OMAHA, Neb. — Both Union Pacific and CSX reported strong performance in the fourth quarter as they braced for potential challenges arising from the current administration’s policies and the broader economy.
With President Trump’s discussions around imposing tariffs on major trading partners such as Mexico and Canada, the import volumes that railroads handle could be impacted. However, a shift towards relaxed regulations from the Federal Railroad Administration and tax adjustments may provide relief to the rail industry. Additionally, any actions that promote domestic manufacturing could bolster railroad operations.
Jim Vena, CEO of Union Pacific, expressed hope that the proposed tariffs are merely a bargaining strategy, arguing that increased costs from tariffs could adversely affect U.S. consumers unless there are critical national security concerns at play.
CSX’s CEO, Joe Hinrichs, mentioned that obtaining the regulatory waivers they have sought could shift the focus of employees from problem identification to problem-solving; however, union opposition remains a hurdle. They emphasize that technology should be an enhancement rather than a replacement for human inspections.
Hinrichs shared an optimistic outlook on the regulatory environment, anticipating a more collaborative approach from governing bodies regarding technological advancements and safety measures within the rail sector. He highlighted the importance of maximizing freight hauling efficiency in managing upcoming challenges, a sentiment echoed by Edward Jones analyst Jeff Windau. Despite facing the repercussions of two severe hurricanes, CSX has managed to maintain efficiencies during the quarter.
Union Pacific, based in Omaha, Neb., reported a profit of $1.76 billion, or $2.91 per share, significantly surpassing Wall Street’s expectations. This is an increase from the previous year’s profit of $1.65 billion, or $2.71 per share. The railroad improved its financial performance despite incurring an extra one-time cost of $40 million for personnel buyouts in a specific region. Wall Street analysts expected earnings per share to average around $2.80.
Although revenue saw a slight dip of 1% to $6.12 billion, the volume of shipments increased by 5%. However, the rise in volume was largely attributed to intermodal carloads, which typically yield lower profits than other freight categories like coal. Analysts had projected Union Pacific’s revenue to hit $6.15 billion. The company reiterated its commitment to achieving its long-term objectives of delivering significant earnings growth over the next three years.
As two of the largest freight railroads in the U.S., Union Pacific primarily operates in the western regions, while CSX focuses on the East Coast. CSX reported earnings of $733 million, or 38 cents per share, during the quarter, reflecting a slight increase in volume by 1%. This number is down from the previous year when it earned $882 million, or 45 cents per share. The decline was attributed to a one-time $108 million accounting charge tied to its Quality Carriers division.
Excluding the charge, CSX would have reported a profit of $815 million, which aligns with analysts’ expectations. Revenue fell by 4% to $3.54 billion, partly due to decreased income from fuel surcharges, which was just short of Wall Street’s predictions, while expenses rose by 3%.
CSX began the quarter by addressing the aftereffects of Hurricanes Helene and Milton in the Southeast. Officials previously indicated that although they managed a swift recovery for operations after the storms, lingering damage remained significant.
Looking ahead, Hinrichs foresees growth in volume by low to mid-single digits. However, he cautioned that weak coal prices and lower fuel costs will likely hinder revenue growth. CSX is also engaged in extensive construction projects to repair hurricane damage and to upgrade a key tunnel in Baltimore to facilitate double-stacked shipping containers across the East Coast.
