There has been considerable good press in recent Trains about CSX’s current situation with great growth, strong management, investment in property (North Baltimore is featured in the current issue) and profitability.
So, what is the current status between CSX and NS in the east? What are the strengths and weaknesses of both carriers (including traffic lanes)? If this is a topic of interest I will do a little research on the financials of both carriers and post it later.
I am about ready to re-read The Men Who Loved Trains by Rush Loving Jr. In the book it seems that NS management was really concerned about CSX and considered them a sleeping giant. It appears that giant has awoken.
Let’s face it, for the most part, the nature of railroading is whoever has the siding to the customer gets the business, but there are major exceptions, primarily intermodal. How much do these railroads compete against each other?
csx and Ns are both doing catch up on the rails they let go by the wayside capacity wise.They both need to increase the MOW budget so that trains can run sooner rather than later.
Both companies spent most of the first decade after acquiring ConRail accumulating wealth to pay down the inflated purchase price that was paid for ConRail thanks to their bidding against each other for total acquisition of the property.
Now both have undertaken capacity enhancement projects to position their companies to handle increased traffic potential after the expansion of the Panama Canal.
Both are progressive 21st Century rail transportation companies.
Here is my gut feeling, and it is only an outsider’s observations.
Both railroads have strong route structures and have been able to digest the Conrail merger effectively, adding strong routes and markets to their portfolios. The weeding out process of since Staggers in 1980 has eliminated carriers and routes that were ineffective. That can actually be backtracked to the Penn Central, eastern mess evolving into Conrail.
The duopoly nature of the eastern scene allows both to have a fairly high revenue base and profit margins. Perhaps there are certain competitive lanes, but as BaltACD indicated, both are going in the right direction.
The thing I find facinating about the two railroads is–although I think I understand your point about the PC–they are what should have happened instead of the PC, allowing two profitable railroads rather than one big mess.
I think an advantage that NS has over CSX is the Meridian Southern seems to be a major area of growth for NS that CSX does not really have an answer for. I think NS’ access to Kansas City also is an advantage. Finally, I think NS’ access to Detroit is superior, should Detroit ever become relevant again.
In all fairness to the PC, they were hamstrung by costly and outdated labor practices and by a pre Staggers Act reguatory enviroment. Furthermore, the PC was the victim of a massively subsidized interstate highway system that sucked up alot of freight in its operating region.
PC would probably have done fine had Staggers come along 5 years sooner and with modern labor practices such as two person crews etc.
Although both CSX and NS area a showcase for how well a railroad can be run, and certainly shareholders have much to be please about, let’s not forget that to get to that point involved great waste of time and resources and required massive infusion of tax monies over many years.
Conrail and all of its costs were just a stepping stone that could have been avoided had the right decisions been made in the mid 1950s.
The interstate system seems to be working quite well however railroads are now able to compete effectively. Not so 40 years ago when trains required 5 man crews etc…
It is interesting when looking at the numbers how similar these two railroads are. Both have 21,000 miles of track (source: Morningstar) and have comparable revenues. Trailing 12 months for CSX is $11.3b while NS is at $10.3b.
While there is a $1b difference in revenue between the two railroads, the net income for the TTM is identical at $1.7B. Return on equity (ROE) which I track closely on investments, is at 19.9% for CSX and 16.7% for NSC. With these ROEs at this level (almost unheard of in railroad history), there is no doubt, as Balt indicated…these are two well run railroads.
Now that the numbers have been presented…what causes CSX to generate $1B more in revenue with the same track miles? What is it that allows NSC to generate the same net income as CSX on $1B less revenue?
Both carriers have the same % of revenue as coal $$$ - 29% for NSC and 30% for CSX. Intermodal revenue for NSC is 19% and only 12% for CSX. One would reason that the lower intermodal percentage would yield higher profits for CSX, based on past margins.
Routes:
Gabe brings up a great point about the Meridian Speedway route of NSC being superior, but how critical is that? Advantage NSC.
I monitor the Chicago routes for both carriers (scanner) and it appears NSC generates considerably more revenue out of Chicago for the east coast. Their Elkhart line sees considerably more trains daily than the CSX Williard route. Plus NSC has the “secondary” NKP line to Ft Wayne with 20 plus trains daily. Advantage NSC.
I really dont have a clue on other routes, but as Gabe also pointed out, NSC reaches out to Kansas City and their Michigan footprint seems stronger.
CSX does appear to have a huge advantage into Boston, but isnt that primarily a one way consumer (intermodal) market? Advantage CSX
Perhaps part of the revenue advantage to CSX is Florida. Their revenue to that market
At the end of the day it probably boils down to the quality of the management. Both roads are well managed currently however CSX had that battle with Children’s Investment Fund awhile back which was a distraction that the managers at NS did not have to contend with. Where routes, mileages, customer base, and infrastructure are very simliar as they are in this comparison, I would say the quality of the management would be the key differentiator…and that’s probably why those two roads are for the most part neck and neck…they’re both equally well managed.
Until recently. NS’ “Patriot Corridor” partnership with Pan Am Rwys. / Guilford over the fomer B&M from Mechanicville (Albany), NY to metro Boston - which is now cleared for double-stacks - will level that playing field. See (May 16, 2008, 14 pages/ slides, approx. 718 KB in size): http://www.nscorp.com/nscportal/nscorp/pdf/patriot_corridor.pdf
CSX has very little presence from the Southern Tier of New York down to the Mason-Dixon line of Pennsylvania, save for along the Delaware River around Philadelphia and the southwestern corner routes through and around Pittsburgh. Not sure if that’s a handicap or an advantage, though . . . [:-^]
I own some shares of both railroads. MP 173 / Ed’s thumbnail analysis above is a good start, and right on point. When I have some more time, I want to pursue this further and more in-depth. (Similar comparisons could also be made between BNSF and UP, and CN and CP.)
If there is interest, I am going to have a “battle of the bands” between BNSF/UP and CN/CP. BNSF might be a little harder to compare as it is now privately owned (no shareholder info). Perhaps there are other reports out there.
How have the two stocks performed for you? I only own CN at this time. Thinking about CSX.
I don’t own any CSX stock however I’ve owned NS since 2007 and have been very happy with its performance. I don’t think you would go wrong with either CSX or NS…both are excellent companies. I own CN as well…am much happier with the stocks that trade on the TSX…CN’s US stock has floundered for the last year…not sure why that is. Same company after all.
My own CNI holdings are down about 7.5%, but that may be because I bought in when the price was at its highest. I’m not too worried about it though as I think over the longterm CNI will do fine. Hard to say if CN on the TSX is doing better but I think it is. I have had that one for many years and have bought steadily through the years as well…overall I’m very happy with the stock. The currency fluctuations may have some impact…
The September 26, 2011 issue of Fortune Magazine has an article titled “Showdown on the Railroad”, it relates to some of the discussion here as well as some future considerations about the big 4 railroads and the alleged “cartel” they have become. Interesting, I strongly recommend checking it out. May I add this is an interesting topic, hope to see more from everyone.