In response to a series of problems that created bottlenecks across the railroad’s network, CSX chief executive Jim Foote went on what he called an “apology tour,” asking forgiveness of customers whose supply lines had been disrupted and promising improvements.
After the company reported first quarter results late Tuesday, CSX investors don’t need a similar show of atonement.
The company handily beat analysts’ estimates, earning 78 cents a share on sales of $2.88 billion. That was less impressive than it appeared at first, since estimates for CSX and other railroads came down through the quarter as weather and other problems hampered performance. On the other hand, an 8% decline CSX’s operating expenses was a clear positive. Shares were up nearly 5% in after hours trading.
Last year’s snafus and the first quarter’s lower costs came from the same thing: The plan put in place by late chief executive Hunter Harrison when he took the throttle at CSX last March.
Mr. Harrison moved to make the railroad more efficient by idling excess equipment, running longer trains, making tighter schedules and closing down yards. Those moves created massive bottlenecks during the summer, with long delays leading to production slowdowns at CSX customers waiting to get needed supplies. In response to those problems, the Surface Transportation Board required the company to hold weekly discussions with it. Mr. Harrison died in December.
Now, the CSX appears to have put its operations in order. The company said its performance metrics have improved, and on its earnings call Tuesday said that the STB is no longer requiring the weekly calls. What’s left is the lower costs.
CSX shares are near the highs reached after Mr. Harrison took over. Future share performance depends on how much more costs CSX can cut without running into more operating problems, or indeed whether recent problems might emerge again. For now, though, it has given investors a ticket to ride.
Write to Justin Lahart at justin.lahart@wsj.com