uploads///CSX Coal

What Led to the Solid Jump in CSX’s Coal Revenues in 2Q17?


Jul. 20 2017, Updated 1:35 p.m. ET

CSX’s coal revenues in 2Q17

In this article, we’ll take stock of CSX’s (CSX) coal revenues in 2Q17. In this quarter, CSX posted coal revenues of $530.0 million, up 27% from its $416.0 million in 2Q16.

The year-over-year situation for coal has certainly improved for CSX. However, on a sequential basis, coal revenues were up by just 1.5%, which shows that coal volumes remain uncertain.

The above graph shows that CSX’s coal revenues were as high as $638.0 million just ten quarters before. From the levels in 1Q15, the company’s coal revenues were 20.4% lower in 2Q17. Coal’s share of CSX’s total revenues went up to 18.1% in 2Q17 from 15.4% in 2Q16.

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CSX’s coal volumes

Domestic utility coal volumes slid 1% due to the loss of short-haul interchange traffic. However, this fall was partly offset by growth in coal consumption from existing coal-fired power plants. Note that utility coal accounts for 47% of CSX’s total tonnage.

The domestic coke and iron ore and other volumes fell 6% in 2Q17 mainly due to a temporary drop in iron ore production by one of CSX’s large customers. On the positive side, the company saw a 30% rise in export coal volumes. The 2Q17 volumes rose as a result of solid global demand for US metallurgical coal. Export metallurgical coal and export thermal coal together constituted 34% of CSX’s total coal tonnage in 2Q17.

Coal outlook

According to the US EIA, “in 2017, growth in coal-fired electricity generation and exports are expected to lead to an increase of 57 MMst (8%) in total US coal production. Production in the Western region is forecast to increase by 26 MMst. Increases in production from the Appalachian region and the Interior region are expected to be 16 MMst and 15 MMst, respectively.”

The growth in coal prices in 2017 has rekindled hopes of higher volumes for CSX and its peers such as Norfolk Southern (NSC), Union Pacific (UNP), Genesee & Wyoming (GWR), and Canadian Pacific (CP). All major US railroads are included in the portfolio holdings of the WisdomTree Earnings 500 ETF (EPS).

Keep reading to know more about CSX’s intermodal segment’s performance in 2Q17.


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