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Inside CSX’s Double-Digit Intermodal Revenue Growth in Q3 2018

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Aug. 18 2020, Updated 10:40 a.m. ET

CSX’s YoY intermodal revenues

Previously in this series, we examined CSX’s (CSX) third-quarter coal revenues. Here, we’ll assess its intermodal revenues. In the third quarter, the railroad’s intermodal revenues expanded 12.1% YoY (year-over-year) to $500.0 million from $446.0 million in the third quarter of 2017.

Intermodal’s revenue contribution to CSX’s total operating revenues declined 0.3% to 16.0% in the quarter from 16.3% in the third quarter of 2017.

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CSX’s Q3 2018 intermodal volumes

CSX’s intermodal shipments rose 3.0% YoY in the third quarter to 739,000 containers and trailers from 718,000 units in the third quarter of 2017. The railroad’s intermodal revenue growth was driven by a solid 7.0% increase in revenue per unit. The company’s intermodal revenue was $677.00 per unit in the quarter compared to $621.00 in the third quarter of 2017.

CSX’s domestic intermodal revenues rose 11.5% YoY to $391.0 million in the third quarter from $350.0 million in the third quarter of 2017. Domestic intermodal shipments grew due to tight truck capacity. Tightening in the truck market resulted in business growth with existing customers. However, this growth was partially offset by the rationalization of low-density lanes at the end of last year.

International intermodal revenues jumped a whopping 47.0% YoY to $241.0 million in the third quarter from $164.0 million in the third quarter of 2017. The addition of new customers and more business from existing customers led the increase in its international intermodal volumes. This volume growth was negatively impacted by the loss of shipments resulting from the rationalization of low-density lanes in late 2017.

Management insights

CSX announced new key initiatives at its Northwest Ohio facility. The facility previously functioned as a sorting facility under the earlier hub-and-spoke strategy. The railroad plans to leverage the facility as an important intermodal terminal to garner more revenue. The company is working with NorthPoint Development to set up a logistics park adjacent to the terminal.

CSX expects international intermodal to drive its intermodal business growth going forward. On the other hand, its domestic intermodal revenues are expected to remain unchanged due to the rationalization of low-density lanes. In 2018, major railroads (XLI) Union Pacific (UNP), Norfolk Southern (NSC), and Canadian National Railway (CNI) have reported solid intermodal business growth along with CSX.

In the next article, we’ll review CSX’s general merchandise segment’s performance.

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