Railroad companies report double-digit revenue growth but volumes slow
Three of the Class 1 US railroad companies reported double-digit revenue increases for third quarter. CSX reported an 11% increase to $3bn; Union Pacific reported revenue of $5.1bn, a 16% increase and Norfolk Southern reported an 18% increase to $2.9bn. Revenue increases for all three companies were attributed to higher rates and fuel surcharges.
While revenues increased, third quarter volumes increased only slightly for the three railroad companies. CSX and Union Pacific reported an overall 1% increase, while Norfolk Southern reported a 3.3% increase in carloads. Most of the railroad companies reported positive volume growth in their industrial segment; however, it appears intermodal growth which has previously been so strong this year slowed considerably for CSX and Union Pacific during third quarter.
CSX’s intermodal volume was flat despite a 5% increase in domestic volume as international volume declined 4%. According to CSX, the decline in international intermodal volume was mostly due to difficult comparisons from an early peak shipping season in 2010 versus a "lighter, more moderate peak shipping season" this year.
Union Pacific’s intermodal volume declined 6%. Like CSX, Union Pacific recorded a decline in international intermodal shipments. However, Union Pacific noted the decline was due to weak west coast imports and the loss of a contract during the second quarter of this year which resulted in a loss of 12,000 units. Domestic intermodal volumes, however, were up 2%.
Norfolk Southern’s total volume increased over 3% including a 13% increase in domestic intermodal shipments.
Although third quarter intermodal volumes were weak, it does appear the railroad companies were able to continue to take market share from trucking companies as the domestic intermodal sector posted higher volumes. Indeed, trucking company, J.B. Hunt, recently reported its third quarter intermodal volume increased 15% during the third quarter and noted it was successful in converting freight from over-the-road to intermodal. Norfolk Southern executives said high turnover among truck drivers was creating an opportunity for railroads to take more of the freight-hauling market.
The railroad companies remain upbeat regarding the short-term outlook as all expect slow to moderate economic growth in the fourth quarter.
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