CSX Corporation (CSX)’s Fourth Quarter 2014 Earnings Conference Call Transcript

Operator

Thank you. The next question is from Chris Wetherbee with Citi Research.

Clarence Gooden

Good morning, Chris.

Chris Wetherbee, Citi Research

Hey good morning guys, thanks. When you think about the double-digit earnings growth for 2015, you look at sort of the various buckets of the opportunities that are presented. Where do you think the potential risk could come from? Clarence, you talked about the domestic coal side up in the first quarter and implied down in Q2, Q3 and Q4 based on flat for the full year. Does it come from there if natural gas prices stay at these levels or dip down? I want a rough sensitivity of the variability of the model. I know you talk about cost too so just some color there would be great.

David Baggs

Sure with any money that you put together there are challenges and there are opportunities and I would say that the challenges that we’re seeing is on the coal side and in the crude side. Right now we feel that on the domestic side that what we think flat is the right place to be there’s probably more downside than upside to that. Export we outlined that we expect export volumes to drop close to 25% for the year and crude while we’re not hearing from our customers that there are any change in the shipping patterns, clearly we’re monitoring that closely as well. But, if you look at opportunity side, I think you’ve heard about our productivity initiatives close to $200 million.We expect to grow our non-coal business fast in the economy as a whole and the pricing environment continues to get stronger and stronger frankly. So when you add all that up, we feel that double-digit is the right place to be. I think it’s never slam dunk because it wouldn’t be meaningful guidance if it was but it is something that I think we can achievement.

Chris Wetherbee

Okay, correct. That’s helpful. Just a follow-up, just thinking about the pricing dynamic that you just mentioned. Certainly seems like it’s firming up into ’15. When you think about intermodal and relationship at the truck, with declining fuel surcharges it would still seem that the instability to price that business up at a reasonable pace given what’s going on in the truck market but just wanted rough sense. Do you feel a cap to some extent if we see prices continuing to fall from where they are currently?

Clarence Gooden

Chris, this is Clarence. I think there’s a very positive trend in the intermodal pricing. We see that the truck issues still remain there even with the 34-hour rule that’s been turned back. There’s capacity issues, there’s driver issues. Even with Class A truck orders being up, there’s still the issues of being able to get the drivers to move the business, so we think that there’s a lot of pricing opportunities in intermodal itself.

Chris Wetherbee

Okay, perfect, thanks for the time guys. I appreciate it.