CSX Transportation looks for the U.S. economy and its rail freight traffic to keep growing “at a modest rate” in the next few quarters, said Michael Ward, its chairman and CEO.
Ward told CNBC that September rail traffic pointed to a normal autumn buildup by retailers, while automotive-related shipments continue to strengthen. CSX profit rose 12 percent in the third quarter to $464 million and revenue increased 11 percent to about $3 billion, even though freight traffic grew just 1 percent.
“All our key markets had revenue growth, and most of them showed volume growth as well in this quarter,” Ward said. CSX is the first large railroad to report earnings for the period.
He rejected the idea the economy has weakened to “stall speed,” and said customer feedback points to further mild growth head. “We’re encouraged,” and CSX is hiring more workers, he said.
“If you look at our 10 major (freight) markets, five of them grew in volume in the quarter, two of them were flat and three were down. So it’s a little bit of a mixed bag, and clearly the economy moderated some,” he said. “But when we talk to our customers and look at the markets we serve, we expect continued modest growth in the coming quarters.”
Intermodal and chemicals traffic at CSX was about even with the 2010 third quarter, while coal, farm products and consumer food shipments were down. But metals and forest products showed strong gains, with milder increases in other areas.
Ward said the railroad industry is “a good barometer of the economy, (and) we did see some uptick in September. It’s a normal fall peak, whereby retailers are stocking the stores for the Christmas time.”
The auto sector is poised build on recent gains, he said, with inventories of finished vehicles now at about 49 days’ worth of sales, while the industry prefers 60 days’ supply on hand. Light vehicle output is also predicted to increase next year. So, “we expect the automotive (traffic) to continue to pick up steam as the year progresses, and then next year,” Ward said.