The railroad business has been tough lately, and companies like CSX (CSX 0.15%) have had to deal with the ups and downs of the industrial economy and its impact on shipping volume. Coming into Wednesday's first-quarter financial report, however, CSX investors were excited about the prospects for a resurgence in the railroad's growth prospects.

With a new CEO at the helm, CSX's results were indeed strong. Moreover, the company sees more good things happening in the months to come. Let's look more closely at CSX to see how it did and what lies ahead for the railroad going forward.

CSX railroad train.

Image source: CSX.

CSX toots its horn

CSX's first-quarter report continued an improving trend in the railroad's performance. Sales were up almost 10% to $2.87 billion, which was almost double the top-line growth rate that most investors were expecting to see. On a GAAP basis, net income inched upward by just 2% to $362 million. But after taking in account one-time restructuring charges, adjusted earnings of $0.51 per share were $0.08 higher than the consensus forecast among those following the stock.

Looking more closely at the numbers, CSX saw solid performance in most of its business segments. The biggest revenue increase came from the coal segment, where sales climbed by nearly a third to $522 million. From a volume basis, coal gains were relatively small, and the biggest increases came in shipments of minerals and the metals and equipment unit, which saw volume rise 21% and 13% respectively. Intermodal gains were muted, but revenue from all of CSX's reporting segments climbed, and volumes were flat or up in all but the forest products unit.

One part of the boost came from a rise in fuel surcharges. Those charges climbed by $33 million to $85 million during the quarter, as fuel costs finally bounced higher by 45% after seeing substantial declines throughout much of the past two years. Elsewhere, significant efficiency gains sent labor costs lower, and in general, CSX's cost-cutting measures continue to bear fruit even as restructuring efforts led to one-time charges.

From an operational standpoint, CSX saw mixed results. Gross ton-miles climbed 5% to 100.3 billion, and CSX's train accident rate fell by 25% to 2.37 per million train miles. Personal injuries were up slightly to 0.99 per 200,000 worker-hours, and on-time arrivals fell three percentage points to 61%. Train velocities were down slightly, and delay times at key terminals were roughly flat from year-ago levels. Perhaps most importantly, though, operating ratios were relatively good at 75.2%, and on an adjusted basis, an even more favorable adjusted ratio of 69.2% reflected the efforts that CSX has made to improve its costs.

New CEO Hunter Harrison introduced himself to investors and was optimistic in his assessment of CSX. "Working together," Harrison said, "we are going to make this company the best North American railroad, capable of consistently meeting and exceeding the expectations of our customers and our shareholders." The CEO was also enthusiastic about the railroad's future prospects through its restructuring efforts.

What's coming down the railroad for CSX?

In particular, better conditions seem to be giving CSX some added momentum. As Harrison put it, "As the business environment continues to improve and we implement Precision Scheduled Railroading, CSX will realize these objectives while driving volume growth and achieving a new level of financial performance."

Interestingly, CSX is now seeing the strange positive impact that rising fuel costs can have. At first glance, one would think fuel gains are bad, because they make operating railroads more expensive. Yet CSX and its industry peers have largely figured out how to pass through those costs through surcharges, and so the same forces that sent revenue downward when fuel prices were plunging are now helping sales climb in a rising cost environment.

CSX investors celebrated the news, and the stock climbed nearly 3% after-market trading on Wednesday afternoon following the announcement. With signs of recovery in its business, CSX could well build up some momentum that could produce fundamental improvement throughout the rest of 2017.