CSX CEO James Foote has surely seen it all in a decorated 40-year career in the railroad industry.
That is except for the apparently odd behavior of the Trump economy.
“The present economic backdrop is one of the most puzzling I have experienced in my career,” Foote told Wall Street analysts on a conference call Tuesday evening. “Both global and U.S. economic conditions had been unusual this year to say the least and have impacted our volumes. You see it every week in our reported carloads.”
Foote added, “We are seeing a range of conflicting data points and economic indicators and regularly speak with customers who despite the recent downtime — slowdown, remain cautiously optimistic about the second half.”
So is the sound of an industrial CEO fresh off delivering bad news to investors, mostly at the hands of a puzzling global economy rife with tariffs, cautious customers and a lightning rod presidential Twitter feed.
CSX (CSX) shares tanked 11% on Wednesday as second quarter earnings came in 2 cents short of analyst forecasts. Sales dropped 1% to $3.06 billion, roughly in line with projections.
The company slashed its full year sales outlook to a decline of 1% to 2%. Previously, CSX was looking for a low-single digit percentage increase. Foote pinned the sales warning primarily on weakness among industrial customers (a group caught smack in the middle of the trade war).
“Although it shouldn’t have come as a shock that CSX lowered its FY19 revenue guide (the weekly industry volume data has been telegraphing macro weakness for some time), investors balked at the shortfall in yields relative to expectations. And while negative mix did have an impact, CSX also saw a sequential deceleration in core pricing in some parts of its book,” railroad analyst Allison Landry wrote in a note to clients.
UBS analyst Thomas Wadewitz echoed Landry’s sentiment.
“We expect solid cost side execution from CSX but weaker markets are a meaningful headwind to both EPS performance and the stock,” Wadewitz said.
In case you need a point of reference: U.S. GDP is generally viewed to have grown by 2% in the second quarter. Judging by CSX’s results, that’s not a real number.