CSX CEO hopeful for U.S. economy in 2017 and that Trump can help

CSX is hoping Trump’s planned tax cuts and infrastructure program will lead to economic growth. CSX Instagram photo.

CSX CEO expects Q1 earnings to grow in “low-to mid-teens” in percentage terms

By Nick Carey

DETROIT, Jan 18 (Reuters) – The head of No. 3 U.S. railroad CSX Corp said on Wednesday he sees room for optimism that the U.S. economy could continue to gain momentum in 2017, especially if President-elect Donald Trump follows through on pro-growth promises.

“Going into the year we feel it’s going to be a better market environment in 2017 than last year,” Chief Executive Officer Michael Ward told Reuters. “There may be a little bit of upside as Mr. Trump implements some of his initiatives.”

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Trump, a Republican businessman, plans sweeping tax cuts and a large infrastructure program, which could potentially add to economic growth.

CSX said on Wednesday it expects first-quarter earnings per share to grow in the “low- to mid-teens” in percentage terms versus the same period in 2016 and higher full-year earnings.

Executives said the Jacksonville, Florida-based company plans capital expenditures of $2.2 billion in 2017, down from $2.7 billion in 2016, and is targeting $150 million in cost cuts and productivity gains.

Like other railroads, CSX has been hit hard over the past two years by declining coal freight volumes as utilities switched to burning cheaper natural gas and as the strong U.S. dollar hurt coal exports.

While coal volumes at the railroad fell 20 per cent in 2016, Ward said the pace of decline has slowed so the impact will be lower in 2017.

He expects the U.S. economy to grow between 2 per cent and 2.5 per cent this year and industrial production to grow by 2 per cent.

Ward said consumer confidence seems to be a “mixed bag” as polls have shown public opinion divided over the incoming administration.

“If we’re able to create jobs, which Trump seems intent on doing, I think that will be a positive for consumer confidence,” he said. “But to be fair, there’s lots of people that have their doubts about Mr. Trump.”

Trump may be able to boost CSX’s bottom line through his criticism of U.S. and other automakers that produce cars in Mexico for import to America.

“What the president-elect is doing, where he’s strongly encouraging them to invest in U.S. versus Mexican facilities, is actually a positive for CSX because we don’t have direct access to Mexico,” Ward said. “So having the automobiles produced in America only has upside for us, I think.”

(Editing by Chizu Nomiyama and Jeffrey Benkoe)