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The third quarter was another tough one for CSX Corp. — the first Class I to report 3Q results. Traffic volume fell 15 percent to about 1.4 million units, revenue tumbled 23 percent to $2.3 billion, earnings from continuing operations declined 20 percent to $293 million, or 74 cents per share, and operating income dropped 18 percent to $598 million compared with third-quarter 2008 figures.

However, efforts to right-size resources helped reduce the quarterly operating ratio 1.3 points to a record 73.9, and productivity and cost-cutting initiatives helped cut operating expenses 24 percent to $1.7 billion. In addition, there were signs in the quarter that demand is beginning to strengthen, said Chairman, President and Chief Executive Officer Michael Ward during an earnings teleconference and Webcast held this morning.

“We are seeing sequential improvements in our markets overall,” he said. “This reinforces our view that the worst of the recession is likely behind us.”

Nonetheless, each market segment registered significant year-over-year revenue and volume declines. Coal revenue dropped 20 percent to $680 million, volume fell 18 percent to 382,000 units and revenue per unit decreased 2 percent to $1,780 primarily because utility stockpiles reached their highest level this decade, said Executive Vice President of Sales and Marketing Clarence Gooden.

“The coal inventory level is two times the monthly rate of consumption,” he said. “Utility stockpiles likely will remain high well into 2010.”

Merchandise revenue dropped 23 percent to $1.1 billion, volume decreased 17 percent to 545,000 units and revenue per unit declined 8 percent to $2,048 primarily because of weak phosphates and metals business, and sluggish housing starts. Automotive revenue tumbled 35 percent to $127 million, volume dropped 28 percent to 57,000 units and revenue per unit decreased 10 percent to $2,228 even though the federal “Cash for Clunkers” program helped reduce dealer inventories and several assembly plants came back online.

Finally, intermodal revenue fell 24 percent to $303 million, volume dropped 10 percent to 481,000 units and revenue per unit dipped 16 percent to $630 as international traffic remained weak and CSX faced “highly competitive truck prices,” said Gooden.

On the cost-control front, CSX reined in quarterly operating expenses primarily because fuel costs dropped 56 percent to $223 million as diesel prices fell and fuel consumption dropped, said EVP and Chief Financial Officer Oscar Munoz. In addition, materials, supplies and other expenses declined 25 percent to $428 million, and labor costs decreased 13 percent to $653 million as headcount dropped by more than 3,500 and the Class I registered productivity gains, he said.

— Jeff Stagl