We attended CSX Investor Day 2024 on Nov. 7. There are 25 Wall Street analysts who cover CSX and 24 of them went to hear what CSX’s average annual EPS growth guidance is for the next few years. It’s ~10%, same as the other rails—surprise. CSX was basically telling us to model ~7-8% in 2025 and ~11-12% in 2026 and 2027. We were there because the event included a tour of Rice Yard in Waycross, Ga., and we needed reassurance on an issue that keeps us up at night: the yard’s water drainage systems in the context of network resiliency. We don’t claim to be normal.
The Waycross hump yard is important. Really important. It has the highest throughput of any of CSX’s car yards and every (non-unit-train) car moving to or from Florida must transit through it. It’s the southern “hub,” the single most-critical piece of infrastructure on CSX’s system, and, increasingly, in hurricane alley, taking a direct hit from Hurricane Debby and a glancing blow from Helene more recently.
Our conversations with managers at Waycross were reassuring. Yes, the yard has flooded in the past, but decades ago, and yes, Waycross had some water gather during the inundation from Hurricane Debby, but it quickly cleared. No issues with Hurricane Helene. Waycross’s geography isn’t naturally flood prone. Its drainage systems are effective and reliable and continue to be improved over time.
We always pick up some tidbits on these trips, and we garnered some more context around terminal dwell. Waycross’s dwell is currently sitting at 24.9 hours, and we all know this is defined as the average car transit time from in-gate to out-gate, excluding cars on run-through trains (trains that only stop for an hour or two to change crews). However, the 24.9 consists of three main components. The biggest of course is the humping operation: in-gate, classification, out-gate, within 24 hours. The second piece we were reminded of is that hump yards also have a local yard within the same complex, and cars in this yard typically sit for longer (72 hours isn’t uncommon). Third, these yards also have car repair shops, and the terminal dwell number includes the hour count from the point the cars are released from the repair shop to the out-gate. So, the 24.9 is a blended number for the humping operation (less than 24 hours), local yard (more than 24 hours) and released from repair. The point of this is that you can’t simply compare one hump yard with another on dwell because there’s a mix effect based on the relative scale of local yard vs. humping operations.
What’s a good efficiency benchmark for Waycross? The fact that it’s so critical to CSX’s full system operation means we can use it as a canary in a coal mine. CSX can’t run well unless Waycross runs well, and a deteriorating dwell trend at Waycross could be a leading indicator of problems that will ultimately hit the financials. So, what’s a good dwell number for the yard?
The chart below shows historic Waycross dwell times in addition to the count of all cars on CSX’s system that sit idle for 48-hours or more. The latter number provides context in terms of how fluid the overall railroad is (lower is better). We start the chart in 2019 to capture both good and bad times to determine the span of dwell outcomes. Starting on the left, you can see that during the strong operating period in late 2019 and through the COVID lockdowns in early 2020 when volume pressure was minimal, dwell at Waycross sometimes dipped below 20 hours and averaged 21.2. Now, fast forward to the 2022 Service Crisis and dwell is running between 30-40 hours in a congested system plagued by crew shortages. So, there’s your span: 20-40 hours. Low 20s is the best-case scenario. Mid-20s, where we are now, is efficient and normal, and anything above 30 hours is a red flag that bears watching and hints at broader network-wide problems.
That’s all we need to say about the yard, so we’ll wrap up by thanking CSX for organizing both the yard visit and a broader, constructive investor event.
