CSX Q4 2025 CSX Corp Earnings Call | AllMind AI Earnings | AllMind AI
Q4 2025 CSX Corp Earnings Call
Speaker #2: I would now like to turn the conference over to Matthew Korn, Head of Investor Relations. Please go ahead.
Maryclare Kenney: Thank you, Sarah. Good afternoon, everyone. We're very pleased to have you join our fourth quarter earnings call. Joining me from the CSX leadership team are Steve Angel, President and Chief Executive Officer; Mike Cory, EVP and Chief Operating Officer; Kevin Boone, EVP and Chief Financial Officer; and Maryclare Kenney, SVP and Chief Commercial Officer. In the presentation that accompanies this call, which is available on our website, you will find slides with our forward-looking and non-GAAP disclosures. We encourage you to review them. And with that, I'm very happy to turn the call over to Mr. Steve Angel.
Matthew Korn: Thank you, Sarah. Good afternoon, everyone. We're very pleased to have you join our fourth quarter earnings call. Joining me from the CSX leadership team are Steve Angel, President and Chief Executive Officer; Mike Cory, EVP and Chief Operating Officer; Kevin Boone, EVP and Chief Financial Officer; and Maryclare Kenney, SVP and Chief Commercial Officer. In the presentation that accompanies this call, which is available on our website, you will find slides with our forward-looking and non-GAAP disclosures. We encourage you to review them. With that, I'm very happy to turn the call over to Mr. Steve Angel.
Speaker #3: Quarter earnings call. Joining me from the CSX leadership team are Steve Angel, President and Chief Executive Officer; Mike Cory, EVP and Chief Operating Officer; Kevin Boone, EVP and Chief Financial Officer; and Mary Claire Kenny, SVP and Chief Commercial Officer.
Speaker #3: In the presentation that accompanies this
Kevin Boone: Good afternoon, and thank you for joining our fourth quarter call. This has been a challenging year for CSX and for our industry overall, with subdued demand and limited growth opportunities persisting across many of our key markets. Against this backdrop, our service levels remained positive in the fourth quarter, and we delivered modest total volume growth. However, reported operating income, operating margin, and earnings per share were all lower year over year. As noted in our press release, these results included approximately $50 million in expenses related to important actions we've taken to adjust our cost structure, deliver better financial results, and position the railroad to succeed. We are committed to delivering stronger performance into 2026 as we build on our key accomplishments.
Steve Angel: Good afternoon, and thank you for joining our fourth quarter call. This has been a challenging year for CSX and for our industry overall, with subdued demand and limited growth opportunities persisting across many of our key markets. Against this backdrop, our service levels remained positive in the fourth quarter, and we delivered modest total volume growth. However, reported operating income, operating margin, and earnings per share were all lower year over year. As noted in our press release, these results included approximately $50 million in expenses related to important actions we've taken to adjust our cost structure, deliver better financial results, and position the railroad to succeed. We are committed to delivering stronger performance into 2026 as we build on our key accomplishments.
Speaker #4: This has been a challenging year for CSX and for our industry overall, with subdued demand and limited— Thank you, Sarah.
Speaker #4: growth opportunities persisting Good afternoon,
Speaker #4: Across many of our key markets, and against this backdrop, our service levels remain positive in the fourth quarter, and we delivered modest total volume growth.
Speaker #4: However, reported operating income, operating margin, and earnings per share were all lower year over year. As noted in our press release, these results included approximately $50 million in expenses related to important actions we've taken to adjust our cost structure.
Speaker #4: Deliver better financial results and position the railroad to succeed. We are committed to delivering stronger performance into 2026 as we build on our key accomplishments.
Speaker #4: We've renewed the leadership team, putting the best people into the best positions to drive value. And we're aligned in driving greater fiscal responsibility and disciplined execution across the company.
Kevin Boone: We've renewed the leadership team, putting the best people into the best positions to drive value, and we're aligned in driving greater physical responsibility and discipline execution across the company. We've stabilized service on our network at high levels, delivering consistency and reliability for our customers while realizing clear productivity gains. We've capitalized on the strength of our service to win business, and we will be ready and able to respond when demand increases. As we move forward, you will continue to see us take thoughtful actions to drive greater profitability and cash flow and build momentum into the year ahead. And now I'll turn it over to Mike.
We've renewed the leadership team, putting the best people into the best positions to drive value, and we're aligned in driving greater physical responsibility and discipline execution across the company. We've stabilized service on our network at high levels, delivering consistency and reliability for our customers while realizing clear productivity gains. We've capitalized on the strength of our service to win business, and we will be ready and able to respond when demand increases. As we move forward, you will continue to see us take thoughtful actions to drive greater profitability and cash flow and build momentum into the year ahead. Now I'll turn it over to Mike.
Speaker #4: We've stabilized service on our network at high levels, delivering consistency and reliability for our customers while realizing clear productivity gains. We've capitalized on the strength of our service to win business, and we will be ready and able to respond when demand increases.
Speaker #4: As we move forward, you will continue to see us take thoughtful actions to drive greater profitability and cash flow, and build momentum into the year ahead.
Speaker #4: And now I'll turn it over to Mike.
Speaker #5: Yeah, thank you, Steve. So, let's take a quick look at our safety and operational metrics on slide five. Our operations team is improving safety performance through focused execution of our safety plan.
Mike Cory: Yeah, thank you, Steve. So let's take a quick look at our safety and operational metrics on slide five. Our operations team is improving safety performance through focused execution of our safety plan. The left portion of this slide highlights meaningful full-year declines in both FRA injury and accident rates, with the fourth quarter posting the year's best metrics. We know that an outstanding safety record is a clear indicator of effective management at every level, and we're taking solid steps towards our goal of reaching best-in-class performance for the industry. The right portion of the slide shows strong year-end fluidity and customer service performance. Velocity, cars online, dwell, and trip plan compliance all showed substantial improvement from Q1 to Q4. These are encouraging trends as we enter 2026. Running a cost-effective, efficient network while delivering consistent, reliable service is essential to our success.
Mike Cory: Yeah, thank you, Steve. Let's take a quick look at our safety and operational metrics on slide five. Our operations team is improving safety performance through focused execution of our safety plan. The left portion of this slide highlights meaningful full-year declines in both FRA injury and accident rates, with the fourth quarter posting the year's best metrics. We know that an outstanding safety record is a clear indicator of effective management at every level, and we're taking solid steps towards our goal of reaching best-in-class performance for the industry. The right portion of the slide shows strong year-end fluidity and customer service performance. Velocity, cars online, dwell, and trip plan compliance all showed substantial improvement from Q1 to Q4. These are encouraging trends as we enter 2026. Running a cost-effective, efficient network while delivering consistent, reliable service is essential to our success.
Speaker #5: The left portion of this slide highlights meaningful full-year declines in both FRA injury and accident rates, with the fourth quarter posting the year's best metrics.
Speaker #5: We know that an outstanding safety record is a clear indicator of effective management at every level, and we're taking solid steps toward our goal of reaching best-in-class performance for the industry.
Speaker #5: The right portion of the slide shows strong year-end fluidity and customer service performance. Velocity, cars online, dwell, and trip plan compliance all showed substantial improvement from Q1 to Q4.
Speaker #5: These are encouraging trends as we enter 2026. Running a cost-effective, efficient network while delivering consistent, reliable service is essential to our success. We'll maintain this balance and preserve our operational momentum while ensuring CSX has the capacity available when the industrial cycle turns.
Mike Cory: We'll maintain this balance and preserve our operational momentum while ensuring CSX has the capacity available when the industrial cycle turns. Kevin will now review our quarterly results in more detail.
We'll maintain this balance and preserve our operational momentum while ensuring CSX has the capacity available when the industrial cycle turns. Kevin will now review our quarterly results in more detail.
Speaker #5: Kevin will now review our quarterly results in more detail.
Speaker #4: Thank you, Mike, and good afternoon. I'm excited to be back in the CFO role and have an opportunity to work with this team. As Steve mentioned, over the last couple of months we have taken steps to align our cost structure to the current business environment.
Kevin Boone: Thank you, Mike, and good afternoon. I'm excited to be back in the CFO role and have an opportunity to work with this team. As Steve mentioned, over the last couple of months, we have taken steps to align our cost structure to the current business environment. The team is fully engaged, and I'm encouraged by the momentum we are building, with opportunities to drive efficiencies in nearly every part of our business as we enter 2026. Now let's move to the fourth quarter results. Volume increased 1%, with revenue down 1%, driven by business mix headwinds and coal pricing. Fourth quarter operating income and earnings per share fell by 9% and 7%, respectively, against adjusted prior year figures. These results included approximately $50 million, or $0.02, of charges for actions taken during the fourth quarter to optimize our workforce and technology portfolio.
Kevin Boone: Thank you, Mike, and good afternoon. I'm excited to be back in the CFO role and have an opportunity to work with this team. As Steve mentioned, over the last couple of months, we have taken steps to align our cost structure to the current business environment. The team is fully engaged, and I'm encouraged by the momentum we are building, with opportunities to drive efficiencies in nearly every part of our business as we enter 2026. Now let's move to the fourth quarter results. Volume increased 1%, with revenue down 1%, driven by business mix headwinds and coal pricing. Fourth quarter operating income and earnings per share fell by 9% and 7%, respectively, against adjusted prior year figures. These results included approximately $50 million, or $0.02, of charges for actions taken during the fourth quarter to optimize our workforce and technology portfolio.
Speaker #4: The team is fully engaged, and I'm encouraged by the momentum we are building, with opportunities to drive efficiencies in nearly every part of our business as we enter 2026.
Speaker #4: Now, let's move to the fourth quarter results. Volume increased 1%, with revenue down 1%, driven by business mix headwinds and coal pricing. Fourth quarter operating income and earnings per share fell by 9% and 7%, respectively.
Speaker #4: Against adjusted prior year figures. These results included approximately $50 million, or $0.02 per share, of charges for actions taken during the fourth quarter to optimize our workforce and technology portfolio.
Speaker #4: Now, let's turn to the next slide for a closer look at the expense lines. Fourth quarter expenses increased by $73 million, or 3%, excluding the 2024 goodwill impairment.
Kevin Boone: Now let's turn to the next slide for a closer look at the expense lines. Fourth quarter expenses increased by $73 million, or 3%, excluding the 2024 Goodwill impairment. As mentioned, the quarter included approximately $50 million of charges comprised of $31 million of separation costs in the labor line and $21 million of technology impairments in PS&O. We continue to see opportunities to drive efficiency in our labor costs as we prioritize safety, customer service, and profitable growth. Ending rail headcount finished the quarter down over 3% as we continue to align to the current business environment. Additionally, overtime remains a focus for Mike's team as we look for ways to provide better visibility and tools to manage these costs.
Now let's turn to the next slide for a closer look at the expense lines. Fourth quarter expenses increased by $73 million, or 3%, excluding the 2024 Goodwill impairment. As mentioned, the quarter included approximately $50 million of charges comprised of $31 million of separation costs in the labor line and $21 million of technology impairments in PS&O. We continue to see opportunities to drive efficiency in our labor costs as we prioritize safety, customer service, and profitable growth. Ending rail headcount finished the quarter down over 3% as we continue to align to the current business environment. Additionally, overtime remains a focus for Mike's team as we look for ways to provide better visibility and tools to manage these costs.
Speaker #4: As mentioned, the quarter included approximately $50 million of charges, comprised of $31 million of separation costs in the labor line and $21 million of technology impairments and PS&O.
Speaker #4: We continue to see opportunities to drive efficiency in our labor costs as we prioritize safety, customer service, and profitable growth. Ending rail headcount finished the quarter down over 3% as we continue to align to the current business environment.
Speaker #4: Additionally, overtime remains a focus for Mike's team, as we look for ways to provide better visibility and tools to manage these costs. We have identified meaningful opportunities to reduce non-labor spending, with well over 100 diverse savings initiatives across the company.
Kevin Boone: We have identified meaningful opportunities to reduce non-labor spending with well over 100 diverse savings initiatives across the company, including cutting outside and professional service spend, improving asset utilization and maintenance efficiencies, as well as enhancing controls around all sources of discretionary spend. 2026 expenses will also see year-over-year benefit from cycling network disruption cost, Q3 and Q4 separation cost, and Q4 technology impairments. Depreciation expense will be relatively stable year-over-year as normal increases to the asset base are offset by favorable results from an equipment life study, asset retirements, and targeted reductions to technology and aviation assets. We are encouraged by the cost improvements identified as we move through the quarter. Similar to our focus on cost, capital spend and driving free cash flow remains a significant area of opportunity.
We have identified meaningful opportunities to reduce non-labor spending with well over 100 diverse savings initiatives across the company, including cutting outside and professional service spend, improving asset utilization and maintenance efficiencies, as well as enhancing controls around all sources of discretionary spend. 2026 expenses will also see year-over-year benefit from cycling network disruption cost, Q3 and Q4 separation cost, and Q4 technology impairments. Depreciation expense will be relatively stable year-over-year as normal increases to the asset base are offset by favorable results from an equipment life study, asset retirements, and targeted reductions to technology and aviation assets. We are encouraged by the cost improvements identified as we move through the quarter. Similar to our focus on cost, capital spend and driving free cash flow remains a significant area of opportunity.
Speaker #4: Including cutting outside and professional service spend, improving asset utilization and maintenance efficiencies, as well as enhancing controls around all sources of discretionary spend. 2026 expenses will also see year-over-year benefit from cycling network disruption costs.
Speaker #4: Third and fourth quarter separation costs and fourth quarter technology impairments. Depreciation expense will be relatively stable year-over-year, as normal increases to the asset base are offset by favorable results from an equipment life study, asset retirements, and targeted reductions to technology and aviation assets.
Speaker #4: We are encouraged by the
Speaker #1: The cost improvements and as we move through the quarter , similar to our focus on cost , capital spend and driving free cash flow remains and driving free cash flow remains a significant area of opportunity .
Kevin Boone: Working with Mike and his team, we are developing improved oversight to ensure every dollar of capital is spent efficiently and aligns to our strategic priorities, including safety, customer service, and driving profitable growth. With that, I'll turn it over to Maryclare to review our revenue results.
Working with Mike and his team, we are developing improved oversight to ensure every dollar of capital is spent efficiently and aligns to our strategic priorities, including safety, customer service, and driving profitable growth. With that, I'll turn it over to Maryclare to review our revenue results.
Speaker #1: With Mike Working and his team, we are developing improved oversight to ensure every dollar of capital is spent efficiently and aligns to our strategic priorities, including safety, customer service, and driving profitable growth.
Speaker #1: With that, I'll turn it over to Marie Claire to review our revenue results.
Maryclare Kenney: Thank you, Kevin. I'm happy to be here and excited to have the opportunity to lead the professionals in our commercial organization. The railroad is running well, and we have many opportunities ahead. That said, as you've heard from Steve, we continue to navigate the challenges of a mixed industrial demand environment. The strength of our relationships is critical when uncertainty is elevated, and our voice of the customer surveys show that our team has been doing an excellent job at staying close to our customers and being responsive as conditions change. Turning to slide 10, let's cover fourth quarter volume and revenue performance. Overall, total volume was up 1% in the quarter, but revenue was down 1% as negative mix and weaker export coal prices led to a 2% decline in total revenue per unit.
Maryclare Kenney: Thank you, Kevin. I'm happy to be here and excited to have the opportunity to lead the professionals in our commercial organization. The railroad is running well, and we have many opportunities ahead. That said, as you've heard from Steve, we continue to navigate the challenges of a mixed industrial demand environment. The strength of our relationships is critical when uncertainty is elevated, and our voice of the customer surveys show that our team has been doing an excellent job at staying close to our customers and being responsive as conditions change. Turning to slide 10, let's cover fourth quarter volume and revenue performance. Overall, total volume was up 1% in the quarter, but revenue was down 1% as negative mix and weaker export coal prices led to a 2% decline in total revenue per unit.
Speaker #2: Thank you, Kevin. I'm happy to be here and excited to have the opportunity to lead the professionals in our commercial organization.
Speaker #2: The railroad is running well, and we have many opportunities ahead. That said, as you've heard from Steve, we continue to navigate the challenges of a mixed industrial demand environment.
Speaker #2: The strength of our relationships is critical when uncertainty is elevated and our voice of the customer. Surveys show that our team has been doing an excellent job at staying close to our customers and being responsive as conditions change.
Speaker #2: Turning to slide ten . Let's cover fourth quarter volume and revenue performance . Overall , total volume was up 1% in the quarter , but revenue was down 1% as negative mix and weaker export coal prices led to a 2% decline in total revenue per unit .
Maryclare Kenney: Our merchandise franchise, where volume and revenue were both down 2%, continues to face market-driven headwinds. Revenue per unit was modestly higher and was also affected by mix as growth was strongest in low RPU areas such as minerals and fertilizers. We continue to see softness in chemicals and forest products, where volume was down 6% and 11%, respectively. The industrial chemicals market remains weak, and many of our customers are carefully controlling freight spend as they manage through inflation and tariff pressures. In forest products, we continue to see the effects of plant closures, particularly with pulp and container board, that occurred up until the start of the fourth quarter. Despite these headwinds, our team has had success at winning incremental business, and we anticipate benefits from new facilities ramping up in 2026. Automotive volume was down 5% year-over-year.
Our merchandise franchise, where volume and revenue were both down 2%, continues to face market-driven headwinds. Revenue per unit was modestly higher and was also affected by mix as growth was strongest in low RPU areas such as minerals and fertilizers. We continue to see softness in chemicals and forest products, where volume was down 6% and 11%, respectively. The industrial chemicals market remains weak, and many of our customers are carefully controlling freight spend as they manage through inflation and tariff pressures. In forest products, we continue to see the effects of plant closures, particularly with pulp and container board, that occurred up until the start of the fourth quarter. Despite these headwinds, our team has had success at winning incremental business, and we anticipate benefits from new facilities ramping up in 2026. Automotive volume was down 5% year-over-year.
Speaker #2: Our merchandise franchise , where volume and revenue were both down 2% , continues to face market driven headwinds . Revenue per unit was modestly higher and was also affected by mix as growth was strongest in low RPO areas such as minerals and fertilizers .
Speaker #2: We continue to see it in chemicals and softness in forest products, where volume was down 6% and 11%, respectively. The industrial chemicals market remains weak, and many of our customers are carefully controlling freight spend as they manage through inflation and tariff pressures.
Speaker #2: In forest products, we continue to see the effects of plant closures, particularly with pulp and containerboard, that occurred up until the start of the fourth quarter.
Speaker #2: Despite these headwinds, our team has had success at winning incremental business, and we anticipate benefits from new facilities ramping up in 2026.
Speaker #2: Automotive volume was down 5% year over year. While we saw some manufacturers gain momentum through the quarter, supply constraints with chips and metals limited output at other facilities.
Maryclare Kenney: While we saw some manufacturers gain momentum through the quarter, supply constraints with chips and metals limited output at other facilities. That said, we've been encouraged by the continued strength in fertilizers and mineral shipments. Fertilizer volume was up 7% on improved phosphate rock production and business wins in the nitrogen market. Minerals volume remains supported by demand for aggregates and cement for infrastructure projects. Our intermodal franchise really drove our growth this quarter, with revenue up 7% year-over-year on a 5% increase in volume. We've been winning new domestic and international business as we've brought faster transit times and more connectivity to our customers. Finally, our coal business grew modestly in the quarter, with volume up 1% year-over-year. Domestic tonnage increased by 6%, driven by a substantial increase in domestic utility volume supported by growing power demand and higher natural gas prices.
While we saw some manufacturers gain momentum through the quarter, supply constraints with chips and metals limited output at other facilities. That said, we've been encouraged by the continued strength in fertilizers and mineral shipments. Fertilizer volume was up 7% on improved phosphate rock production and business wins in the nitrogen market. Minerals volume remains supported by demand for aggregates and cement for infrastructure projects. Our intermodal franchise really drove our growth this quarter, with revenue up 7% year-over-year on a 5% increase in volume. We've been winning new domestic and international business as we've brought faster transit times and more connectivity to our customers. Finally, our coal business grew modestly in the quarter, with volume up 1% year-over-year. Domestic tonnage increased by 6%, driven by a substantial increase in domestic utility volume supported by growing power demand and higher natural gas prices.
Speaker #2: That said, we've been encouraged by the continued strength in fertilizers and mineral shipments. Fertilizer volume was up 7% on improved phosphate rock production and business wins in the nitrogen market.
Speaker #2: Minerals volume supported remains by demand for aggregates and cement for infrastructure projects. Our intermodal franchise really drove our growth this quarter, with revenue up 7% year over year on a 5% increase in volume.
Speaker #2: We've been winning new domestic and international business as we've brought faster transit times and more connectivity to our customers. Finally, our coal business grew modestly in the quarter, with volume up 1% year over year.
Speaker #2: Domestic tonnage increased by 6%, driven by a substantial increase in domestic utility volume, supported by growing power demand and higher natural gas prices.
Maryclare Kenney: Export tonnage declined 3% in the quarter, with a derailment in late October impacting shipments for a short time. Revenue was down 5% on a 6% decline in RPU, primarily due to a decline in Met Coal benchmark pricing. Notably, the discount for East Coast Met Coal indices widened versus Australian pricing this quarter, which impacted our yields. Now let's turn to slide 11 and talk about the key components of our market expectations in 2026. Starting with merchandise, we are positioned to benefit from consistent strength in infrastructure project activity in key regions served by CSX that's driving demand for materials such as cement, aggregates, plate, and scrap metal. More uncertain are conditions in the housing and automotive markets, which affect many commodity markets.
Export tonnage declined 3% in the quarter, with a derailment in late October impacting shipments for a short time. Revenue was down 5% on a 6% decline in RPU, primarily due to a decline in Met Coal benchmark pricing. Notably, the discount for East Coast Met Coal indices widened versus Australian pricing this quarter, which impacted our yields. Now let's turn to slide 11 and talk about the key components of our market expectations in 2026. Starting with merchandise, we are positioned to benefit from consistent strength in infrastructure project activity in key regions served by CSX that's driving demand for materials such as cement, aggregates, plate, and scrap metal. More uncertain are conditions in the housing and automotive markets, which affect many commodity markets.
Speaker #2: Export tonnage declined 3% in the quarter, with a derailment in late October impacting shipments for a short time. Revenue was down 5% on a 6% decline in RPU, primarily due to a decline in met coal benchmark pricing.
Speaker #2: Discount for notably, the East Coast met coal indices widened versus Australian pricing this quarter, which impacted our yields. Let's turn to slide 11 and talk.
Speaker #2: Now, about the key components of our market expectations in 2026. Starting with merchandise, we are positioned to benefit from consistent strength in infrastructure project activity in key regions served by CSX.
Speaker #2: That's driving demand for materials such as cement, aggregates, and scrap metal. More uncertain are conditions in the housing and automotive markets, which affect many commodity markets.
Maryclare Kenney: Consensus forecasts call for a modest decline in housing starts this next year, and affordability and overall demand levels continue to impact the prospects for North American light vehicle production. Our merchandise volumes will also reflect cycling of facility closures, largely in the forest products and metals areas that occurred through 2025. We've been encouraged by the success we've had in intermodal, where the team won new business in 2025 as we expanded our network reach through new operational agreements, and our strong service has allowed us to provide a faster service product. At Howard Street, the first of two bridges being raised to support double-stack capability is now complete, and our customers are excited about the opportunities coming later this spring. They're bidding on business now for volume to start moving double-stack through the tunnel in Q2.
Consensus forecasts call for a modest decline in housing starts this next year, and affordability and overall demand levels continue to impact the prospects for North American light vehicle production. Our merchandise volumes will also reflect cycling of facility closures, largely in the forest products and metals areas that occurred through 2025. We've been encouraged by the success we've had in intermodal, where the team won new business in 2025 as we expanded our network reach through new operational agreements, and our strong service has allowed us to provide a faster service product. At Howard Street, the first of two bridges being raised to support double-stack capability is now complete, and our customers are excited about the opportunities coming later this spring. They're bidding on business now for volume to start moving double-stack through the tunnel in Q2.
Speaker #2: Consensus forecasts call for a modest decline in housing starts this next year, and affordability and overall demand levels continue to impact the prospects for North American light vehicle production.
Speaker #2: Our merchandise volumes will also reflect cycling of facility closures, largely in the forest products and metals areas, that occurred through 2025. We've been encouraged by the success we've had in intermodal; the team won with the new business in 2025.
Speaker #2: As we expanded our network reach through new operational agreements, and our strong service has allowed us to provide a faster service product at Howard Street, the first of the raised to two bridges being—supporting double stack capability—is now complete, and our customers are excited about the opportunities coming later this spring.
Speaker #2: They're bidding on business now for volume to start moving double stack through the tunnel in Q2. Still, the markets reflect the reality of a still soft trucking market, where we're watching the supply-driven increase in truck rates carefully.
Maryclare Kenney: Still, the markets reflect the reality of a still soft trucking market, where we're watching the supply-driven increase in truck rates carefully. We also need to be aware of the risk of a slowdown in imports after the pull forward of activity that occurred through 2025. For coal, we're pleased to have two important mines on our network back open after extended outages. These mines provide good quality Met Coal for the export market, though global steel markets and benchmark prices remain subdued. Domestically, many utilities continue to buy more thermal coal given increasing power demand. We do have coal plants on our network scheduled to retire this year, but we have seen some closures get delayed. Overall, we see good potential in 2026, but we expect the best results will come from our own specific initiatives.
Still, the markets reflect the reality of a still soft trucking market, where we're watching the supply-driven increase in truck rates carefully. We also need to be aware of the risk of a slowdown in imports after the pull forward of activity that occurred through 2025. For coal, we're pleased to have two important mines on our network back open after extended outages. These mines provide good quality Met Coal for the export market, though global steel markets and benchmark prices remain subdued. Domestically, many utilities continue to buy more thermal coal given increasing power demand. We do have coal plants on our network scheduled to retire this year, but we have seen some closures get delayed. Overall, we see good potential in 2026, but we expect the best results will come from our own specific initiatives.
Speaker #2: We also need to be aware of the risk of a slowdown in imports after the pull-forward of activity that occurred through 2025.
Speaker #2: For coal, we're pleased to have two important mines on our network back open after extended outages. These mines provide good quality coal for the export market, though global steel markets and benchmark prices remain subdued.
Speaker #2: Domestically, many utilities continue to buy more thermal coal given increasing power demand. We do have coal plants on our network scheduled to retire this year, but we have seen some closures get delayed.
Speaker #2: Overall , we see good potential in 2026 , but we expect the best results will come from our specific own initiatives . Our visibility is limited , but from what we can see and hear from customers our today , there's no short term catalyst on the horizon to lift the major industrial markets .
Maryclare Kenney: Our visibility is limited, but from what we can see and hear from our customers today, there's no short-term catalyst on the horizon to lift the major industrial markets. Our team will work hard to make the most of every profitable opportunity, and we will be ready to respond when macro conditions improve. Now I'll hand it back to Steve to talk through our outlook.
Our visibility is limited, but from what we can see and hear from our customers today, there's no short-term catalyst on the horizon to lift the major industrial markets. Our team will work hard to make the most of every profitable opportunity, and we will be ready to respond when macro conditions improve. Now I'll hand it back to Steve to talk through our outlook.
Speaker #2: Our team will work hard to make the most of every profitable opportunity, and we will be ready to respond when macro conditions improve.
Speaker #2: Now I'll hand it back to Steve to talk through our outlook.
Operator: Thank you, Maryclare. Now we'll review our guidance for 2026 on slide 13. We have a well-running railroad and a good pipeline of growth initiatives. However, as Maryclare discussed, the near-term outlook across many key markets remains soft. As we plan for 2026, we do not anticipate any meaningful improvement in macroeconomic conditions. We are assuming low single-digit revenue growth for the year based on flat industrial production, modest GDP growth, and fuel and benchmark coal prices consistent with current levels. We expect to deliver year-over-year operating margin expansion in the range of 200 to 300 basis points. This is from a combination of workforce optimization, tighter management of discretionary expenses, our drive for efficiency, and the benefits of a more stable, fluid railroad.
Steve Angel: Thank you, Maryclare. Now we'll review our guidance for 2026 on slide 13. We have a well-running railroad and a good pipeline of growth initiatives. However, as Maryclare discussed, the near-term outlook across many key markets remains soft. As we plan for 2026, we do not anticipate any meaningful improvement in macroeconomic conditions. We are assuming low single-digit revenue growth for the year based on flat industrial production, modest GDP growth, and fuel and benchmark coal prices consistent with current levels. We expect to deliver year-over-year operating margin expansion in the range of 200 to 300 basis points. This is from a combination of workforce optimization, tighter management of discretionary expenses, our drive for efficiency, and the benefits of a more stable, fluid railroad.
Speaker #1: Thank you Mary . Thank you Mary . Claire . Now we'll review our guidance for 2026 on slide 13 . We have a running well railroad and a good pipeline of growth initiatives .
Speaker #1: However , as Mary Claire discussed , the near-term outlook across many key markets remain soft . As we plan 2026 , we for do not anticipate any meaningful improvement in macroeconomic conditions .
Speaker #1: So, we are assuming low single-digit revenue growth for the year based on flat industrial production, modest GDP growth, and fuel and benchmark coal prices consistent with current levels.
Speaker #1: We expect to deliver year-over-year operating margin expansion in the range of 200 to 300 basis points. This is from a combination of workforce optimization and tighter management of discretionary expenses.
Speaker #1: Our drive for efficiency, and the benefits of a more stable, fluid railroad with our Blue Ridge project complete, and focused efforts on capital discipline in place.
Operator: With our Blue Ridge project complete and focused efforts on capital discipline in place, we plan for a 2026 CapEx below $2.4 billion, a substantial reduction from last year. Our CapEx priorities are unchanged: invest in our infrastructure for safety and reliability, and invest in growth and productivity projects that pass our financial criteria. For free cash flow, higher earnings, a more normalized cash tax rate, and lower capital outlays should drive growth of at least 50% compared to 2025. Finally, let me address the multi-year targets that were offered at the company's 2024 Investor Day. The opportunities ahead for CSX are strong. When we execute on the core fundamentals of service, cost discipline, operating efficiency, and prudent capital deployment, we will create shareholder value over the long term. That said, the macroeconomic environment and the industry dynamics were meaningfully different than compared to today.
With our Blue Ridge project complete and focused efforts on capital discipline in place, we plan for a 2026 CapEx below $2.4 billion, a substantial reduction from last year. Our CapEx priorities are unchanged: invest in our infrastructure for safety and reliability, and invest in growth and productivity projects that pass our financial criteria. For free cash flow, higher earnings, a more normalized cash tax rate, and lower capital outlays should drive growth of at least 50% compared to 2025. Finally, let me address the multi-year targets that were offered at the company's 2024 Investor Day. The opportunities ahead for CSX are strong. When we execute on the core fundamentals of service, cost discipline, operating efficiency, and prudent capital deployment, we will create shareholder value over the long term. That said, the macroeconomic environment and the industry dynamics were meaningfully different than compared to today.
Speaker #1: We plan for 2026 CapEx below 2.4 billion , a substantial reduction from last year . Our CapEx priorities are unchanged . Invest in our infrastructure for safety and reliability and invest in growth and productivity projects that pass our financial criteria for free cash flow , earnings , a more normalized cash tax rate and lower capital outlays should drive growth of at least 50% compared to 2025 .
Speaker #1: Finally , let me address the multiyear targets that were offered at the company's 2024 Investor Day . The opportunities ahead for CSX are strong when we execute on the core fundamentals of service cost , discipline , operating efficiency , and prudent capital deployment , we will create shareholder value over the long term .
Speaker #1: That said , the macroeconomic environment and the industry dynamics were meaningfully different than compared to today . I am replacing our 2025 2027 targets with a guidance we've given for 20 2026 .
Operator: I am replacing our 2025-2027 targets with the guidance we've given for 2026 only. I will continue to evaluate our outlook as we make progress toward our goal to be the best-performing railroad in North America. With that, Matthew, we will open it up for questions.
I am replacing our 2025-2027 targets with the guidance we've given for 2026 only. I will continue to evaluate our outlook as we make progress toward our goal to be the best-performing railroad in North America. With that, Matthew, we will open it up for questions.
Speaker #1: I will continue to evaluate our outlook as we make progress toward our goal to be the best performing railroad in North America.
Speaker #1: With that , Matthew , we will open it up for questions . Thank you Steve . We'll now question and answer proceed to the session .
Mike Cory: Thank you, Steve. We will now proceed to the question-and-answer session. Now, to ensure that we maximize everyone's opportunity to participate, we ask that you please limit yourselves to one and only one question. Sarah, with that, we're ready to begin.
Matthew Korn: Thank you, Steve. We will now proceed to the question-and-answer session. Now, to ensure that we maximize everyone's opportunity to participate, we ask that you please limit yourselves to one and only one question. Sarah, with that, we're ready to begin.
Speaker #1: Now, to ensure that we maximize everyone's opportunity to participate, we ask that you please limit yourself to one question—and one question only. Sarah.
Speaker #1: With that, we're ready to begin.
Operator: Thank you. If you would like to ask a question, please press star one on your telephone keypad. If you would like to withdraw your question, simply press star one again. Please ensure that your phone is not on mute when called upon. Thank you. Your first question comes from Tom Wadewitz with UBS. Your line is open.
Operator: Thank you. If you would like to ask a question, please press star one on your telephone keypad. If you would like to withdraw your question, simply press star one again. Please ensure that your phone is not on mute when called upon. Thank you. Your first question comes from Tom Wadewitz with UBS. Your line is open.
Speaker #3: Thank you . If you would like to ask a question , please press Star One on your telephone keypad . If you would like to withdraw your question , simply press star one again .
Speaker #3: Please ensure that your phone is not on mute when called upon. Thank you. Your first question comes from Tom Wadewitz with UBS.
Speaker #3: Your line is open .
[Analyst] (UBS): Great. Good afternoon. Just, I guess, one fine point on the OR improvement, if you could tell us what the base OR is in 2025, kind of just like what's included. But I guess the real question, if you will, how do you think about pricing and price-cost spread? I think, Steve, focus on price and productivity are kind of two hallmarks of your approach. How do you think about the opportunity to have some traction on the price initiatives and see pricing above cost inflation in 2026? Thank you.
Tom Wadewitz: Great. Good afternoon. Just, I guess, one fine point on the OR improvement, if you could tell us what the base OR is in 2025, kind of just like what's included. But I guess the real question, if you will, how do you think about pricing and price-cost spread? I think, Steve, focus on price and productivity are kind of two hallmarks of your approach. How do you think about the opportunity to have some traction on the price initiatives and see pricing above cost inflation in 2026? Thank you.
Speaker #4: Oh , great . Good afternoon . Just I guess one fine point on the Or improvement . If you could tell us what the base is in 25 .
Speaker #4: Kind of just like what's included . But I guess the the real question , if you will , how do you think about pricing and price cost spread ?
Speaker #4: You know , I think Steve , you know , focus on price and productivity are kind of two hallmarks of your approach . How do you think about the opportunity to have some traction on the price initiatives and see pricing above cost inflation in 2026 ?
Speaker #4: Thank you .
Operator: Yeah. Tom, on the base, the starting point for 2025 is obviously ex the charge that we took on goodwill. So that's the starting point that we have in the adjusted number that we disclosed. On your questions on price and productivity, so as we think about price, I mean, certainly, you would like to be able to cover the cost of inflation in any given year and actually do better than that. In terms of kind of where we are in the pricing initiatives, Maryclare has taken the ball on that and has already put some new structures in place that I think are definitely going to help in terms of our price yield. As we look at what we have in the plan for 2026 versus 2025, price yield will be higher in 2026 over 2025 than it was in 2025 over 2024.
Kevin Boone: Yeah. Tom, on the base, the starting point for 2025 is obviously ex the charge that we took on goodwill. So that's the starting point that we have in the adjusted number that we disclosed.
Speaker #1: Yeah .
Speaker #5: On Tom , on the on the base , the starting point for 2025 is obviously X . The the charge that we took on goodwill .
Speaker #5: So that's the starting point that we have in the adjusted number that we disclosed.
Steve Angel: On your questions on price and productivity, so as we think about price, I mean, certainly, you would like to be able to cover the cost of inflation in any given year and actually do better than that. In terms of kind of where we are in the pricing initiatives, Maryclare has taken the ball on that and has already put some new structures in place that I think are definitely going to help in terms of our price yield. As we look at what we have in the plan for 2026 versus 2025, price yield will be higher in 2026 over 2025 than it was in 2025 over 2024.
Speaker #1: And on your questions on price and productivity . So you know , as we think about price , I mean , certainly you would like to be able to cover .
Speaker #1: You know , the cost of inflation in any given year . And , and actually do better than that . In terms of kind of where we are in the pricing initiatives , Mary Claire is , you the know , taking that ball on and is already put some new structures in place that I think are definitely going to help in terms of our price yield .
Speaker #1: As we look at , you know , what we have in the plan for 2026 versus 2025 , price , will be higher in 2026 over 2025 than it was in 2025 over 2024 .
Operator: So we're making progress, I think, on the pricing front. It'll be a bit slow going, but I think we'll continue to make progress as we work harder on the whole price management equation. And in terms of these contracts, they roll off in certain time frames that would probably take until about this time next year before we've had a chance to touch every contract and stress test, if you will, in terms of what the right price is versus the value we're bringing to that customer.
So we're making progress, I think, on the pricing front. It'll be a bit slow going, but I think we'll continue to make progress as we work harder on the whole price management equation. And in terms of these contracts, they roll off in certain time frames that would probably take until about this time next year before we've had a chance to touch every contract and stress test, if you will, in terms of what the right price is versus the value we're bringing to that customer.
Speaker #1: So we're making progress , I think , on the pricing front , it'll be a bit slow going , but I think we'll continue to make progress work harder .
Speaker #1: as we On the whole price management equation . And in terms of , you know , these contracts have they roll off in certain time frames , it would probably take until about this time next year before we had a chance to touch every contract .
Speaker #1: And stress test, if you will, in terms of what the right price is versus the value we're bringing to that customer.
Operator: The next question comes from Brian Ossenbeck with JP Morgan. Your line is open.
Operator: The next question comes from Brian Ossenbeck with JP Morgan. Your line is open.
Speaker #3: The question comes from Ossenbeck with Brian J.P. Morgan. Your line is open.
Sean Pelkey: Hey, good afternoon. Thanks for taking the question. So maybe one for Kevin. In the two to 300 basis points guidance for improvement, can you give us some qualification of how much of that you think is already baked in based on some of the one-time items or the things you know are rolling off? And sort of what are you expecting for inflation within that guide? Because if you look at the ALIF index, for example, that's starting to pick up a bit here. So maybe give us a little bit more color in terms of the building blocks there and sort of what's already spoken for and what are the assumptions underlying the rest of it. Thanks.
Brian Ossenbeck: Hey, good afternoon. Thanks for taking the question. So maybe one for Kevin. In the two to 300 basis points guidance for improvement, can you give us some qualification of how much of that you think is already baked in based on some of the one-time items or the things you know are rolling off? And sort of what are you expecting for inflation within that guide? Because if you look at the ALIF index, for example, that's starting to pick up a bit here. So maybe give us a little bit more color in terms of the building blocks there and sort of what's already spoken for and what are the assumptions underlying the rest of it. Thanks.
Speaker #6: Hey , good afternoon . Thanks for taking the question . So maybe one for Kevin in the 2 to 300 basis point guidance for improvement .
Speaker #6: Can you give us some qualification? How much of that do you think is already baked in, based on some of the one-time items or the things you know are rolling off? And, sort of, what are you expecting for the inflation guide?
Speaker #6: Because if you, within that, look at the Aleph Index, for example, it's starting to pick up a bit here. So, maybe you can give us a little bit more color in terms of the building blocks there and sort of what's already spoken for.
Speaker #6: And what are the assumptions underlying it? The rest of—thanks.
Operator: Yeah. No, when you look at some of the unique charges that occurred in 2025 between the severance, the technology write-off that we disclosed, as well as some of the costs related to the Blue Ridge and the Howard Street Tunnel, you can roughly assume those are about $150 million. What we're doing, what our guidance implies, is a much greater initiative around productivity and a big focus across the organization to drive that. And so you'll see our productivity numbers. If you do the math, have a fairly significant increase and step up. When we think about what's happening on the inflation side on our labor side, that's pretty self-explanatory. On the union side, the industry has obviously embedded labor inflation. Next year, you'll see another wage increase in the 3.75% range. We're also experiencing a little bit more healthcare inflation going into 2026 versus 2025.
Kevin Boone: Yeah. No, when you look at some of the unique charges that occurred in 2025 between the severance, the technology write-off that we disclosed, as well as some of the costs related to the Blue Ridge and the Howard Street Tunnel, you can roughly assume those are about $150 million. What we're doing, what our guidance implies, is a much greater initiative around productivity and a big focus across the organization to drive that. And so you'll see our productivity numbers. If you do the math, have a fairly significant increase and step up. When we think about what's happening on the inflation side on our labor side, that's pretty self-explanatory. On the union side, the industry has obviously embedded labor inflation. Next year, you'll see another wage increase in the 3.75% range. We're also experiencing a little bit more healthcare inflation going into 2026 versus 2025.
Speaker #5: Yeah . No . When you when you look at some of the unique charges that occurred in 2025 between the severance , the technology write off that we disclosed , as well as , you know , some of the costs related to the Blue Ridge and and Howard Street Tunnel .
Speaker #5: You know, you could roughly assume those are about $150 million. What we're doing, and what our guidance implies, is a much greater initiative around productivity and a big focus across the organization to drive that.
Speaker #5: And so you'll see our productivity numbers if you do the back , if you do the math , have a fairly significant increase in step up .
Speaker #5: When we think about what's happening on the inflation side , on our labor side , that's pretty self-explanatory . On the union side , you know , the industry has obviously embedded labor inflation .
Speaker #5: Next year, you'll see another wage increase in the 3.75% range. We're also experiencing a little bit more health care inflation going into '26 versus '25.
Operator: So I would say on the labor side, that's pretty consistent with what we saw last year, maybe a little bit higher than last year. And then on the non-labor side, a lot of efforts by the procurement team and others to drive that a little bit lower. So expect a little bit lower inflation on the non-labor side. So overall, I would look at inflation probably being in that 3% to 3.5% range.
So I would say on the labor side, that's pretty consistent with what we saw last year, maybe a little bit higher than last year. And then on the non-labor side, a lot of efforts by the procurement team and others to drive that a little bit lower. So expect a little bit lower inflation on the non-labor side. So overall, I would look at inflation probably being in that 3% to 3.5% range.
Speaker #5: So I would say, on the labor side, that's pretty consistent with what we saw last year, maybe a little bit higher than last year.
Speaker #5: And then, on the non-labor side, a lot of efforts by the procurement team and others to drive that a little bit lower.
Speaker #5: So expect a little bit lower inflation on the non-Labor side . So overall , you know , I would I would look at inflation probably being in that 3 to 3.5% range .
Operator: The next question comes from Scott Group with Wolfe Research. Your line is open.
Operator: The next question comes from Scott Group with Wolfe Research. Your line is open.
Speaker #3: The next question comes from Scott Group with Wolfe Research. Your line is open.
Matthew Korn: Hey, thanks. Afternoon. The low single-digit revenue growth for the year: any just sort of rough thoughts on volume versus yield in that? And then maybe, Steve, just bigger picture, the guide this year, I guess, implies like a 64 to 65 OR. Now that you've been here a few months, do you have a feel for what you think the longer-term operating ratio should be? Should this be a sub-60 OR railroad in the next few years, or is that a—I don't know. How should we think about that? Thank you.
Scott Group: Hey, thanks. Afternoon. The low single-digit revenue growth for the year: any just sort of rough thoughts on volume versus yield in that? And then maybe, Steve, just bigger picture, the guide this year, I guess, implies like a 64 to 65 OR. Now that you've been here a few months, do you have a feel for what you think the longer-term operating ratio should be? Should this be a sub-60 OR railroad in the next few years, or is that a—I don't know. How should we think about that? Thank you.
Speaker #7: Hey thanks . Afternoon . The the low single digit revenue growth for the year . Any just sort of rough thoughts on volume versus yield in that .
Speaker #7: And then maybe Steve just bigger picture like the guide . This year I guess implies like a 64 to 65 or now that you've been here a few months , do you have a feel for like what you think the longer term operating ratio should be , should this be a sub or railroad in the next few years , or is not ?
Speaker #7: Is that—I don't know. How should we think about that? Thank you.
Maryclare Kenney: Hi, Scott. This is Maryclare. I'll take the first part. So I think as we think about next year, we're looking at modest volume growth going into the year. I covered some of the macro environment that we're seeing out there. And while we're optimistic about certain areas and we see growth opportunities in places like intermodal, places where you see infrastructure investment like our minerals markets, and I think there's some potential on the domestic utility side when you think about the need for power generation as well as natural gas prices are, those are kind of more positives for us. But then, as I talked about, when you look at more of the industrial economy, we still see a lot of headwinds out there. So at this point, we'd say really modest volume growth next year.
Maryclare Kenney: Hi, Scott. This is Maryclare. I'll take the first part. So I think as we think about next year, we're looking at modest volume growth going into the year. I covered some of the macro environment that we're seeing out there. And while we're optimistic about certain areas and we see growth opportunities in places like intermodal, places where you see infrastructure investment like our minerals markets, and I think there's some potential on the domestic utility side when you think about the need for power generation as well as natural gas prices are, those are kind of more positives for us. But then, as I talked about, when you look at more of the industrial economy, we still see a lot of headwinds out there. So at this point, we'd say really modest volume growth next year.
Speaker #2: Hi , Scott , this is Mary Claire . I'll take the first part . So I think as we think about next year , we're looking at modest volume growth going into the year .
Speaker #2: I covered some of the macro environment that we're seeing out there . And , you know , while we're optimistic about certain areas and we see growth opportunities in places like intermodal , places where you see infrastructure investment like our minerals markets .
Speaker #2: And I think , you know , there's some some potential on the domestic utility side . When you think about the need for power generation as well as natural gas prices , are those are kind of more positives for us .
Speaker #2: But then, as I talked about, you know, when you look at more of the industrial economy, we still see a lot of headwinds out there.
Speaker #2: So, at this point, we'd say really modest volume growth next year.
Operator: Yeah. And I'll just talk in terms of operating margin percent. Look, we want to expand it every year. And if we're doing the right things on price management and productivity, we will be able to do that. And I have confidence in this team. I have confidence in our ability to build solid productivity programs to be able to grow operating margin a certain percent every year. And I could give you a number now, but I think I'll wait and talk about that later. But the objective is best-in-class performance. And you know what that is with respect to operating margin. I know what that is. I have confidence we can get there. The question is over what time frame we'll make progress every year.
Steve Angel: Yeah. And I'll just talk in terms of operating margin percent. Look, we want to expand it every year. And if we're doing the right things on price management and productivity, we will be able to do that. And I have confidence in this team. I have confidence in our ability to build solid productivity programs to be able to grow operating margin a certain percent every year. And I could give you a number now, but I think I'll wait and talk about that later. But the objective is best-in-class performance. And you know what that is with respect to operating margin. I know what that is. I have confidence we can get there. The question is over what time frame we'll make progress every year.
Speaker #1: And on Yeah . the I'll just talk in terms of operating margin , percent , you know , look , we want to expand it every year .
Speaker #1: And if you're if we're doing the right things on price management and productivity . We will be able to do that . And you know , I confidence have in this team .
Speaker #1: I have confidence in our ability to build solid productivity programs, to be able to grow operating margin to a certain percent every year.
Speaker #1: And I could give you a number now , but I think I'll wait and talk about that later . But you know , the objective is best in class performance .
Speaker #1: And , you know , you know what that is with respect to operating margin . I know what that is . I have confidence we can get there .
Speaker #1: The question is , you know , over what time frame we'll make progress every . Would I would like to do I mean , we have a very solid plan , as Kevin described .
Operator: What I would like to do, I mean, we have a very solid plan, as Kevin described, and we put a ton of time into building this plan for the environment that we're facing and to make sure we could deliver an outcome that we would be proud of. So that's where we are. But what I would like to see over the course of time is how well we can execute to those plans. I have confidence we can, but I'd like to experience that a few quarters, if you will, just so I can get grounded and confident in our ability to build, I'll call it sustainable productivity over time. And I think we can do that, but give me a little time to get more confident in our ability to do that.
What I would like to do, I mean, we have a very solid plan, as Kevin described, and we put a ton of time into building this plan for the environment that we're facing and to make sure we could deliver an outcome that we would be proud of. So that's where we are. But what I would like to see over the course of time is how well we can execute to those plans. I have confidence we can, but I'd like to experience that a few quarters, if you will, just so I can get grounded and confident in our ability to build, I'll call it sustainable productivity over time. And I think we can do that, but give me a little time to get more confident in our ability to do that.
Speaker #1: And we put a ton of time into building this plan for the environment that we're facing. And to make sure we could deliver an outcome that we would be proud of.
Speaker #1: So, that's where we are. But what I would like to see over the course of time is how well we can execute to those plans.
Speaker #1: You know , I have confidence we can , but I'd like to , you know , experience that a few quarters , a few quarters , if you will , just so I can get grounded and confident in our ability to build .
Speaker #1: it I'll call sustainable productivity over time . And I think we can do that . But , you know , give me a little time to get more confident in our ability to do that .
Operator: The next question comes from Ari Rosa with Citi. Your line is open.
Operator: The next question comes from Ari Rosa with Citi. Your line is open.
Speaker #3: The next question comes from Ari Rosa with Citigroup. Your line is open.
[Analyst] (UBS): Hi. Thanks for taking the question and good afternoon. So we're looking at, I apologize because this is a little bit short-termist, but we're looking at potentially a pretty nasty storm coming up. Not too long ago, we saw CSX's network face a pretty big setback given some storms. I'm curious, maybe Mike is the best one to answer this question. Just how are you preparing for the storm and how do we get confidence? Maybe it's an opportunity to talk about kind of how you're running the network differently now versus, say, 12 to 18 months ago. But what are the risks that these types of events could present setbacks, and how do we get comfortable that this isn't going to be a big obstacle in Q1? Thanks.
Ari Rosa: Hi. Thanks for taking the question and good afternoon. So we're looking at, I apologize because this is a little bit short-termist, but we're looking at potentially a pretty nasty storm coming up. Not too long ago, we saw CSX's network face a pretty big setback given some storms. I'm curious, maybe Mike is the best one to answer this question. Just how are you preparing for the storm and how do we get confidence? Maybe it's an opportunity to talk about kind of how you're running the network differently now versus, say, 12 to 18 months ago. But what are the risks that these types of events could present setbacks, and how do we get comfortable that this isn't going to be a big obstacle in Q1? Thanks.
Speaker #8: Hi . Thanks for taking the question . And good afternoon . So we're looking at . I apologize because this is a little bit short .
Speaker #8: Termist , but we're looking at potentially a pretty nasty storm coming up . You know , not too long ago we saw CSX's network face a pretty big setback given given some storms .
Speaker #8: I'm curious , maybe Mike is the best one to answer this question . Just how are you for the preparing storm , and how do we get confidence ?
Speaker #8: You know , maybe it's an opportunity to talk about kind of how you're running the the network differently now versus , say , 12 to 18 months ago .
Speaker #8: But what are the risks that these types of events could present setbacks? And how do we get comfortable with that? You know, this isn't going to be a big obstacle in Q1.
Speaker #8: Thanks .
Mike Cory: Sure. Thanks for the question. All right. As we've said, the network is going into this in much better condition than last year when we started facing storms. So just to give you just a view of what we see, we're going to see ice on our southern portion of our network, basically going from Nashville right across through Alabama, through Georgia. And then in the middle section of our network, we're going to experience, or we see right now from the weather reports, we're going to experience heavy snow right from Indiana through Kentucky, right across PA, western Maryland, Virginia, all the way up the I-95. So in terms of precautions, here's some real detail. I mean, we're going to have senior coverage right around the clock in all of our key areas, including our network center.
Mike Cory: Sure. Thanks for the question. All right. As we've said, the network is going into this in much better condition than last year when we started facing storms. So just to give you just a view of what we see, we're going to see ice on our southern portion of our network, basically going from Nashville right across through Alabama, through Georgia. And then in the middle section of our network, we're going to experience, or we see right now from the weather reports, we're going to experience heavy snow right from Indiana through Kentucky, right across PA, western Maryland, Virginia, all the way up the I-95. So in terms of precautions, here's some real detail. I mean, we're going to have senior coverage right around the clock in all of our key areas, including our network center.
Speaker #9: Sure . Thanks for the question . Ari . As we've said , like the network is , is going into this in much better condition than we than last year when we started facing storms .
Speaker #9: So just to give you, you know, just a view of what we see, we're going to see ice on our southern portion of our network.
Speaker #9: Basically going , you know , from Nashville right across through the through Alabama , through through Georgia . And then in the middle , middle section of our network , we're going to experience we see right now from the from the weather reports , we're going to experience heavy snow , right from Indiana through Kentucky , right across PA , Western Maryland , Virginia , all the way up the I-95 .
Speaker #9: So in terms of precautions , you know , here's some some real detail . I mean , we're going to have senior coverage right around the clock in all of key areas , our including our network center .
Mike Cory: We've gone over from snow clearing to tree clearing, generators, everything that we need in each location, each facility that we see the storm coming through. We've modified our operating plan, working with our customers, notifying them because they're going to have the same conditions. That really, assets for us right now are going to be the most crucial thing that we protect. At the same time, we expect to see power outages, highway closures. We're going to see cold right after that. So I do not see us coming out of this probably for a few days. If we get it Sunday, we're looking at midweek to recover. But I'm very confident, especially with the condition that we're going in, that we will come through this with no issues. This is not going to lead us into four months of trouble like it did the year before.
We've gone over from snow clearing to tree clearing, generators, everything that we need in each location, each facility that we see the storm coming through. We've modified our operating plan, working with our customers, notifying them because they're going to have the same conditions. That really, assets for us right now are going to be the most crucial thing that we protect. At the same time, we expect to see power outages, highway closures. We're going to see cold right after that. So I do not see us coming out of this probably for a few days. If we get it Sunday, we're looking at midweek to recover. But I'm very confident, especially with the condition that we're going in, that we will come through this with no issues. This is not going to lead us into four months of trouble like it did the year before.
Speaker #9: We've got we've gone over from snow clearing to tree clearing generators . Everything that we need in each in each location , each facility that we see the storm coming through .
Speaker #9: We've modified our operating plan, working with our customers, notifying them, because we have the same conditions that really, assets for us right now are going to be the most crucial thing that we protect.
Speaker #9: We at the same time , you know , we expect to see power outages , highway closures . We , you know , we're going to see cold , right after that .
Speaker #9: So I do not see us coming out of this , probably for a few days . If we get it Sunday . You know , we're looking at midweek to recover , but I'm very confident , especially with the condition that we're going in , that we we will come through this with with no issues .
Speaker #9: This does not lead us into going through four months of trouble like it did the year before, even if there is some consecutiveness to it.
Mike Cory: Even if there is some consecutiveness to it, we have everything in place. And what we learned last year, we're putting into effect throughout the beginning and right through this storm.
Even if there is some consecutiveness to it, we have everything in place. And what we learned last year, we're putting into effect throughout the beginning and right through this storm.
Speaker #9: We have everything in place, and what we learned last year, we're putting into effect throughout the beginning and right through this storm.
Operator: The next question comes from Brandon Oglenski with Barclays. Your line is open.
Operator: The next question comes from Brandon Oglenski with Barclays. Your line is open.
Speaker #3: The next question comes from Brandon Oglenski with Barclays. Your line is open.
Matthew Korn: Hey, everyone. Thanks for taking the question. I guess, Mike, it's not shocking that it snows in January. I'd ask, maybe more importantly, how are you approaching operations differently this year, especially with new leadership concepts at the company? How do you get back to those best-in-class metrics that the railroad had three or four years ago?
Brandon Oglenski: Hey, everyone. Thanks for taking the question. I guess, Mike, it's not shocking that it snows in January. I'd ask, maybe more importantly, how are you approaching operations differently this year, especially with new leadership concepts at the company? How do you get back to those best-in-class metrics that the railroad had three or four years ago?
Speaker #10: Hey everyone . Thanks for taking the question . And I guess , Mike , it's not shocking that it snows in January . So I I'd ask maybe more importantly , like , how are you approaching operations differently this year especially , you know , with like new leadership concepts at the company .
Speaker #10: How do you get back to those best in class metrics that the railroad had ? You know , 3 or 4 years ago ?
Mike Cory: Yeah. No, thanks for the question. I think you can see by the metrics we have now, we're running as good as we have three or four years ago. But I mean, it's a focus on asset utilization. It's a focus on oversight and to the key measures that we look at every day. Really, that's what we've done. What we learned through that exercise was to make sure that we take action as soon as we can on the issues that are preventing us from being fluid. And that's from making sure that we don't bring equipment in when we shouldn't. It's making sure we have our excess equipment in places to be able to respond to issues we have. And that's generally what we did to come out of the second quarter issue, the first and second quarter issues we've had.
Mike Cory: Yeah. No, thanks for the question. I think you can see by the metrics we have now, we're running as good as we have three or four years ago. But I mean, it's a focus on asset utilization. It's a focus on oversight and to the key measures that we look at every day. Really, that's what we've done. What we learned through that exercise was to make sure that we take action as soon as we can on the issues that are preventing us from being fluid. And that's from making sure that we don't bring equipment in when we shouldn't. It's making sure we have our excess equipment in places to be able to respond to issues we have. And that's generally what we did to come out of the second quarter issue, the first and second quarter issues we've had.
Speaker #9: Yeah , no . Thanks for the question . I , I think you can see by the metrics we have now , we're we're running as good as we have 3 or 4 years ago .
Speaker #9: But really , I mean , it's a focus on asset utilization . It's a focus on oversight . And you know , to the key measures that we look at every day , really , that's that's what we've done , what we learned through that exercise was to make sure that we take action as soon as we can on the issues that are preventing us from being fluid .
Speaker #9: And that's , you know , from that's , making sure that we don't bring equipment in when we shouldn't . It's making sure we have our excess equipment in places to , to be able to respond to issues .
Speaker #9: We have . And that's , that's generally what we did to come out of the second quarter issue , first and second quarter issues .
Mike Cory: But I don't see us really failing on this storm coming up. I appreciate your concern, but we're ready for it. And again, I see us coming through it very well.
But I don't see us really failing on this storm coming up. I appreciate your concern, but we're ready for it. And again, I see us coming through it very well.
Speaker #9: had . We've But I don't see I don't see us really . You know , failing on this , on this storm coming up .
Speaker #9: I appreciate your concern , but we're ready for it . And I again , I see us coming through it very well .
Operator: The next question comes from Ken Hoexter with Bank of America. Your line is open.
Operator: The next question comes from Ken Hoexter with Bank of America. Your line is open.
Speaker #3: The next question comes from Ken Hoexter with Bank of America. Your line is open.
Kevin Boone: Hey, great. Good afternoon. So Kevin, sounds like a lot of programs. I think you mentioned 100 different ones. But just so we don't get lost in kind of minutia, can you maybe talk dollar amounts for buckets so we can, I don't know, track something? Is there workforce optimization or a headcount target? Anything from Mike Cory on the op savings? And Kevin, you mentioned non-labor spending. Maybe you could just maybe parse that out a little bit because if we've got very low volume growth, very low pricing growth, how do we get that 2 to 300 margin basis points? I guess you take out maybe 100 basis points or so from the $100 million that you spent this year. But if you can bucketize some of that stuff to help us walk through and what to expect.
Ken Hoexter: Hey, great. Good afternoon. So Kevin, sounds like a lot of programs. I think you mentioned 100 different ones. But just so we don't get lost in kind of minutia, can you maybe talk dollar amounts for buckets so we can, I don't know, track something? Is there workforce optimization or a headcount target? Anything from Mike Cory on the op savings? And Kevin, you mentioned non-labor spending. Maybe you could just maybe parse that out a little bit because if we've got very low volume growth, very low pricing growth, how do we get that 2 to 300 margin basis points? I guess you take out maybe 100 basis points or so from the $100 million that you spent this year. But if you can bucketize some of that stuff to help us walk through and what to expect.
Speaker #11: Hey , great . Good afternoon . So , Kevin , sounds like a lot of programs . I think you mentioned a hundred different ones , but just so we don't get lost in , in kind of minutia , can you maybe talk dollar amounts for buckets so we can I don't know , track something .
Speaker #11: Is there workforce optimization or headcount target anything from Mike quarry on the ops savings . And Kevin , you mentioned non-labor spending . Maybe you could just maybe parse that out a little bit .
Speaker #11: So , you know , because we've got very low volume growth , very low pricing growth , you know , how do we get that 2 to 300 margin basis points ?
Speaker #11: I guess you take out maybe 100 basis points or so from the $100 million that you spent this year. But if you can bucketize some of that stuff to help us walk through and what to expect.
Operator: Yeah. When you look at the majority of the productivity that you obviously can solve for after the $150 million that I pointed out, that naturally just comes out, that won't repeat in 2026. It's very, very highly focused on the labor line and the PS&O line. And so a lot of activity in those two areas, I would say, largely equally divided. You'll probably see on an absolute basis, an absolute dollar basis, more come out of the PS&O line because you're going to have less inflation, core inflation in that line versus the labor, which I talked about a little bit earlier, given obviously our union labor contracts and what we're seeing on the medical side on that area. But those are the areas we're certainly focused on driving cost improvement across the line items.
Kevin Boone: Yeah. When you look at the majority of the productivity that you obviously can solve for after the $150 million that I pointed out, that naturally just comes out, that won't repeat in 2026. It's very, very highly focused on the labor line and the PS&O line. And so a lot of activity in those two areas, I would say, largely equally divided. You'll probably see on an absolute basis, an absolute dollar basis, more come out of the PS&O line because you're going to have less inflation, core inflation in that line versus the labor, which I talked about a little bit earlier, given obviously our union labor contracts and what we're seeing on the medical side on that area. But those are the areas we're certainly focused on driving cost improvement across the line items.
Speaker #5: Yeah . You know , when you look at the majority of , you know , the productivity that you obviously can solve for after the 150 million that I , that I pointed out that that naturally just comes out , that won't repeat in 2026 .
Speaker #5: It's very , very highly focused on the labor line and the snow line . And so a lot of activity in those two areas , I would say largely equally divided .
Speaker #5: You'll probably see on an absolute basis dollar absolute an basis , more come out of the snow line , because you're going to have less inflation , core inflation in that line versus the labor , which I , talked about a little bit earlier , given obviously our union labor contracts and what we're seeing on the medical side on that , on that area .
Speaker #5: But those are the areas we're certainly focused on driving cost improvement across the line . Items , depreciation more or less . It will be in the flat range as we as we pointed out .
Operator: Depreciation, more or less, will be in the flat range, as we pointed out. And then certainly some areas of improvement. Mike will always tell you on the fuel side, we're looking for every opportunity to continue to get more fuel efficient. And then on the rent side, there's some opportunity as we run better, certainly from a car hire and other areas that we expect to drive improvement there too. So the good news is a diversified portfolio of opportunities. I guess the bad news on that side is we've got to stay very, very focused across all these areas to make sure that we're capitalizing on those.
Depreciation, more or less, will be in the flat range, as we pointed out. And then certainly some areas of improvement. Mike will always tell you on the fuel side, we're looking for every opportunity to continue to get more fuel efficient. And then on the rent side, there's some opportunity as we run better, certainly from a car hire and other areas that we expect to drive improvement there too. So the good news is a diversified portfolio of opportunities. I guess the bad news on that side is we've got to stay very, very focused across all these areas to make sure that we're capitalizing on those.
Speaker #5: And then , you know , certainly some some areas of improvement , I you know , Mike will always tell you on the fuel side , we're looking for every opportunity to continue to get more fuel efficient .
Speaker #5: And then on the rent side , there's there's some opportunity as we run better , certainly from a car and other hire areas that we we expect to drive improvement .
Speaker #5: There too . So the good news is that diversified portfolio of opportunities , I guess the bad news on that side got , you know , we've got to is we've stay very , very focused across all these areas to make sure that we're we're capitalizing on on those and my full expectation as we move into later in this month , in February and March , we're going to come up with an additional list that obviously , hopefully drive further improvement in the back half of the year .
Operator: My full expectation as we move into later into this month in February and March, we're going to come up with an additional list that'll obviously hopefully drive further improvement in the back half of the year and then create some opportunities as we move into 2027.
My full expectation as we move into later into this month in February and March, we're going to come up with an additional list that'll obviously hopefully drive further improvement in the back half of the year and then create some opportunities as we move into 2027.
Speaker #5: And then create some opportunities as we move into 2027.
Operator: The next question comes from Stephanie Moore with Jefferies. Your line is open.
Operator: The next question comes from Stephanie Moore with Jefferies. Your line is open.
Speaker #3: The next question comes from Stephanie Moore with Jefferies. Your line is open.
Maryclare Kenney: Great. Good afternoon. Thank you. I think I would be a bit remiss not to ask Elise about the major merger that is underway for this industry. If you could maybe talk about how you are positioning the company in the wake of what could be a pretty transformational deal. So in the near term, while it's under review, what are the opportunities that you all can take advantage of? And then, of course, I'm sure you're also having to somewhat scenario analyze what would be like if the deal is approved. And in that way, what is the strategy for CSX as kind of the sole East Coast merger? East Coast Rail. Thanks.
Stephanie Moore: Great. Good afternoon. Thank you. I think I would be a bit remiss not to ask Elise about the major merger that is underway for this industry. If you could maybe talk about how you are positioning the company in the wake of what could be a pretty transformational deal. So in the near term, while it's under review, what are the opportunities that you all can take advantage of? And then, of course, I'm sure you're also having to somewhat scenario analyze what would be like if the deal is approved. And in that way, what is the strategy for CSX as kind of the sole East Coast merger? East Coast Rail. Thanks.
Speaker #12: Great . Good afternoon . Thank you . You know , I think I would be a remiss not to ask at least about the major merger that is underway for this industry .
Speaker #12: If you could maybe talk about how you are positioning the company in the wake of what could be a pretty transformational deal. So in the near term, while it's under review, what are the opportunities that you all can take advantage of?
Speaker #12: And then, of course, I'm sure you're also having to somewhat scenario analyze what it would be like if the deal approved is that way.
Speaker #12: Is the 'And' in strategy for CSX about the whole East Coast merger? East Coast Rail, thanks.
Operator: Made a call. It took three years before the final restriction was lifted. So for three years, we were kind of in deal purgatory. What you have to do is make sure that you're running the business to the best of your ability every day. That's kind of the key in this process. I don't know what conditions are going to be required for approval. That remains to be seen. I think this is a long process, and we'll find out what that is. Then when you get to the end of that, if the merger is approved, you still have to execute. So I think it's a long process. As I said, there are going to be opportunities we can take advantage of. We see some today that we're taking advantage of. Whatever risks are out there, we'll certainly manage those. We'll mitigate those.
Steve Angel: Made a call. It took three years before the final restriction was lifted. So for three years, we were kind of in deal purgatory. What you have to do is make sure that you're running the business to the best of your ability every day. That's kind of the key in this process. I don't know what conditions are going to be required for approval. That remains to be seen. I think this is a long process, and we'll find out what that is. Then when you get to the end of that, if the merger is approved, you still have to execute. So I think it's a long process. As I said, there are going to be opportunities we can take advantage of. We see some today that we're taking advantage of. Whatever risks are out there, we'll certainly manage those. We'll mitigate those.
Speaker #1: And made a call. It took three years before the final restriction was lifted. So for three years, we were kind of in deal purgatory.
Speaker #1: And what you have to do is make sure that, you know, you're running the business to the best of your ability every day, and that that's kind of the key in this process.
Speaker #1: You know , I don't know what conditions are going to be required for approval . That remains to be seen . I think this is a long process , and we'll find out .
Speaker #1: You know what that is . And then when you get to the end of that , you know , the if the merger is approved , you know , you still have to execute .
Speaker #1: So I think it's a long process . I As said , you know , they're going to be , you know , opportunities .
Speaker #1: We can take advantage of . We we see some today that we're taking advantage of whatever risk and are out there . We'll certainly manage those will mitigate those .
Operator: We'll have plans for those. As the time comes forward for us to make our case to the appropriate authorities, we'll certainly be prepared to do that. And then the focus is just making sure that we can be as competitive as we can be. But at the end of the day, we can create value by running CSX better every day. So you can set the merger aside. We're going to manage that. We're going to work through that. We're going to have many, many quarters to talk about that probably. But what we know we can do now is run this company better every day. And we feel really good about our ability to do that.
We'll have plans for those. As the time comes forward for us to make our case to the appropriate authorities, we'll certainly be prepared to do that. And then the focus is just making sure that we can be as competitive as we can be. But at the end of the day, we can create value by running CSX better every day. So you can set the merger aside. We're going to manage that. We're going to work through that. We're going to have many, many quarters to talk about that probably. But what we know we can do now is run this company better every day. And we feel really good about our ability to do that.
Speaker #1: We'll have plans for those as the time comes forward for us to, you know, make our case to the appropriate authorities. We'll certainly be prepared to do that.
Speaker #1: And then the focus is just making sure that we can be as competitive as we can be , you know ? But of the day , at the end you know , we can create value by running CSX better every day .
Speaker #1: can set So you the merger aside . We're going to manage that . We're going to work through that . We're going to have many , many quarters to talk to about that probably .
Speaker #1: But what we know we can do now is run the company better every day. And we feel really good about our ability to do that.
Operator: The next question comes from Jonathan Chappell with Evercore ISI. Your line is open.
Operator: The next question comes from Jonathan Chappell with Evercore ISI. Your line is open.
Speaker #3: The next question comes from Jonathan Chapell with Evercore ISI. Your line is open.
Matthew Korn: Thank you. Good afternoon. Kevin, maybe Maryclare, can you just help us a little bit with coal RPU? Feels like the way that we're calculating it now is a little bit different than the last several years. What are you thinking about as baked into that revenue growth? This is from both a Q1 and a full-year perspective. Is it kind of stabilized from this Q4 exit rate, or is there some improvement baked into what's a very important yield line item?
Jonathan Chappell: Thank you. Good afternoon. Kevin, maybe Maryclare, can you just help us a little bit with coal RPU? Feels like the way that we're calculating it now is a little bit different than the last several years. What are you thinking about as baked into that revenue growth? This is from both a Q1 and a full-year perspective. Is it kind of stabilized from this Q4 exit rate, or is there some improvement baked into what's a very important yield line item?
Speaker #13: Thank you . Good afternoon . Kevin , maybe Mary Claire , can you just help us a little bit with coal ? Rpu feels like the way that we're calculating it now is a little bit different than the last several years .
Speaker #13: And what are you thinking about is baked into that revenue growth? Do we see? And this is from both Q1 and a full year perspective.
Speaker #13: Is it kind of stabilized from this Q4 exit rate, or is there some improvement baked into what’s very important—the yield line item?
Maryclare Kenney: Yeah. So this is Maryclare. I'd say as we think about RPU going forward, there's always a mixed element that comes into our business. So as I think about going into 2026, talked about some of the markets that we feel a little bit better about, as well as ones that we see more risk. And so intermodal, we feel good about. When you think about some of our merchandise side of the business, we see some impacts there of probably stronger growth in some of our lower RPU business, like minerals, and fertilizers, and more softness in some of our higher RPU business when you think about our forest products business, or our chemicals business. Talk a little bit more about next year. We've got overlaps that we saw closures over the course of 2025, quite a few of that in our forest products line of business.
Maryclare Kenney: Yeah. So this is Maryclare. I'd say as we think about RPU going forward, there's always a mixed element that comes into our business. So as I think about going into 2026, talked about some of the markets that we feel a little bit better about, as well as ones that we see more risk. And so intermodal, we feel good about. When you think about some of our merchandise side of the business, we see some impacts there of probably stronger growth in some of our lower RPU business, like minerals, and fertilizers, and more softness in some of our higher RPU business when you think about our forest products business, or our chemicals business. Talk a little bit more about next year. We've got overlaps that we saw closures over the course of 2025, quite a few of that in our forest products line of business.
Speaker #2: Yeah . So Mary Claire , I'd say as we think about rpu going forward , you know , there's always a a mix element that comes into our business .
Speaker #2: And so as I think about going into 2026 . Talked about some of the markets that we feel a little bit , a little bit better about , as well as ones that , you know , we see more risk .
Speaker #2: And so, intermodal we feel good about. When you think about some of our merchandise out of the business, we see some impacts there of probably stronger growth in some of our lower ARPU business, like minerals and fertilizers, and more softness in some of our higher RPU business.
Speaker #2: When you think about our forest products business, or our chemicals business, you know, talk a little bit more about next year.
Speaker #2: We've got overlaps that we saw, closures. And over the course of 2025, quite a few of that in our forest products line of business.
Maryclare Kenney: We see auto down next year from a North American-like vehicle production perspective. We also have a large plant on our network that will be down over the course of next year. So that'll certainly impact where we see volume growth versus decline, and that comes into play. I would tell you, see, you spoke earlier about how we're thinking about pricing. We've had a lot of conversations there. We've looked at our processes and controls. Mike's delivering a really good service product right now, and customers value that. So we're going to take that into account as we think about going forward. You also know there's a portion of our business that we can touch every year. So that'll impact from a timing perspective.
We see auto down next year from a North American-like vehicle production perspective. We also have a large plant on our network that will be down over the course of next year. So that'll certainly impact where we see volume growth versus decline, and that comes into play. I would tell you, see, you spoke earlier about how we're thinking about pricing. We've had a lot of conversations there. We've looked at our processes and controls. Mike's delivering a really good service product right now, and customers value that. So we're going to take that into account as we think about going forward. You also know there's a portion of our business that we can touch every year. So that'll impact from a timing perspective.
Speaker #2: We see auto down next year from a North American light vehicle production perspective. And we also have a large plant on our network that will be down over the course of next year.
Speaker #2: So that'll certainly impact , you know , where we volume see growth versus decline . And that comes into play . I would tell you see you spoke earlier about , you know , how we're thinking about pricing .
Speaker #2: We've had a lot of conversations there. We've looked at our processes and controls. And, you know, Mike's delivering a really good service product right now.
Speaker #2: And customers value that . And so we're going to take that into account as we think about going forward . And you also know there's you know , there's a portion of our business that we can touch every year .
Speaker #2: So, that'll impact from a timing perspective.
Operator: Yeah. And I'll just add on the coal RPU, just as a headline, we went through a year where we're lapping some pretty difficult comps. And that'll be largely we'll be through that by Q1 on that side. So we'll see a lot more stable, maybe slightly down. But again, to Maryclare's point, it's a lot about mix. And obviously, with a stronger southern utility demand, that is helpful as well, given the length of haul.
Kevin Boone: Yeah. And I'll just add on the coal RPU, just as a headline, we went through a year where we're lapping some pretty difficult comps. And that'll be largely we'll be through that by Q1 on that side. So we'll see a lot more stable, maybe slightly down. But again, to Maryclare's point, it's a lot about mix. And obviously, with a stronger southern utility demand, that is helpful as well, given the length of haul.
Speaker #5: Yeah I'll just add on on the coal on the coal Rpu just as a headline , we went through a year where we were lapping some pretty difficult comps and that will that'll be largely will be through that by the first quarter .
Speaker #5: On that side . So you know , we'll see a lot more stable , maybe slightly down . But again that to Mary Claire's point , it's a lot about mix .
Speaker #5: And, obviously, with a stronger Southern utility demand, that is helpful as well, given the length of haul.
Operator: The next question comes from Chris Weatherby with Wells Fargo. Your line is open.
Operator: The next question comes from Chris Weatherby with Wells Fargo. Your line is open.
Speaker #3: The next question comes from Chris Wetherbee with Wells Fargo. Your line is open.
[Analyst] (UBS): Hey, thanks. Good afternoon, guys. Maybe I wanted to come back to a question I was asked earlier in the call and maybe think about it a little bit differently. I guess, Steve, you talked about best-in-class. And when you think about it from a margin perspective, we kind of know where the benchmarks are. CSX was there probably five or six years ago for a few years. And I know things are different. Mix is different. There are some other dynamics in the market relative to them.
Chris Wetherbee: Hey, thanks. Good afternoon, guys. Maybe I wanted to come back to a question I was asked earlier in the call and maybe think about it a little bit differently. I guess, Steve, you talked about best-in-class. And when you think about it from a margin perspective, we kind of know where the benchmarks are. CSX was there probably five or six years ago for a few years. And I know things are different. Mix is different. There are some other dynamics in the market relative to them.
Speaker #14: Yeah . Hey , thanks . Good afternoon guys . Maybe want to come back to a question I was asked earlier in the call and maybe think about it a little bit differently , I guess .
Speaker #14: Steve , you know , you talked about best in class . And when you think about it from a margin perspective , we kind of know where the benchmarks are .
Speaker #14: CSX was there probably five or six years ago for a few years. And I know things are different. Mix is different.
Speaker #14: You know , there are some other dynamics in the market relative to then . But I guess as you've been there for three plus months now and had a chance to kind of think about the business , is there anything meaningful that you see that would sort of prevent the ability to get back to those levels , whether you think about sort of the different customer mix , how things are changing , if there's anything from a network perspective , we should be thinking about , I get the productivity and you have to kind of get some reps in feel before you comfortable with how that can be sustainable .
[Analyst] (UBS): But I guess as you've been there for three-plus months now and had a chance to kind of think about the business, is there anything meaningful that you see that would sort of prevent the ability to get back to those levels, whether you think about sort of the different customer mix, how things are changing, if there's anything from a network perspective we should be thinking about? I get the productivity, and you have to kind of get some reps in before you feel comfortable with how that can be sustainable. But anything sort of maybe insurmountable that you see right off the bat?
But I guess as you've been there for three-plus months now and had a chance to kind of think about the business, is there anything meaningful that you see that would sort of prevent the ability to get back to those levels, whether you think about sort of the different customer mix, how things are changing, if there's anything from a network perspective we should be thinking about? I get the productivity, and you have to kind of get some reps in before you feel comfortable with how that can be sustainable. But anything sort of maybe insurmountable that you see right off the bat?
Speaker #14: But, but anything sort of, you know, maybe insurmountable that you see right off the get, off the bat.
Operator: I mean, in an answer, no, I don't see anything insurmountable. It's not like I'm sitting here thinking that we're going to go back to the heydays of coal, and that's how we're going to accomplish it. That's not what I'm thinking. I'm thinking about basically take the mix we got and through some of the strong initiatives that Maryclare talked about earlier, finding some growth through our own actions. Obviously, anytime you get a little help from the economy, that would certainly help a great deal towards moving those operating margins up faster. But I really don't sit here and think I need to have a lot of help from the economy. I think our own growth initiatives, doing a better job on price management, and working the productivity equation very hard. And both Mike and Kevin have talked about certain actions that they've taken.
Steve Angel: I mean, in an answer, no, I don't see anything insurmountable. It's not like I'm sitting here thinking that we're going to go back to the heydays of coal, and that's how we're going to accomplish it. That's not what I'm thinking. I'm thinking about basically take the mix we got and through some of the strong initiatives that Maryclare talked about earlier, finding some growth through our own actions. Obviously, anytime you get a little help from the economy, that would certainly help a great deal towards moving those operating margins up faster. But I really don't sit here and think I need to have a lot of help from the economy. I think our own growth initiatives, doing a better job on price management, and working the productivity equation very hard. And both Mike and Kevin have talked about certain actions that they've taken.
Speaker #1: I mean , in an answer , no , I don't see insurmountable . anything And like I'm sitting it's not here , you know , thinking that we're going to go back to the heydays of coal and that's how we're going to accomplish it .
Speaker #1: That's not what I'm thinking . thinking I'm about , you know , basically take the mix . We got and , you know , through some of the strong initiatives that that Mary Claire talked about earlier , you know , finding some growth through our own actions .
Speaker #1: Obviously , anytime you get a little help from the economy , that would certainly help a great deal towards , you know , moving those operating margins up faster .
Speaker #1: But I really don't sit here and think, you know, I need to have a lot of help from the think economy.
Speaker #1: Our own growth initiatives are doing a better job on price management and working the productivity equation very hard. And both Mike and Kevin have talked about certain actions that they've taken.
Operator: But I can lay out something that says we should be able to get there. But again, I want to see the kind of proof in the pudding. And I think that'll happen. But that's kind of how I think about it.
But I can lay out something that says we should be able to get there. But again, I want to see the kind of proof in the pudding. And I think that'll happen. But that's kind of how I think about it.
Speaker #1: But , you know , I can I can lay out something that says , you know , we should be able to get there .
Speaker #1: want to see again , I the But kind of proof in the pudding . And I think that'll happen . But , you know , that's kind of how I think about it .
Operator: The next question comes from Jason Seidl with TD Cowen. Your line is open.
Operator: The next question comes from Jason Seidl with TD Cowen. Your line is open.
Speaker #3: The next question comes from Jason Seidl with TD Cowen. Your line is open.
Kevin Boone: Thank you, Operator. Steve, team, hello. Maryclare, I guess this is going to be one for you. We're going to go back to the coal side, but I want a clarification first. I think you said it was you were calling for muted growth, and then you said next year. I'm assuming you were talking 2026 and not 2027?
Jason Seidl [Managing Director and Industrials: Thank you, Operator. Steve, team, hello. Maryclare, I guess this is going to be one for you. We're going to go back to the coal side, but I want a clarification first. I think you said it was you were calling for muted growth, and then you said next year. I'm assuming you were talking 2026 and not 2027?
Speaker #15: Thank you . Arpit . Stephen , team . Hello . Mary . Claire , I guess this is going to be one for you .
Speaker #15: We're going to go back to the coal side. But I want a clarification first. I think you said it was, you know, you were calling for muted growth.
Speaker #15: And then you said next year—I'm assuming you were talking '26 and not '27.
Maryclare Kenney: Yes, 2026. Sorry.
Maryclare Kenney: Yes, 2026. Sorry.
Speaker #2: Yes, 26. Sorry.
Kevin Boone: Okay. Not a problem. I've done that a bunch of times already this year. Wanted to just ask a question. Given this storm and some of the impacts that we've seen, at least over the last two days with natural gas futures, just how long do natural gas prices have to stay elevated until we see a flow-through on the volume side? And what's sort of the best way to monitor that?
Jason Seidl [Managing Director and Industrials: Okay. Not a problem. I've done that a bunch of times already this year. Wanted to just ask a question. Given this storm and some of the impacts that we've seen, at least over the last two days with natural gas futures, just how long do natural gas prices have to stay elevated until we see a flow-through on the volume side? And what's sort of the best way to monitor that?
Speaker #15: Oh , okay . Not a problem . I've done that a bunch of times already this year . What is that ? Just ask a question .
Speaker #15: You know , given , you know , this storm and some of the impacts that we've seen at least over the last two days with natural gas futures , just just how long do natural gas prices have to stay elevated ?
Speaker #15: Until we see a flow-through on the volume side, what's sort of the best way to monitor that?
Maryclare Kenney: Yeah. Thanks, Jason. I would say, as I think about the coal side, both with greater power demand that we're seeing here and the increase in the natural gas prices, certainly supported recently about this upcoming storm, we feel good about the volume demand on the domestic utility side. I would say one of the things that we're watching here, though, is there were some planned closures that were supposed to start happening this year. We expect those will get delayed, but for how long, that's a little bit uncertain. I think there's going to be more demand and more opportunity for us. I think the piece we'll have to watch is how much can actually be supported by the producers going forward.
Maryclare Kenney: Yeah. Thanks, Jason. I would say, as I think about the coal side, both with greater power demand that we're seeing here and the increase in the natural gas prices, certainly supported recently about this upcoming storm, we feel good about the volume demand on the domestic utility side. I would say one of the things that we're watching here, though, is there were some planned closures that were supposed to start happening this year. We expect those will get delayed, but for how long, that's a little bit uncertain. I think there's going to be more demand and more opportunity for us. I think the piece we'll have to watch is how much can actually be supported by the producers going forward.
Speaker #2: Yeah . Thanks , Jason . I would say , as I think about the coal side , you know , both with greater power demand that we're seeing here and in the increase natural gas prices .
Speaker #2: You know , certainly supported recently this about this , upcoming storm . We feel good about the volume demand on the domestic utility side .
Speaker #2: would say , you I know , one of the things that that we're watching here , though , is there were some plant closures that were supposed to start happening this year .
Speaker #2: We expect those will get delayed. But for how long? That's a little bit uncertain. I think there's going to be more demand and more opportunity for us.
Speaker #2: I think the piece we'll have to watch is, you know, how much can actually be supported by the producers going forward.
Operator: The next question comes from Ravi Shankar with Morgan Stanley. Your line is open.
Operator: The next question comes from Ravi Shankar with Morgan Stanley. Your line is open.
Speaker #3: The next question comes from Ravi Shanker with Morgan Stanley. Your line is open.
Sean Pelkey: Great. Thank you. Good afternoon, everyone. Steve, it's understandable that you pulled the long-term guidance given our macros down the last couple of years. But is that still the right template to think about earnings growth in the long term when macro is normal? Or do you think something's changed in the business where it could be better or worse than that initial guidance?
Ravi Shanker: Great. Thank you. Good afternoon, everyone. Steve, it's understandable that you pulled the long-term guidance given our macros down the last couple of years. But is that still the right template to think about earnings growth in the long term when macro is normal? Or do you think something's changed in the business where it could be better or worse than that initial guidance?
Speaker #16: Great . Thank you . Good afternoon everyone . Steve . It's understandable that you pulled the long term guidance given on macros done in the last couple of years .
Speaker #16: But is that still the right template, thinking about growth into the long term? When macro is normal? Or do you think something's changed with the business where it could be better or worse than that?
Speaker #16: Initial guidance .
Operator: No, I don't think anything's changed in the business where we can't come back and lay out a longer-term guidance or a longer-term algorithm. I don't see anything that's fundamentally changed the business that would prevent us from doing that. It's just caution on my part that I want to make sure that we can execute the plans in front of us before we start talking about a longer-term picture. But I'm not sitting here thinking that we need to get away from that any kind of longer-term guidance because there's something fundamentally wrong in the business. I don't see that.
Steve Angel: No, I don't think anything's changed in the business where we can't come back and lay out a longer-term guidance or a longer-term algorithm. I don't see anything that's fundamentally changed the business that would prevent us from doing that. It's just caution on my part that I want to make sure that we can execute the plans in front of us before we start talking about a longer-term picture. But I'm not sitting here thinking that we need to get away from that any kind of longer-term guidance because there's something fundamentally wrong in the business. I don't see that.
Speaker #1: No , I don't I don't think anything has changed in the business where , you know , we can't come back . And lay out a longer term , you know , guidance or a longer term algorithm .
Speaker #1: You know , I don't see anything that's fundamentally changed the business . That would prevent us from doing that . It's just , you know , caution on my part that I want to make sure that we can , you know , that we can execute the plans in front of us before we start talking about a longer term picture .
Speaker #1: But I'm not sitting here thinking that , you know , we need to get away from that . Any kind of longer term guidance because there's something fundamentally wrong in the business .
Speaker #1: I don't see that .
Operator: The next question comes from Jordan Alliger with Goldman Sachs. Your line is open.
Operator: The next question comes from Jordan Alliger with Goldman Sachs. Your line is open.
Speaker #3: The next question comes from Jordan Alliger with Goldman Sachs. Your line is open.
Matthew Korn: Yeah. Hi. Just sort of curious. Can you maybe talk a little bit more about the double-stack opportunity, perhaps sort of update, if anything, on the sizing? I know you said people are putting bids out for the second quarter. Any additional sense for how we should think about the timing of how that could ramp into your business in order of magnitude? Thanks.
Jordan Alliger: Yeah. Hi. Just sort of curious. Can you maybe talk a little bit more about the double-stack opportunity, perhaps sort of update, if anything, on the sizing? I know you said people are putting bids out for the second quarter. Any additional sense for how we should think about the timing of how that could ramp into your business in order of magnitude? Thanks.
Speaker #17: Hi . Yeah . Just sort of curious , can you maybe talk a little bit more about the double stack opportunity ? You know , perhaps sort of update if anything on on the sizing .
Speaker #17: And I know you said people are putting bids out for the second quarter. Any additional sense for how we should think about the timing of how that could ramp into your business, in order of magnitude?
Speaker #17: Thanks .
Maryclare Kenney: Yeah. Thank you. So I tell you, we're really excited about Howard Street Tunnel. I've been here 14 years and excited to see it come to fruition. And there's a couple of opportunities there. One, we're adding new connectivity from the Southeast up into the Northeast. And so we've announced new lanes of service. But it's also going to improve our service product from Chicago to and from Baltimore. It's also enabled us to allow efficient double-stack service from the West Coast all the way through to Baltimore versus having to do a rubber tire crosstown in Chicago. So we're excited about the opportunities that are out there. We're talking to our customers today, both channel partners and shippers.
Maryclare Kenney: Yeah. Thank you. So I tell you, we're really excited about Howard Street Tunnel. I've been here 14 years and excited to see it come to fruition. And there's a couple of opportunities there. One, we're adding new connectivity from the Southeast up into the Northeast. And so we've announced new lanes of service. But it's also going to improve our service product from Chicago to and from Baltimore. It's also enabled us to allow efficient double-stack service from the West Coast all the way through to Baltimore versus having to do a rubber tire crosstown in Chicago. So we're excited about the opportunities that are out there. We're talking to our customers today, both channel partners and shippers.
Speaker #2: Yeah. Thank you. So I'll tell you, we're really excited about the Howard Street Tunnel. I've been here 14 years and I'm excited to see it come to fruition.
Speaker #2: And, you know, there are a couple of opportunities there. One, we're adding new connectivity from the Southeast up into the Northeast.
Speaker #2: And so, we've announced new lanes of service. But it's also going to improve our service product from Chicago to and from Baltimore.
Speaker #2: And it's also enabled us to allow efficient double-stack service from the West Coast all the way through to Baltimore, versus having to do a rubber-tire crosstown in Chicago.
Speaker #2: So, we're excited about the opportunities that are out there. Today, we're talking to our customers, both channel partners and shippers.
Maryclare Kenney: But what I would tell you is, based on past experience, it typically takes a couple of bid cycles to really for customers to kind of see the opportunity and convert more business. So we expect to see growth this year and going into the future, I would say both on our domestic and in the future on the international side of the business as well.
But what I would tell you is, based on past experience, it typically takes a couple of bid cycles to really for customers to kind of see the opportunity and convert more business. So we expect to see growth this year and going into the future, I would say both on our domestic and in the future on the international side of the business as well.
Speaker #2: But what I would tell you is based on past experience , it typically takes a couple of cycles to to really for customers to kind of see the opportunity and , and convert more business .
Speaker #2: So, we expect to see growth this year and going into the future, I would say both on our domestic and, in the future, on the international side of the business as well.
Operator: The next question comes from Walter Spracklin with RBC Capital. Your line is open.
Operator: The next question comes from Walter Spracklin with RBC Capital. Your line is open.
Speaker #3: The next question comes from Walter Spracklin with RBC Capital. Your line is open.
[Analyst] (RBC Capital): Yeah. Thanks very much, Sarah. Good afternoon, everyone. I wanted to come back to the revenue growth profile of low single digit. I know whenever I think about pricing in the rail industry, I kind of consider it in the 3.5% area. And then you do assume some volume growth, it would seem. So just curious, is there a mix effect at play here where we should build in some negative mix, or are we seeing that core pricing number that's typically north of 3, somewhere below 3? I know, Maryclare, you flagged truck pricing. I don't know if that's I mean, truck pricing is catching a bid here. So I'm just curious as to how you decompose the revenue growth versus what you would have seen typically in the past.
Walter Spracklin: Yeah. Thanks very much, Sarah. Good afternoon, everyone. I wanted to come back to the revenue growth profile of low single digit. I know whenever I think about pricing in the rail industry, I kind of consider it in the 3.5% area. And then you do assume some volume growth, it would seem. So just curious, is there a mix effect at play here where we should build in some negative mix, or are we seeing that core pricing number that's typically north of 3, somewhere below 3? I know, Maryclare, you flagged truck pricing. I don't know if that's I mean, truck pricing is catching a bid here. So I'm just curious as to how you decompose the revenue growth versus what you would have seen typically in the past.
Speaker #18: Yeah , thanks very much . Operator . Good afternoon , everyone . I wanted to come back to the revenue growth profile of low single digit .
Speaker #18: I know whenever I, you know, I think about pricing in the rail industry, I kind of consider it in the 3.5% up area.
Speaker #18: And then you do assume some volume growth . It would seem so . Just curious , is there a mix effect at play here where we should we should build in some negative mix or are we seeing that core pricing number that's typically north of three , somewhere below three ?
Speaker #18: I know , Mary Claire , you flagged truck pricing . I don't know if that's a I mean , truck pricing is catching a bit here .
Speaker #18: So, I'm just curious as to how they decompose the revenue growth versus what you would have seen typically in the past.
Maryclare Kenney: Yeah. What I would say is mix is always going to play a role, right? And so as I talked about this year and what we're seeing, we expect some of the stronger growth to be in our lower RPU segments. And so that is going to absolutely have an impact on us. On the intermodal side, that's lower RPU. Minerals and fertilizer is a little bit lower RPU for us. We are, when you think about chemicals, when you think about forest products, when you think about automotive, there's headwinds out there. I mean, we're going to go after opportunities that we see and make sure they're accretive to the business. But mix is certainly going to impact where we see the growth come in 2026, and that will have an overall impact on the business. Kevin touched a little bit on the coal side earlier.
Maryclare Kenney: Yeah. What I would say is mix is always going to play a role, right? And so as I talked about this year and what we're seeing, we expect some of the stronger growth to be in our lower RPU segments. And so that is going to absolutely have an impact on us. On the intermodal side, that's lower RPU. Minerals and fertilizer is a little bit lower RPU for us. We are, when you think about chemicals, when you think about forest products, when you think about automotive, there's headwinds out there. I mean, we're going to go after opportunities that we see and make sure they're accretive to the business. But mix is certainly going to impact where we see the growth come in 2026, and that will have an overall impact on the business. Kevin touched a little bit on the coal side earlier.
Speaker #2: Yeah , what I would say is , you know , mix is always going to play a role . Right . And so as I talked about this year and what we're seeing , we expect some of the stronger growth to be in our lower rpu segments .
Speaker #2: And so that is going to absolutely have an impact on us . You know , on the intermodal side , that's that's lower rpu minerals and fertilizers a little bit lower Rpu for us are when , we you think about chemicals , when you think about forest products , when you think about automotive , there's there .
Speaker #2: headwinds out I mean , we're going to go after opportunities that we see and make sure they're accretive to the business . But mix is certainly going to impact where we see the growth come in 2026 , and that will have an overall impact on the business .
Speaker #2: know , Kevin touched a little bit on the You coal side earlier . just I you know , mentioned on that . I do think that not only is there , you know domestic utility opportunity this year , provided , you know , these closures that are scheduled get pushed back .
Maryclare Kenney: I just mentioned on that. I do think that not only is there domestic utility opportunity this year provided these closures that are scheduled get pushed back, but I would also say on the export side, last year we saw the numbers, the benchmarks come down pretty significantly over the course of the year. I think what we've seen is some pretty recent stabilization there. I guess I would call out that PLV has jumped up a bit. But I think it's important to note that when you think about our business, we're more heavily indexed to Hival. And I would say that's been more stable as opposed to seeing any significant increase at this point.
I just mentioned on that. I do think that not only is there domestic utility opportunity this year provided these closures that are scheduled get pushed back, but I would also say on the export side, last year we saw the numbers, the benchmarks come down pretty significantly over the course of the year. I think what we've seen is some pretty recent stabilization there. I guess I would call out that PLV has jumped up a bit. But I think it's important to note that when you think about our business, we're more heavily indexed to Hival. And I would say that's been more stable as opposed to seeing any significant increase at this point.
Speaker #2: would also But I say on the export side , you know , last year we saw the numbers , the benchmarks come down pretty significantly over the course of the year .
Speaker #2: I think what we've seen is some pretty recent stabilization there . I guess I call out would that , you know , Plv has has jumped up a bit , but I think it's important to note that when you think about our business , we're more heavily indexed to high vol .
Speaker #2: And I would say that's been more stable, as opposed to seeing any significant increase at this point.
Operator: The next question comes from Bascome Majors with Susquehanna. Your line is open.
Operator: The next question comes from Bascome Majors with Susquehanna. Your line is open.
Speaker #3: The next question comes from Bascome Majors with Susquehanna. Your line is open.
[Analyst] (Susquehanna): Steve, last quarter, you gave us some thoughts early on in your tenure about your compensation philosophy and how it kind of applied to the rail model. Now that you've gotten through a few more months, you're in planning, can you talk a little bit more tactically about how you and the board have talked about changing the incentives for senior management, both on an annual basis and a go-forward long-term basis? How are they different today than they were the last few years? Thank you.
Bascome Majors: Steve, last quarter, you gave us some thoughts early on in your tenure about your compensation philosophy and how it kind of applied to the rail model. Now that you've gotten through a few more months, you're in planning, can you talk a little bit more tactically about how you and the board have talked about changing the incentives for senior management, both on an annual basis and a go-forward long-term basis? How are they different today than they were the last few years? Thank you.
Speaker #19: Steve, last quarter you gave us some thoughts early on in your tenure about your compensation philosophy and how it kind of applied to the rail model.
Speaker #19: You know , now that you've through a few more gotten months , you're in planning . Can you talk a little bit more tactically about how you and the board have talked about , you know , changing the incentives for senior management both on an annual basis and a go forward long term basis .
Speaker #19: How are they different today than they were ? You know , the last few years ? Thank you .
Operator: Well, we're basically in the process of rolling out the new metrics kind of as we speak. But if you to your point about what I discussed last time about most important, and it's really inherent in our guidance, right? I talked about operating margins as being very important in terms of demonstrating that we can continue to improve the quality of the business. And so that's an obvious metric. Operating income dollars, that's what translates into net income and earnings per share. So that will always be an important metric. Safety will always be part of the mix. And if I had to pick three metrics that are most important to us sitting here at this time, it'd be those three, including safety. That's really on a year-to-year basis.
Steve Angel: Well, we're basically in the process of rolling out the new metrics kind of as we speak. But if you to your point about what I discussed last time about most important, and it's really inherent in our guidance, right? I talked about operating margins as being very important in terms of demonstrating that we can continue to improve the quality of the business. And so that's an obvious metric. Operating income dollars, that's what translates into net income and earnings per share. So that will always be an important metric. Safety will always be part of the mix. And if I had to pick three metrics that are most important to us sitting here at this time, it'd be those three, including safety. That's really on a year-to-year basis.
Speaker #1: Well , you're you know , we're basically in the process of rolling out the new metrics , you know , kind of as we speak .
Speaker #1: But if you if you , you know , to your point about what I discussed last time about most important and it's really inherent in our guidance , right ?
Speaker #1: I talked about operating margins as being very important in terms of, you know, demonstrating that we can continue to improve the quality of the business.
Speaker #1: And so that's an obvious metric . You know , operating income , dollars . That's what translates into , you know , net income and earnings per share .
Speaker #1: So that's obviously always going to be an important metric. Safety will always be part of the mix. And if I had to pick the three metrics that are most important to us sitting here at this time, it'd be those three, including safety.
Operator: As you look into the longer term, which we call kind of three years, and you've heard me say, and those of you who've heard me say this for many years, some of you, return on capital, I think, is the truth serum for any capital-intensive business. So return on capital is very important. It's total shareholder return. How well are we doing compared to the S&P 500 industrials? I think that's important to all of us. So kind of in a nutshell, those are the metrics that are most important. I've always liked to focus the organization on a handful of really important metrics as opposed to having eight, 10, 12, as I've seen other companies do over time.
Speaker #1: That's really on a year to year basis . And as you look into , you know , the longer term , which we call , you know , kind of three years and you've heard me say and those of you who've heard me say this for many years , some of you , you know , return on capital , I think is truth the serum .
As you look into the longer term, which we call kind of three years, and you've heard me say, and those of you who've heard me say this for many years, some of you, return on capital, I think, is the truth serum for any capital-intensive business. So return on capital is very important. It's total shareholder return. How well are we doing compared to the S&P 500 industrials? I think that's important to all of us. So kind of in a nutshell, those are the metrics that are most important. I've always liked to focus the organization on a handful of really important metrics as opposed to having eight, 10, 12, as I've seen other companies do over time.
Speaker #1: You know , for any capital intensive business . So return on capital is very important . And , you know , it's total return .
Speaker #1: shareholder You know , how well are we doing compared to the S&P 500 industrials ? I think that's , you know , important to all of us .
Speaker #1: So, you know, kind of in a nutshell, those are the metrics that are most important. You know, and I, you know, I've always liked to focus the organization on a handful of really important metrics as opposed to having, you know, eight, ten, twelve as I've seen other companies do over time.
Operator: I think that's if you want to motivate the organization, if you want to incent the organization, you need to have metrics that are very meaningful, and reinforce that every day.
I think that's if you want to motivate the organization, if you want to incent the organization, you need to have metrics that are very meaningful, and reinforce that every day.
Speaker #1: And I think that's , you know , if you want to if you want to motivate the organization , to if you want incent the organization , you need to have metrics that that are very meaningful and reinforce that every day .
Operator: The next question comes from David Vernon with Bernstein. Your line is open.
Operator: The next question comes from David Vernon with Bernstein. Your line is open.
Speaker #3: The next question comes from David Vernon with Bernstein. Your line is open.
[Analyst] (Bernstein): Hey, good afternoon. Thanks for fitting me in here. So, Steve, if you could maybe kind of address the cadence of OR improvement we're expecting as we get through this year, should we be expecting kind of year-over-year across the board, or is it going to be a little bit more back or front-end weighted? And then, if you could put a hard number around what the run rate benefit you're expecting from the cost actions you've taken to date, I think that would help us kind of better understand the bridge for kind of what's organic or volume-dependent and what's already kind of in the bag. Thank you.
David Vernon: Hey, good afternoon. Thanks for fitting me in here. So, Steve, if you could maybe kind of address the cadence of OR improvement we're expecting as we get through this year, should we be expecting kind of year-over-year across the board, or is it going to be a little bit more back or front-end weighted? And then, if you could put a hard number around what the run rate benefit you're expecting from the cost actions you've taken to date, I think that would help us kind of better understand the bridge for kind of what's organic or volume-dependent and what's already kind of in the bag. Thank you.
Speaker #20: Hey, good afternoon, and thanks for getting me in here. So, see if you could maybe kind of address the cadence of improvement.
Speaker #20: We're expected as we get through this year . Should we expecting kind of year over year across the board , or is it going to be a little more back end or front weighted .
Speaker #20: And then if you could put a hard number around what the benefit , the run rate benefit you're expecting from the cost actions you've taken to date , I think that would help us kind of better understand the bridge for kind of what's what's what's organic or volume dependent and what's already kind of in the bag .
Speaker #20: Thank you .
Sean Pelkey: Yeah. Certainly, there are comparisons when you think about what occurred in 2025. I would obviously highlight Q1, given some of the storm activity and other things that occurred to us as a quarter where we should have good year-over-year performance, probably above the average for the year. This is a continual process. As we move through the year, we continue to expect to get better and drive more costs out of the business. We'll see what the revenue story is. We're obviously not assuming a whole lot, but there's a lot of activity around that as well. The framework that I would use from a margin perspective is the $150 million that I certainly highlighted as not going to reoccur next year. I highlighted 3 to 3.5% inflation in our business. You'll see that more pronounced on the labor side versus the non-labor side.
Kevin Boone: Yeah. Certainly, there are comparisons when you think about what occurred in 2025. I would obviously highlight Q1, given some of the storm activity and other things that occurred to us as a quarter where we should have good year-over-year performance, probably above the average for the year. This is a continual process. As we move through the year, we continue to expect to get better and drive more costs out of the business. We'll see what the revenue story is. We're obviously not assuming a whole lot, but there's a lot of activity around that as well. The framework that I would use from a margin perspective is the $150 million that I certainly highlighted as not going to reoccur next year. I highlighted 3 to 3.5% inflation in our business. You'll see that more pronounced on the labor side versus the non-labor side.
Speaker #5: Yeah . When you , you know , certainly there are comparisons when you think about what occurred in 2025 . And , you know , I would I would obviously highlight first quarter given some of the storm activity and that other things occurred to us as a quarter where we should have good year over year and performance , probably above the the average for the year .
Speaker #5: This is a continual process. As we move through the year, we continue to expect to get better and drive more costs out of the business.
Speaker #5: And we'll see if the what the revenue is . story We're obviously not assuming a whole lot , but there's a lot of activity around that as well .
Speaker #5: You know , the that I framework would use from a margin perspective is , you know , the 150 million that I , that I certainly highlighted as not going to reoccur next year .
Speaker #5: I highlighted 3% to 3.5% inflation in our business. And you'll see that more pronounced on the labor side versus the non-labor side.
Sean Pelkey: I think you can effectively back into what we're assuming from a productivity standpoint from there.
I think you can effectively back into what we're assuming from a productivity standpoint from there.
Speaker #5: And I think you can effectively back into, you know, what we're assuming from a productivity standpoint. From there.
Operator: The next question comes from Diane McKinney with Deutsche Bank. Your line is open.
Operator: The next question comes from Diane McKinney with Deutsche Bank. Your line is open.
Speaker #3: The next question comes from Diane McKinney with Deutsche Bank. Your line is open.
Matthew Korn: Hi there. This is Megan. Thanks for taking my question. Kind of sticking with the OR progression, I think it was really encouraging to hear about the over 100 diverse savings initiatives that the team identified. But it also sounds like there's potential for more. But as it relates to the full-year outlook of the 200 to 300 basis points of OR improvement, can you help us bridge from 2025? Are these cost savings considered? How much is dependent on the market versus what's within CSX's control? Any color there would be really helpful.
[Analyst] (Deutsche Bank): Hi there. This is Megan. Thanks for taking my question. Kind of sticking with the OR progression, I think it was really encouraging to hear about the over 100 diverse savings initiatives that the team identified. But it also sounds like there's potential for more. But as it relates to the full-year outlook of the 200 to 300 basis points of OR improvement, can you help us bridge from 2025? Are these cost savings considered? How much is dependent on the market versus what's within CSX's control? Any color there would be really helpful.
Speaker #21: Hi is there . This Megan . Thanks for taking my question . Kind of sticking with your progression , I think it was really encouraging to hear about the over 100 diverse savings initiatives that the team identified , but it also sounds like there's potential for more .
Speaker #21: But as it relates to the full-year outlook of the 200 to 300 basis points of OR improvement, can you help us bridge from 2025?
Speaker #21: Are these cost savings considered? How much is dependent on the market versus what's within CSX Corp's control? Any color there would be really helpful.
Sean Pelkey: We're not depending on the market. This is a plan that is based on the things that we can control, which is encouraging for us and this team. We're going to focus on those items. And we haven't talked about the potential for some of these markets to improve, but what we're really focused on is creating the operating leverage when the markets improve to, quite frankly, deliver higher incremental margins than what we've done in the past. And I'm fully confident, given all of the things that we're doing, that every incremental dollar of revenue that Maryclare and her team are able to deliver, that will come in at a very, very high incremental margin, given all the cost things that we're focused on. Going back to the 100 different opportunities, it's really across everything from vehicle spend to overtime, focus on rental equipment, travel.
Kevin Boone: We're not depending on the market. This is a plan that is based on the things that we can control, which is encouraging for us and this team. We're going to focus on those items. And we haven't talked about the potential for some of these markets to improve, but what we're really focused on is creating the operating leverage when the markets improve to, quite frankly, deliver higher incremental margins than what we've done in the past. And I'm fully confident, given all of the things that we're doing, that every incremental dollar of revenue that Maryclare and her team are able to deliver, that will come in at a very, very high incremental margin, given all the cost things that we're focused on. Going back to the 100 different opportunities, it's really across everything from vehicle spend to overtime, focus on rental equipment, travel.
Speaker #5: We're not depending on the market. This is a plan that is based on the things that we can control, which is encouraging for us.
Speaker #5: And this team . We're going to focus on items . And those you know , we haven't talked you know , the about , potential for some of these markets to improve .
Speaker #5: But what we're really focused on is , you know , creating the leverage operating when the markets improve to , quite frankly , deliver higher incremental margins than what we've done in the past .
Speaker #5: And I'm fully confident , given all the things that we're doing , that every incremental dollar of revenue that Mary Clare and her team are able to deliver , that will come in at a very very , high incremental margin given all the costs , things that we're focused on , you know , going back to the 100 , you know , different opportunities .
Speaker #5: It's really across everything from vehicle spend to overtime . You know , focus on rental equipment , travel , Mike and his team , Doug Casey , Carrie , all of them have brought ideas to the table .
Sean Pelkey: Mike and his team, Doug, Casey, Terry, all of them have brought ideas to the table. Now it's building the process on a monthly basis to hold our teams accountable to delivering it. Very confident that we can do that and providing better tools, quite frankly, to the operating team and every team across this organization so they have visibility to where the costs are. I'm feeling better and better about that every day. I know Mike and I collaborate on that every day. I'm sure there's things that we don't know about today that we'll continue to identify. Our goal is to build the momentum through the year. When that volume comes back, we're going to have a network that can handle the volume, most importantly, and really deliver the incremental margins.
Mike and his team, Doug, Casey, Terry, all of them have brought ideas to the table. Now it's building the process on a monthly basis to hold our teams accountable to delivering it. Very confident that we can do that and providing better tools, quite frankly, to the operating team and every team across this organization so they have visibility to where the costs are. I'm feeling better and better about that every day. I know Mike and I collaborate on that every day. I'm sure there's things that we don't know about today that we'll continue to identify. Our goal is to build the momentum through the year. When that volume comes back, we're going to have a network that can handle the volume, most importantly, and really deliver the incremental margins.
Speaker #5: And now it's building the process . The on a monthly basis to our hold teams accountable to delivering it . Very confident that we can do that and providing better tools , quite frankly , to the operating team and every team across this organization .
Speaker #5: So they have visibility to where the costs are. And I'm feeling better and better about that every day. I know Mike and I collaborated on that every—
Speaker #5: there's don't know sure things that we day I'm today that will continue identify . And to so our goal is to , you know , build a momentum through the year and and win that volume comes back .
Speaker #5: We're going to have a network that can handle the volume, most importantly, and really deliver the incremental margins.
Operator: This concludes the question and answer session, and we'll conclude today's conference call. We thank you for joining. You may now disconnect.
Operator: This concludes the question and answer session, and we'll conclude today's conference call. We thank you for joining. You may now disconnect.
Speaker #3: This concludes the question and answer session and will conclude today's conference call . We thank you for joining . You may now disconnect .
Operator: Please wait. The conference will begin shortly.
