Class I's release fourth quarter and annual earnings

CSX Corporation announced a solid fourth quarter and full-year financial performance for 2015. The railroad announced declines for the fourth quarter and mixed financial results for the full year.

CSX reported in a press conference that net earnings declined five percent to $466 million or $0.48 per share (down two percent), down from last year’s fourth quarter net earnings of $491 million or $0.49 per share.

Fourth quarter revenue declined 13 percent, as a result of a six percent volume decline and the impact of lower fuel recovery. CSX reported that expenses decreased 13 percent; reflecting reduced fuel prices, lower volume-related costs and efficiency gains. As a result, operating income declined for the quarter by 12 percent to $791 million, while operating ratio improved 20 basis points to 71.6 percent.

For the full year 2015, CSX generated $11.8 billion in revenue as growth in intermodal, automatic and minerals markets partially offset continued significant declines in coal. The company reports a four percent increase of earnings per share to $2.00 on net earnings of $2.0 billion. CSX said that improving service, resource alignment and efficiency gains helped generate an operating income of nearly $3.6 billion and the company’s first sub-70 full-year operating ratio at 69.7 percent.

“CSX delivered solid results in 2015 by balancing strong service with compelling cost control and efficiency gains despite a market challenged by low commodity prices and global impacts of the strong U.S. dollar,” CEO Michael J. Ward said.

“With negative global and industrial market trends projected for 2016, full-year earnings per share are expected to be down compared to 2015. CSX will continue to be rigorous about efficiency, resources and service quality in order to maximize shareholder value and achieve a mid-60s operating ratio longer term.”

Operating ratio is a railroad’s operating expenses expressed as a percentage of operating revenue, and is considered by economists to be the basic measure of carrier profitability. The lower the operating ratio, the more efficient the railroad.

 

Canadian Pacific Railway announced record fourth quarter and full-year earnings for 2015.

The fourth quarter saw the highest ever diluted earnings per share for the period at C$2.08 and adjusted diluted earnings per share of $2.72. Adjusted and reported operating ratio came in at 59.8 percent, matching the record-setting performance of 2014.

For the full-year 2015, CP announced diluted earnings per share at C$8.40 and adjusted diluted earnings per share at a record C$10.10, a 19 percent improvement over last year’s reported adjusted earnings per share of C$8.40. The railroad posted a best-ever full-year adjusted and reported operating ratio of 61 and 60 percent, beating the previous record set in 2014 at 370 and 470 basis points respectively. CP also reported record revenues of C$6.71 billion for the year.

“Thanks to our committed, hard-working employees across the network we have produced a record low operating ratio along with record earnings per share,” CEO E. Hunter Harrison said. “Despite challenging economic conditions and lower commodity prices, we continue to focus on what we can control – lowering costs, creating efficiencies and improving service.

“While the North American economy braces itself for more headwinds, we remain optimistic about the future and CP’s continued growth. Despite the challenges, we expect 2016 to bring an operating ratio below 59 while generating double-digit EPS (earnings per share) growth – a testament to the strength of our operating model and plan for the future.”

 

Union Pacific Corporation reported decreases in revenues for the fourth quarter and full-year 2015.

UP reported a fourth quarter net income of $1.1 billion or diluted earnings per share of $1.31, a 19 percent decline as compared to last year’s fourth quarter of $1.4 billion or $1.61 per diluted share. Similarly, operating revenue was down 15 percent to $5.2 billion and business volumes as measured by total revenue carloads declined nine percent. Operating ratio came in at 63.2 percent, unfavorable by 1.8 points as compared to last year’s fourth quarter.

“Total volumes decreased nine percent in the quarter, more than offsetting another quarter of solid core pricing gains,” CEO Lance Fritz said. “On the cost side, we continued to adjust resources throughout the quarter and also made solid progress with our productivity initiatives. As a result of these efforts, we achieved a quarterly operating ratio of 63.2 percent.”

For the full year 2015, UP reported net income of $4.8 billion or $5.49 per diluted share, down eight and five percent respectively as compared to 2014’s reported net income of $5.2 billion or $5.75 per diluted share. Operating revenue also saw a decrease, coming in at $21.8 billion, as compared to 2014’s reported $24.0 billion. Operating income saw an eight percent decrease to $8.1 billion. Carloadings were down six percent for the year. UP reported an operating ratio of 63.1 percent, a full-year record, improving 0.4 points from the previous year.

“This past year was a difficult one in many respects, but our team did outstanding work in the face of dramatic declines in volumes, and shifts in our business mix,” Fritz said. “Overall economic conditions, uncertainty in the energy markets, commodity prices, and the strength of the U.S. dollar will continue to have a major impact on our business this year. However, we are well-positioned to efficiently serve customers in existing markets as they rebound.

“The strength and diversity of the Union Pacific franchise also will provide tremendous opportunities for new business development as both domestic and global markets evolve. When combined with our unrelenting focus on safety, productivity and service, these opportunities will translate into an excellent experience for our customers and strong value for our shareholders in the years ahead.”

 

Kansas City Southern reported decreases in earnings for the fourth quarter 2015. Revenue for the railroad decreased for the fourth quarter by seven percent to $598 million as compared to the fourth quarter of 2014.

The railroad also saw a decrease in carload volumes (down two percent). Operating expenses declined 12 percent to $379 million, a three percent decrease from last year’s fourth quarter. Operating income surged two percent to $219 million, as compared to last year’s reported $214 million. Operating ratio saw a 3.3 point improvement to 63.4 percent. Net income declined to $140 million or $1.28 per diluted share as compared to the reported $142 million or $1.28 per diluted share from the fourth quarter 2014. Adjusted diluted earnings per share came in at $1.23 as compared to $1.27 in 2014.

“KCS’ ability to react to a rapidly changing market and operational conditions was clearly evidenced during the fourth quarter in which not only did the company have to contend with an unsettled economy, but also with a hurri
cane in Mexico and floods in a key section of its U.S. rail network,” CEO David L. Starling said. “Despite these challenges, KCS attained a fourth quarter 2015 operating ratio of 63.4 percent, a 3.3 point improvement from the prior year. System velocity and system dwell metrics also improved, returning KCS to the top tier of Class I railroads in these categories.”

For the full year 2015, KCS reported a decline in revenue of six percent to $2.4 billion. Carloads decreased three percent from 2014, to 2.2 million. KCS reported an operating income for the year at $813 million. Full-year 2015 adjusted operating income decreased four percent from the prior year. Operating ratio saw a slight improvement of 0.7 points to 66.4 percent as compared to last year’s 67.1 percent. Reported net income for the railroad totaled $485 million or $4.40 per diluted share, as compared with 2014’s reported $504 million or $4.55 per diluted share. Adjusted diluted earnings per share came in at $4.49 as compared to the reported $4.82 adjusted diluted earnings per share in 2014.

“Though our industry still must contend with economic uncertainty in 2016, the progress we have made during 2015 gives us confidence that KCS is positioned to maximize its near-term and longer-term business opportunities,” Starling said.

 

Canadian National Railway reported mixed financial results for the fourth quarter and full-year 2015.

For the fourth quarter, net income increased 11 percent to C$941 million, while diluted earnings per share increased 15 percent to C$1.18. Operating income increased seven percent to C$1,354 million. Revenues for the quarter saw a one percent decrease to C$3,166 million and carloadings declined eight percent and revenue ton-miles declined by five percent. Operating ratio improved 3.5 points to 57.2 percent.

For the full-year 2015, the railway saw a net income increase of 12 percent to C$3,538 million, with diluted earnings per share rising 14 percent to C$4.39. Adjusted net income saw an increase of 16 percent to C$3,580 million; whiled adjusted diluted earnings per share increased 18 percent to C$4.44. Operating income also saw an increase and rose 14 percent to C$5,266 million. Revenues increased four percent to C$12,611 million for the year, while carloadings declined two percent and revenue ton-miles decreased three percent. The operating ratio for 2015 improved by 3.7 points to 58.2 percent. Free cash flow came in at a record C$2,373 million, compared to 2014’s C$2,220 million.

“CN generated strong fourth quarter and full-year 2015 results despite the weak volume environment,” CEO Claude Mongeau said. “Our solid performance is a testament to the strength of CN’s franchise and diversified portfolio of businesses. I am particularly proud that CN’s team of railroaders quickly recalibrated resources to respond to weaker volumes, while protecting customer service.

“Although the economic environment remains challenging, CN will continue to leverage its franchise strength and industry-leading efficiency. For 2016, the company expects to deliver mid-single digit EPS [earnings per share] growth over adjusted diluted 2015 EPS of C$4.44. CN will continue to invest in the safety and efficiency of its network, with a 2016 capital investment program of approximately C$2.9 billion, including the negative impact of foreign exchange and increased spending for Positive Train Control technology.

“Given CN’s strong balance sheet and solid financial prospects, I am pleased to announce that the company’s board of directors approved a 20 percent increase in CN’s 2016 quarterly common-share dividend. CN has increased its dividend per share by 17 percent per year on average since its privatization in 1995 and continues to move towards a target payout ratio of 35 percent.”

 

Norfolk Southern Corporation reported declining financial results for both the fourth quarter and full-year 2015 as compared to the same periods in 2014.

Railway operating revenues declined 12 percent to $2.5 billion for the fourth quarter 2015. On the same token, traffic volumes also decreased by six percent as a result of lower coal volumes and the effects of low commodity prices.

Railway operating expenses decreased by $103 million, or five percent, to $1.9 billion. Income from railway operations was 28 percent lower for the quarter, coming in at $642 million. The operating ratio or operating expenses as a percentage of revenues, was 74.5 percent, as compared to last year’s reported 69 percent for the fourth quarter. Fourth quarter 2015 net income was $361 million or $1.20 per diluted share, a decrease from last year’s $511 million or $1.64 per diluted share.

Full year financials for 2015, like the fourth quarter, also saw declines. Railway operating revenues were $10.5 billion, a 10 percent decrease as compared to 2014. This reflects an $852 million or 64 percent reduction in fuel surcharge revenues. Traffic volume was also down three percent due to declines in coal. Railway operating expenses declined $422 million or five percent to $7.6 billion. Income from railway operations declined 19 percent to $2.9 billion. Operating ratio for the year was 72.6 percent, compared to 69.2 percent from the prior year. For 2015, net income was $1.6 billion or $5.10 per diluted share, as compared to 2014’s $2.0 billion or $6.39 per diluted share.

“We are implementing a plan to reduce costs and enhance profitable growth,” CEO James A. Squires said. This plan will enable us to achieve significant annual expense savings beginning in 2016 without compromising the company’s ability to capitalize on volume and revenue growth opportunities. We are making progress despite a challenging operating environment, including successfully restoring our rail service to previous high levels, realigning resources and completing strategic capacity investments to improve efficiency and productivity.

“Through these actions, we are positioning Norfolk Southern for improved performance and value creation in 2016 and beyond. We are confident in our ability to deliver superior shareholder value through our strategic plan, which is built on exceptional customer service, growth through pricing and new business, cost reduction and control, and increasing returns to capital. Our fourth-quarter results reflect current challenges in domestic and global markets.”