodal increased 7% and international intermodal increased 13%. Union Pacific’s intermodal volumes increased 4%, primarily due to an 8% increase in international intermodal and flat domestic intermodal volumes.

Kansas City Southern continues to achieve success with its cross-border transport. Its cross-border revenue increased 11% because of its automobile and intermodal segments and its revenue from Mexico’s Lazardo Cardenas port increased 14%.

Source: Ti Dashboard – US, Class I Railroad Operators, Revenue

The railroad operators were fairly optimistic in their outlook beyond the first quarter and most believed coal volumes would improve throughout the year. Also, Kansas City Southern noted growth areas of crude oil, automotive and cross-border intermodal, while Union Pacific noted it had been contacted by several European companies about looking at possible manufacturing sites along railroad lines.