CSX posts record quarter as the railroad left out of the merger finds its footing

While Washington argues over the biggest rail consolidation in a generation, the Class I railroad standing outside it has just delivered the best quarter in its history.

CSX reported record revenue of $3.94bn for the second quarter on 22 July, up 10 per cent year on year. Operating income rose 17 per cent to $1.51bn. Diluted earnings came in at 54 cents a share, up 23 per cent, beating a consensus of 52 cents. Operating margin expanded 240 basis points to 38.3 per cent, from 35.9 per cent a year earlier. The stock climbed more than 4 per cent in extended trading.

Volume did the heavy lifting. Total units reached 1.68 million, 6 per cent higher than a year earlier, with growth across merchandise, intermodal and coal. Intermodal alone was up 9 per cent. Revenue also benefited from a higher fuel surcharge and firmer pricing.

"Our second quarter results reflect the solid progress we're making at CSX," said Steve Angel, president and chief executive, promising to strengthen service execution in the second half.

The context matters. Angel inherited a railroad that had spent two years answering questions about service reliability, congestion at Chicago-area terminals and whether it could survive independent in a shrinking field. The Jacksonville company has since scaled back operations at its main Chicago yard and pushed switching work to other carriers. These numbers are the clearest evidence yet that the overhaul is landing.

The intermodal surge is not CSX's alone. Shippers are moving inland freight off the highway as truckload rates climb, lifting industry-wide rail volumes. Coal, meanwhile, continues its structural decline.

For CSX the strategic question stays open. A record quarter is a strong hand. Whether it is strong enough to stay independent is a call regulators, not railroaders, will make.