CSX railroad's CEO signaled he would be open to merger conversations if a deal would boost shareholder value and help the business grow.
As merger rumors swirl in the industry, the Jacksonville, Florida-based railroad said Wednesday that its second-quarter profit dipped 14% to $829 million, or $0.44 per share. That's down from $963 million, or $0.49 per share, a year ago.
The railroad continues working on two major construction projects that are causing delays and added costs, but the results were in line with what the analysts surveyed by FactSet Research predicted.
CEO Joe Hinrichs wouldn't comment directly on the merger rumors and he said that CSX is focused on improving its operations. But Hinrichs also said his railroad would remain open to any possibilities that would help boost shareholder value. The Associated Press reported last week that Union Pacific was in merger talks with Norfolk Southern. Hinrichs wouldn't say if CSX is discussing a merger with anyone.
“While we are confident in CSX’s path forward, we welcome all opportunities that will allow us to deliver value for our shareholders, drive profitable growth, and serve our customers better,” Hinrichs said.
If merger actions heat up in the industry, CSX could be a target for one of the western railroads trying to build a transcontinental network. But the prospects for any deals among the major freight railroads remain uncertain because regulators might be reluctant to approve them.
Hinrichs said he thinks there are opportunities to attract new business and prosper by working together with other railroads today. One example is the new service that CSX and CPKC railroads recently announced to deliver shipments that CPKC picks up in Mexico and have CSX deliver them in the southeast United States.
CSX is in the middle of expanding a key tunnel in Baltimore, so it will be able to carry double-stacked shipping containers, and the railroad is completing repairs related to Hurricanes Helene and Milton. Those projects are adding about $10 million in additional costs every month because of all the shipments that need to be re-routed and constraining the railroad's capacity, so it will be a relief when they are done in the fourth quarter.
Hinrichs said the railroad is operating much more fluidly than it was in the first quarter of this year when the results disappointed. The railroad also eliminated about 125 management jobs earlier this month in a restructuring. Hinrichs said the railroad will take a $15 million to $20 million charge for that in the third quarter, but those cuts will save CSX about $30 million in expenses per year.
Edward Jones analyst Jeff Windau said in a research note that the railroad had a decent quarter even though its service suffered while re-routing so many shipments around the construction.
CSX executives said it remains hard to predict consumer sentiment that drives so much of the economy right now, but if Donald Trump's tariff policy and interest rates become more certain in the second half of the year that should help consumers and businesses feel more comfortable spending and expanding their operations.
“We’re really looking forward to these trade deals and providing some certainty,” Hinrichs said. “The tax bill provides certainty now for businesses. And hopefully we can get an interest rate cut or two in the second half which will also help.”
CSX is one of the major freight railroads that serves the eastern United States and competes with Norfolk Southern.
FILE - A CSX train engine sits idle on tracks in Philadelphia, Sept. 14, 2022. (AP Photo/Matt Rourke, File)
