Q1 2026 CSX Corp Earnings Call

April 22, 2026

Speaker #2: Ladies and gentlemen, thank you for standing by. My name is Abby, and I will be your conference operator today. At this time, I would like to welcome everyone to the CSX CORP first quarter 2026 earnings conference call.

Operator: Ladies and gentlemen, thank you for standing by. My name is Abby, and I will be your conference operator today. At this time, I would like to welcome everyone to the CSX Corporation Q1 2026 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during that time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one a second time. Thank you. I would now like to turn the conference over to Matthew Korn, Head of Investor Relations and Corporate Communications. You may begin.

Speaker #2: All lines have been

Matthew Korn: Thank you, Abby. Good afternoon, everyone. We're very pleased to have you join our Q1 2026 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, Senior Vice President 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 our non-GAAP disclosures. We encourage you to review them. With that said, I'm very happy to turn the call over to Mr. Steve Angel.

Speaker #2: accompanies this call, which is available on our website, you will find slides with our forward-looking and our non-gap disclosures. We encourage you to review them.

Speaker #2: With that significant margin expansion and

Steve Angel: Good afternoon, and thank you for joining our call. I'm pleased with the strong start to the year that our railroaders have delivered. We made great strides in safety and managed through weather challenges, and we advanced our efforts to improve efficiency and streamline our cost structure. The progress we've made can be seen clearly in our quarterly results. Volume and revenue grew year over year, while operating expense moved substantially lower, which led to significant margin expansion and EPS growth. Solid earnings and continued capital discipline helped drive higher free cash flow. Altogether, this represents an encouraging first step toward our goal of best-in-class performance. At the same time, we recognize that we're still early in this process, and market conditions remain uncertain.

Speaker #3: EPS growth. Solid earnings and continued capital discipline helped drive higher free cash flow. Altogether, this represents an encouraging first step toward our goal of best-in-class performance.

Speaker #3: At the same time, we recognize that we're still early in this process, and market conditions remain uncertain. As Mary Clare will discuss, conflict in the Middle East and rising energy prices are creating opportunities for some of our customers but this has also added to broader concerns about inflationary pressure and potential effects on consumer sentiment.

Steve Angel: As Mary Claire will discuss, conflict in the Middle East and rising energy prices are creating opportunities for some of our customers, but this has also added to broader concerns about inflationary pressure and potential effects on consumer sentiment. What remains constant is our focus on execution. Our team is responding to customer needs by expanding our service offerings, improving transit times, and converting freight from truck to rail. We're also moving forward on a wide range of cost initiatives as we push to develop the productivity muscle required to sustain performance over the long term. I'll now pass along to Mike Cory to cover our safety and operational highlights.

Speaker #3: What remains constant is our focus on execution. Our team is responding to customer needs by expanding our service offerings, improving transit times, and converting freight from truck to rail.

Speaker #3: We're also moving forward on a wide range of cost initiatives as we push to develop the productivity muscle required to sustain performance over the long term.

Speaker #3: I'll now pass along to Mike Cory to cover our safety and operational highlights.

Speaker #2: Well, thank you, Steve. Slide 5 shows highlights for our safety and operational performance. Best-in-class performance starts with safety, and we've made good progress in the first quarter.

Steve Angel: Thank you, Steve. Slide 5 shows highlights for our safety and operational performance. S in CLASS performance starts with safety, and we've made good progress in Q1. Our FRA injury rate improved by 13% compared to last year, and that's with a 9% reduction in people hours. Our train accident rate improved by over 30%. Operating safely benefits our employees and our customers, and it allows us to run a more fluid, efficient network. We remain committed to developing a culture at CSX where effective risk awareness and safe operating practices are consistent across our organization. Operationally, we successfully managed through the severe winter storms that covered most of the Midwestern and Northeastern United States through the quarter. Our key metrics compare favorably to last year, when closures due to that Blue Ridge reconstruction and the Howard Street Tunnel project impacted our resilience.

Mike Cory: Thank you, Steve. Slide 5 shows highlights for our safety and operational performance. S in CLASS performance starts with safety, and we've made good progress in Q1. Our FRA injury rate improved by 13% compared to last year, and that's with a 9% reduction in people hours. Our train accident rate improved by over 30%. Operating safely benefits our employees and our customers, and it allows us to run a more fluid, efficient network. We remain committed to developing a culture at CSX where effective risk awareness and safe operating practices are consistent across our organization. Operationally, we successfully managed through the severe winter storms that covered most of the Midwestern and Northeastern United States through the quarter. Our key metrics compare favorably to last year, when closures due to that Blue Ridge reconstruction and the Howard Street Tunnel project impacted our resilience.

Speaker #2: Our effort injury rate improved by 13% compared to last year, and that's with a 9% reduction in people hours. And our train accident rate improved by over 30%.

Speaker #2: Operating safely benefits our employees and our customers, and it allows us to run a more fluid, efficient network. We remain committed to developing a culture at CSX where effective risk awareness and safe operating practices are consistent across our organization.

Speaker #2: Operationally, we successfully managed through the severe winter storms that covered most of the Midwestern and Northeastern United States through the quarter. Our key metrics compare favorably to last year, when closures due to the Blue Ridge reconstruction and the Howard Street Tunnel project impacted our resilience.

Speaker #2: Train speed, dwell, and cars online all improved on a year-over-year basis. We also delivered record first quarter fuel efficiency of 0.97 gallons per 1,000 gross ton miles, and achieved 0.93 gallons per 1,000 GTMs in March.

Steve Angel: Train speed, dwell, cars on line, all improved on a year-over-year basis. We also delivered record Q1 fuel efficiency of 0.97 gallons per thousand gross ton miles and achieved a 0.93 gallons per thousand GTMs in March, our best performance since 2021. Performance at our intermodal terminals has been very good even as we've absorbed substantial new volume. For example, the team at Fairburn in Atlanta handled a 15% increase in intermodal lifts with our expanded domestic business in the southeast while maintaining service our customers can count on. As well, the team has been very effective in finding and eliminating inefficiencies. Our engineering and network groups have been improving productivity substantially through more efficient use of work blocks and better overall coordination with our transportation groups. We've seen double-digit efficiency improvement in rail and tie installation to start the year through disciplined curfew execution.

Mike Cory: Train speed, dwell, cars on line, all improved on a year-over-year basis. We also delivered record Q1 fuel efficiency of 0.97 gallons per thousand gross ton miles and achieved a 0.93 gallons per thousand GTMs in March, our best performance since 2021. Performance at our intermodal terminals has been very good even as we've absorbed substantial new volume. For example, the team at Fairburn in Atlanta handled a 15% increase in intermodal lifts with our expanded domestic business in the southeast while maintaining service our customers can count on. As well, the team has been very effective in finding and eliminating inefficiencies. Our engineering and network groups have been improving productivity substantially through more efficient use of work blocks and better overall coordination with our transportation groups. We've seen double-digit efficiency improvement in rail and tie installation to start the year through disciplined curfew execution.

Speaker #2: Our best performance since 2021. Performance at our intermodal terminals has been very good, even as we've absorbed substantial new volume. For example, the team at Fairburn in Atlanta, handled a 15% increase in intermodal lifts with our expanded domestic business in the Southeast while maintaining service our customers can count on.

Speaker #2: As well, the team has been very effective in finding and eliminating inefficiencies. Our engineering and network groups have been improving productivity, y, substantially, through more efficient use of work blocks and better overall coordination with our transportation groups.

Speaker #2: We've seen double-digit efficiency improvement in rail and tie installation to start the year through disciplined curfew execution. I'm extremely proud of this team and what we've accomplished, and there's so much more that we're working toward.

Steve Angel: I'm extremely proud of this team and what we've accomplished, and there's so much more that we're working toward. We've got great momentum, and our goal is to build on these successes as we progress through the rest of the year. With that, I'll turn it over to Kevin for financial results for the quarter.

Mike Cory: I'm extremely proud of this team and what we've accomplished, and there's so much more that we're working toward. We've got great momentum, and our goal is to build on these successes as we progress through the rest of the year. With that, I'll turn it over to Kevin for financial results for the quarter.

Speaker #2: We've got great momentum, and our goal is to build on these successes as we progress through the rest of the year. With that, I'll turn it over to Kevin for financial results for the quarter.

Speaker #4: Thank you, Mike, and good afternoon. As both Mike and Steve noted, 2026 is off to a strong start. Volume and revenue are up, while costs are lower across the company.

Kevin Boone: Thank you, Mike, and good afternoon. As both Mike and Steve noted, 2026 is off to a strong start. Volume and revenue are up, while costs are lower across the company. These results reflect significant work and partnership throughout CSX to drive efficiencies in nearly every part of the business while maintaining our commitments to safety and customer service. Total revenue increased 2% on 3% volume growth as pricing gains and higher fuel recovery were offset by business mix impacts. Total expenses fell by 6% from the steps taken to improve our cost structure and improve network fluidity. As a result, operating income increased 20% with earnings per share up 26%. Turning to the next slide. Total Q1 expense decreased by $153 million compared to the prior year.

Speaker #4: These results reflect significant work and partnership throughout CSX to drive efficiencies in nearly every part of the business, while maintaining our commitments to safety and customer service.

Speaker #4: Total revenue increased 2% on 3% volume growth, as pricing gains and higher fuel recovery were offset by business mix impacts. Total expenses fell by 6% from the steps taken to improve our cost structure and improved network fluidity.

Speaker #4: As a result, operating share is up 26%. Turning to the next slide, total first quarter expense decreased by $153 million compared to the prior year.

Speaker #4: The variance includes over $100 million of year-over-year efficiency savings, plus other benefits from real estate, and the lapping of network disruption cost, partly offset by inflation and higher fuel prices.

Kevin Boone: The variance includes over $100 million of year-over-year efficiency savings, plus other benefits from real estate, and the lapping of network disruption costs, partly offset by inflation and higher fuel prices. Labor costs were 1% lower as a 5% reduction in headcount paired with a $10 million reduction in overtime expense offset inflation. PS&O savings were broad-based, benefiting from increased accountability for discretionary costs, eliminating wasteful spend, and improved asset utilization. As an example, CSX's vehicle fleet is 7% smaller relative to the end of 2024, including opportunities we found to turn in costly equipment rentals that will reduce both operating expense and capital spend. We will continue to press on these costs at the individual asset level, and new tools will support accountability and address unsafe and inefficient driving practices.

Speaker #4: Labor costs were 1% lower, as a 5% reduction in headcount, paired with a $10 million reduction in overtime expense, offset inflation. PS&O savings were broad-based, benefiting from increased accountability for discretionary costs, eliminating wasteful spend, and improved asset utilization.

Speaker #4: As an example, CSX's vehicle fleet is 7% smaller, relative to the end of 2024, including opportunities we found to turn in costly equipment rentals, that will reduce both operating expense and capital spend.

Speaker #4: We will continue to press on these costs at the individual asset level, and new tools will support accountability and address unsafe and inefficient driving practices.

Speaker #4: We are bringing cost control to the front lines of the organization and educating our leaders on costs beyond their own budget. As Mike mentioned, our engineering group has found ways to drive efficiency, including less use of overtime labor, which will reduce capital spend this year.

Kevin Boone: We are bringing cost control to the front lines of the organization and educating our leaders on costs beyond their own budget. As Mike mentioned, our engineering group has found ways to drive efficiency, including less use of overtime labor, which will reduce capital spend this year. Along the same lines, we are improving visibility of freight car hire expense so our field leaders can support the network center in managing the cost pool of over $1 million of spend per day. While fuel expense was a headwind in the quarter, given higher diesel prices, we delivered a record Q1 fuel efficiency and remain focused on reducing both locomotive and non-locomotive fuel spend. As we move into Q2, we do expect some non-seasonal expense from incentive compensation, timing of contractual locomotive costs, including overhauls, and advisory costs related to industry consolidation.

Speaker #4: Along the same lines, we are improving visibility of freight car hire expense so our field leaders can support the network center and manage the cost pool of over $1 million of spend per day.

Speaker #4: While fuel expense was a headwind in the quarter, given higher diesel prices, we delivered a record first quarter fuel efficiency and remained focused on reducing both locomotive and non-locomotive fuel spend.

Speaker #4: As we move into the second quarter, we do expect some non-seasonal expense from incentive compensation, timing of contractual locomotive costs, including overhauls, and advisory costs related to industry consolidation.

Speaker #4: As Steve noted, we are focused on creating a sustainable, efficient company.

Kevin Boone: As Steve noted, we are focused on creating a sustainable efficiency process that provides our leaders with tools and data visibility while empowering these same leaders to take action. We are not lacking opportunity to continue to improve as we look forward to the years ahead. With that, I'll turn it over to Mary Claire to review revenue results.

Speaker #1: This process provides our leaders with tools and data visibility, while empowering these same leaders to take action. We are not lacking opportunity to continue to improve as we look forward to the years ahead.

Speaker #1: With that, I'll turn it over to Mary Claire to review revenue results.

Speaker #2: Thank you , Kevin , and good afternoon everyone . Our business performed well in the first quarter due to the great work of the commercial team and our strong partnership with the operations group Early on , cold weather and storms weighed on shipments in certain markets , but our network was resilient .

Maryclare Kenney: Thank you, Kevin, and good afternoon, everyone. Our business performed well in Q1 due to the great work of the commercial team and our strong partnership with the operations group. Early on, cold weather and storms weighed on shipments in certain markets, but our network was resilient. We stayed connected with our customers and finished March with momentum, supported by new business, reliable service, and favorable trends in select markets. We've had a good start to the year, and we see several positive indicators entering spring. Looking forward, we remain nimble and customer-focused while executing on initiatives to expand our network reach, improve our customers' experience, and drive profitable growth. Slide 10 covers Q1 volume and revenue performance. Overall, total volume was up 3% in the quarter while revenue was up 2%. Business mix impacts led to a 1% decline in total revenue per unit.

Speaker #2: We stayed connected with our customers and finished March with momentum, supported by—as domestic producers benefited from overseas supply chain disruptions—fertilizers saw gains as phosphate exports out of the Bone Valley improved.

Maryclare Kenney: In merchandise, volume was flat year over year, while revenue and RPU grew 2%. Same-store pricing was in line with our expectations, though total merchandise revenue per unit was impacted by mix. Looking at some of the individual markets, minerals growth led merchandise up 4% in volume, supported by cement and salt shipments. Chemicals was supported by higher frac sand shipments as data center demand drives natural gas production and strength in plastics, as domestic producers benefited from overseas supply chain disruptions. Fertilizers saw gains as phosphate exports out of the Bone Valley improved. On the other hand, forest products continued to drag, with volume down 9%. We are facing difficult comps as we cycle closures that occurred in 2025, while demand remains impacted by weak housing.

Speaker #2: On the other hand, forest products continued to drag, with volume down 9%. We are facing difficult comps as we cycle closures that occurred in 2025.

Speaker #2: While demand remains impacted by weak housing, one emerging positive here is that shippers are looking more to rail conversion as they weigh the impacts of higher fuel and trucking costs. Intermodal was strong this quarter, with revenue up 5% on a 6% increase in volume.

Maryclare Kenney: One emerging positive here is that shippers are looking more to rail conversion as they weigh the impacts of higher fuel and trucking costs. Intermodal was strong this quarter, with revenue up 5% on a 6% increase in volume. New business with key customers benefited us in both international and domestic markets. Mix was also a factor, with RPU down 1% as we saw substantial growth in our inland ports business, which tends to be shorter length of haul. Finally, revenue for our Coal business declined 1% on 1% lower volume, with domestic tonnage slightly up, and export slightly down. Utility coal demand remains high, and strong operational performance in March supported customer restocking, but export shipments were impacted by cold weather that temporarily reduced loadings. Sequentially, global net coal benchmarks remained largely flat, but coal RPU benefited from a favorable mix of southern utility deliveries.

Speaker #2: New business with key customers benefited us in both international and domestic markets. Mix was also a factor, with RPU down 1% as we saw substantial growth in our inland ports business, which tends to be shorter length of haul. Finally, revenue for our coal business declined 1% on 1% lower volume, with domestic tonnage slightly up and exports slightly down.

Speaker #2: Utility coal demand remains high, and strong operational performance in March supported customer restocking. But export shipments were impacted by cold weather that temporarily reduced loadings. Sequentially, global met coal benchmarks remained largely flat, but coal RPU benefited from a favorable mix of southern utility deliveries. Slide 11 covers highlights of our market expectations for the rest of 2026.

Maryclare Kenney: Slide 11 covers highlights of our market expectations for the rest of 2026. Starting with merchandise, we see near-term opportunities in chemicals as domestic plastic producers have a stable supply of feedstocks and look to capitalize on global supply imbalances. Commodities like aggregates, cement, and construction steel remain in high demand for infrastructure projects. Our metals business should also benefit from the ramp-up of new facilities we serve. Housing affordability remains a real headwind, particularly with our forest products business, where we've seen additional closures year to date. Automotive continues to be pressured by lower production and the extended retooling of a major plant on our network. Our intermodal business has good momentum, with tighter trucking supply and higher diesel prices creating tailwinds for freight conversions. Customers are also responding well to new, faster service options.

Speaker #2: Starting with merchandise. We see near-term opportunities in chemicals, as domestic plastic producers have a stable supply of feedstocks and look to capitalize on global supply imbalances. Commodities like aggregates, cement and construction, and steel remain in high demand for infrastructure projects.

Speaker #2: Our metals business should also benefit from the ramp up of new facilities . We serve Housing affordability remains a real headwind , particularly with our forest products business , where we've seen additional closures year to date Automotive continues to be pressured by lower production and the extended retooling of a major plant on our network .

Speaker #2: Our intermodal business has good momentum, with tighter trucking supply and higher diesel prices creating tailwinds for freight conversions. Customers are also responding well to new, faster service options.

Speaker #2: We continue to look for ways to enhance service on both traditional intermodal lanes and new offerings . We are completing the final infrastructure improvements on the former Meridian and Bigbee Railroad , and we will soon be launching improved service with CP KC on our SM product SM provides truck competitive transit between major markets in the southeast with Dallas and Mexico and recent investments will enhance both speed and efficiency Additionally , the final infrastructure improvements around the Howard Street Tunnel clearances are nearing completion .

Maryclare Kenney: We continue to look for ways to enhance service on both traditional intermodal lanes and new offerings. We are completing the final infrastructure improvements on the former Meridian & Bigbee Railroad, and we will soon be launching improved service with CPKC on our SMX product. SMX provides truck competitive transit between major markets in the southeast with Dallas and Mexico, and recent investments will enhance both speed and efficiency. Additionally, the final infrastructure improvements around the Howard Street tunnel clearances are nearing completion. When complete, we will shave a day off our east-west transit and will connect markets in the southeast with markets in the northeast more efficiently than ever before. Our international performance has been strong against challenging year-ago comps, though energy cost inflation poses risk to consumer demand and imports. Export coal should see the benefits of reopened mines. Power demand remains strong, supporting domestic utility volumes.

Speaker #2: When complete, we will shave a day off our east-west transit and will connect markets in the Southeast with markets in the Northeast.

Speaker #2: More efficiently than ever before . Our international performance has been strong against challenging year ago comps . Though energy cost inflation poses risk to consumer demand and imports , export coal should see the benefits of reopened mines Power demand remains strong , some more supporting domestic utility volumes .

Speaker #2: We do have two facilities on our network now scheduled to shut down in the second quarter , but Plant life extensions present potential upside Global met prices remain relatively stable , and we expect that to persist amid challenged global global steel demand .

Maryclare Kenney: We do have 2 facilities on our network now scheduled to shut down in Q2, but plant life extensions present potential upside. Global met prices remain relatively stable, and we expect that to persist amid challenged global steel demand. On the next slide, I'll provide an update on our industrial development program. Our team is positioning CSX Rail as a compelling solution for new and expanding manufacturing facilities. Our pipeline of approximately 600 active projects remains strong. 21 projects went into service over Q1 alone, which should contribute an estimated 33,000 annual car loads at full ramp. For the full year, we expect approximately 100 projects to enter service. This is a very strong year, with multiple facilities coming online that were approved 3 to 4 years ago.

Speaker #2: On the next slide, I'll provide an update on our industrial development program. Our team is positioning CSX rail as a compelling solution for new and expanding manufacturing facilities.

Speaker #2: Our pipeline of approximately 600 active projects remains strong. Twenty-one projects went into service over the first quarter alone, which should contribute an estimated 33,000 annual carloads at full ramp for the full year.

Speaker #2: We expect approximately 100 projects to enter service . This is a very strong year with multiple facilities coming online that were approved 3 to 4 years ago For context , these 100 projects are expected to contribute roughly 50% more volume at full ramp than last year's 85 projects combined .

Maryclare Kenney: For context, these 100 projects are expected to contribute roughly 50% more volume at full ramp than last year's 85 projects combined. The map on this slide gives detail on our Q1 projects and service, including highlights for three key projects. We worked with Keystone Terminals, a bulk commodity terminal in Jacksonville, Florida, to develop a new rail extension, enabling synthetic gypsum shipments to move on our network. Martin Marietta expanded a rail-served aggregate loading facility in Green Cove Springs, Florida, with new rail infrastructure. With strong demand in this market, this facility is expected to reach full ramp by the end of Q2. We also supported Diamond Pet Foods with a multi-state site search that settled in Indiana. Our team worked with the company to develop a complete track design that was incorporated into their site plan.

Speaker #2: The map on this slide gives detail on our Q1 projects and service , including highlights for three key projects We worked with Keystone Terminals , a bulk commodity terminal in Jacksonville , Florida , to develop a new rail extension , enabling synthetic gypsum shipments to move on .

Speaker #2: Our network, Martin Marietta, expanded a rail-served aggregate loading facility in Green Cove Springs, Florida, with new rail infrastructure due to strong demand in this market.

Speaker #2: This facility is expected to reach full ramp by the end of two Q . We also supported Diamond Pet Foods with a multi-state site search that settled in Indiana Our team worked with the company to develop a complete track design that was incorporated into their site plan I'm proud of the depth of work across our sales , marketing and industrial development teams as they continue to build the strong customer and community relationships that underpin our growth efforts .

Maryclare Kenney: I'm proud of the depth of work across our sales, marketing, and industrial development teams as they continue to build the strong customer and community relationships that underpin our growth efforts. With that, I'll pass it back to Steve.

Speaker #2: With that, I'll pass it back to Steve.

Steve Angel: Thank you, Mary Claire. Now we'll review our updated guidance for 2026 on slide 14. Our revenue performance was in line with our expectations and showed favorable trends as the quarter progressed. We remain encouraged by the opportunities ahead for the balance of the year. The change to our top-line outlook is largely driven by higher than expected energy prices, particularly diesel, which will begin to lift fuel-related revenue starting in Q2. Including fuel and assuming diesel prices follow the forward curve as of this week, we now expect full-year revenue growth in the mid-single digits versus low single digits previously. As you know, higher fuel increases our revenue and expands our expenses, which can pressure reported margin.

Speaker #1: Thank you , Mary Claire . Now we'll review our updated guidance for 2026 on slide 14 . Our revenue performance was in line with our expectations and showed favorable trends as the quarter progressed We remain encouraged by the opportunities ahead for the balance of the year The change to our top line outlook is largely driven by higher than expected energy prices , particularly diesel , which will begin to lift fuel related revenue starting in the second quarter , including fuel and assuming diesel prices follow the forward curve .

Speaker #1: As of this week , we now expect full year revenue growth in the mid-single digits versus low single digits . Previously . As you know , higher fuel increases , higher fuel increases .

Speaker #1: Our revenue and our expenses have expanded, which can pressure reported margin. That said, we are pleased with our cost performance year to date.

Steve Angel: That said, we are pleased with our cost performance year to date, and as Kevin described, we have a broad range of productivity efforts underway that position us well for next year and beyond. As a result, we will anticipate year-over-year operating margin expansion of 200 to 300 basis points, but we now expect results to trend toward the high end of that range. We still expect total 2026 capital spending to be below $2.4 billion, and we now anticipate free cash flow to grow by more than 60% compared to 2025. In closing, I want to thank everyone at CSX for their contributions to a successful quarter. We remain focused on our goals and are confident in our ability to continue this momentum through 2026 and beyond. With that, Matthew, we will open it up for questions.

Speaker #1: And as Kevin described , we have a broad range of productivity efforts underway that position us well for next year and beyond . As a result , we will we will anticipate year over year operating margin expansion of 200 to 300 basis points .

Speaker #1: But we now expect results to trend toward the high end of that range. We still expect total 2026 capital spending to be below $2.4 billion.

Speaker #1: And we now anticipate free cash flow to grow by more than 60% compared to 2025. In closing, I want to thank everyone at CSX for their contributions to a successful quarter. We remain focused on our goals and are confident in our ability to continue this momentum through 2026 and beyond.

Speaker #1: And with that , Matthew , we will open it up for questions . Thank you Steve . We will now proceed with the question answer session In order to ensure that we maximize everyone's opportunity to participate , we ask that you please limit yourself to one and only one question .

Matthew Korn: Thank you, Steve. We will now proceed with the question and answer session. In order to ensure that we maximize everyone's opportunity to participate, we ask that you please limit yourselves to one and only one question. Abby, with that, we're ready to begin.

Speaker #1: Abby: With that, we're ready to begin.

Matthew Korn: Thank you. Yes, if you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you'd like to withdraw your question, press star one again. If you're called upon to ask your question and are listening via speakerphone on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Again, it's star one to join the queue. Our first question comes from the line of Chris Wetherbee with Wells Fargo. Your line is open.

Operator: Thank you. Yes, if you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you'd like to withdraw your question, press star one again. If you're called upon to ask your question and are listening via speakerphone on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Again, it's star one to join the queue. Our first question comes from the line of Chris Wetherbee with Wells Fargo. Your line is open.

Speaker #3: Thank you . And yes , if you have dialed in and would like to ask a question , please press star one on your telephone keypad to raise your hand and join the queue .

Speaker #3: If you'd like to withdraw your question , press star one again . If you're called upon to ask your question and are listening via speakerphone on your device , please pick up your handset and ensure that your phone is not on mute .

Speaker #3: When asking your question again, it's star one to join the queue. And our first question comes from the line of Chris Wetherbee with Wells Fargo.

Chris Wetherbee: Yeah. Hey, thanks. Good afternoon, guys. I guess just looking at the guidance here, maybe we'll start where you guys wrapped up. By our math, fuel sort of adds about 100 basis points to the operating ratio or takes away 100 basis points from the operating margin as we think out through the rest of the year. To maintain it and then obviously bias towards the high end is a good outcome. I was hoping maybe you could sort of outline some of the productivity opportunities that you've uncovered. Maybe if you could put some numbers around it, that would be great. But also sort of what's left to come, I guess, as the year progresses and how we should be thinking about that sort of upper end of the 2 to 300 basis point range as we go through the next several quarters.

Speaker #3: Your line is open

Speaker #4: Hey . Hey , thanks . Good afternoon guys . You know , I guess just looking at the guidance here , maybe we'll start where you guys wrapped up in by our math fuel .

Speaker #4: Sort of adds about 100 basis points to the operating ratio or takes away 100 basis points from the operating margin , as we think out through the rest of the year .

Speaker #4: And so to maintain it , and then obviously biased towards the high end is a good outcome . I was hoping maybe you could sort of outline some of the productivity opportunities that you've uncovered .

Speaker #4: Maybe if you could put some numbers around it , that would be great , but also sort of what's left to come , I guess as the year progresses and how we should be thinking about that sort of upper end of the 2 to 300 basis point range as we go through the next several quarters

Steve Angel: Yeah, Chris. Thank you. Obviously, very, very happy with the start to the year. When we convened in Q4 and came up with a plan, that plan consisted of over 100 different initiatives. Obviously that's a lot of work by a lot of different people throughout the organization coming together and driving that progress. Quite frankly, I think a lot of the things that we knew were there, the team delivered in maybe even more quickly than we thought they would. You're seeing that in the Q1 results here.

Kevin Boone: Yeah, Chris. Thank you. Obviously, very, very happy with the start to the year. When we convened in Q4 and came up with a plan, that plan consisted of over 100 different initiatives. Obviously that's a lot of work by a lot of different people throughout the organization coming together and driving that progress. Quite frankly, I think a lot of the things that we knew were there, the team delivered in maybe even more quickly than we thought they would. You're seeing that in the Q1 results here.

Speaker #5: Yeah . Chris , thank you You know , obviously very , very happy with the start to the year when we convened in the fourth quarter and came up with plan , that plan consisted of over 100 different initiatives .

Speaker #5: And obviously, that's a lot of work by a lot of different people throughout the organization coming together, and driving that progress.

Speaker #5: And quite frankly , I think a lot of the things that we knew were there , we happened . The team delivered . And , you know , maybe even more quickly than we thought they would .

Speaker #5: And so you're seeing that in the first quarter results here. I think your, you know, math around the fuel surcharge is relatively directionally correct.

Kevin Boone: I think your math around the fuel surcharge is relatively directionally correct. Obviously, a lot of uncertainty of where fuel will end up through the rest of the year. When you look at the initiatives, clearly you saw a lot of progress on the PS&O line item, and that's a lot of work everywhere. I talked about vehicles. When you look at energy costs, that is one that we're really talking a lot about internally of not only locomotive fuel, but fuel related to vehicles and other areas, utilities. Utility spend is a big part of our spend as well. I would say energy over the next few months is going to be in the crosshairs of everything we're trying to do to try to drive efficiencies, vehicle spend, as I mentioned. The list just goes on and on, and we continue to develop that.

Speaker #5: Obviously , a lot of uncertainty of where fuel will end up through the rest of the year . But , you know , when you look at the initiatives , clearly , you saw a lot of progress on the snow line line item .

Speaker #5: And that's a lot of work everywhere . I talked about vehicles , when you look at energy costs , that is one that we're really talking a lot about internally of , you know , not only locomotive fuel , but , you know , fuel related to vehicles and other areas , utilities , utilities , spend is a big , big part of our spend as well .

Speaker #5: So I would say energy over the next few months is going to be in the crosshairs of everything we're trying to do to try to drive efficiencies, vehicle spend.

Speaker #5: As I mentioned . But the list goes on and on , and we continue to develop that . What our progress has done is given us the opportunity to now think about 2027 and starting to build that pipeline .

Kevin Boone: What our progress has done, it's given us the opportunity to now think about 2027 and starting to build that pipeline. I'm excited about that progress. I can't thank Mike and his team enough for all their work. It's been a group effort to go after it, and I expect us to continue down this path. We got to hold on to these initiatives, so that'll be the big focus as we continue through the year is delivering on the plan that we set forth in Q4.

Speaker #5: So I'm excited about that progress. I can't thank Mike and his team enough for all their work. It's been a group effort to go after it.

Speaker #5: And you know , I expect us to continue down this path . You know , we gotta hold on to these initiatives . So that be the big focus as we continue through the year , is delivering on the plan that we set forth in the fourth quarter

Kevin Boone: Our next question comes from the line of Ken Hoexter with Bank of America. Your line is open.

Operator: Our next question comes from the line of Ken Hoexter with Bank of America. Your line is open.

Speaker #3: And our next question comes from the line of Ken Hoexter with Bank of America. Your line is open.

Ken Hoexter: Hey, great. Good afternoon. Really great to hear, and great job on the cost side and the progress there. Exciting to watch the potential. If we think about, Mary Claire, the service, the Howard Street Tunnel, Port of Baltimore project, maybe just talk about timing and scalability of when the double stacking is going to be fully launched and loaded, and then how quickly can we see it, right? Because you're already posting mid-single digit growth now. What can the system handle, and how quick can we see that volume ramp up? Thanks.

Ken Hoexter (Bank of Ame: Hey, great. Good afternoon. Really great to hear, and great job on the cost side and the progress there. Exciting to watch the potential. If we think about, Mary Claire, the service, the Howard Street Tunnel, Port of Baltimore project, maybe just talk about timing and scalability of when the double stacking is going to be fully launched and loaded, and then how quickly can we see it, right? Because you're already posting mid-single digit growth now. What can the system handle, and how quick can we see that volume ramp up? Thanks.

Speaker #6: Hey , great . Good afternoon . And really great to hear and great job on the cost side . And the progress . There .

Speaker #6: Exciting to to watch the potential . The if we think about Mary Claire , the service , the Howard Street tunnel , port of Baltimore project , maybe just talk about timing and scalability of of when the double stacking is , is going to be fully launched and loaded and then how quickly can we see it ?

Speaker #6: Right ? Because you're already posting kind of mid , mid , single digit growth . Now what can the system handle and how quick can we , can we see that that volume ramp up ?

Maryclare Kenney: Yeah. Good afternoon. I'd say on the Howard Street Tunnel, we've talked a little bit about it before, but really excited about this project. It's been a long time coming, and the operating team really did a phenomenal job last year getting the work on our end completed. The last bridge should be complete in the next week or so, and then we will have double stack access. We've talked about it before. There's a couple things this unlocks for us. One, it's additional capacity and efficiency on the East/West corridor. You think about going from western US to Baltimore, vice versa, even Chicago to and from Baltimore. It essentially doubles our capacity there, and it's also going to take about a day out of our current transit. We're really excited about that. It also grants us the efficiency on the I-95 corridor.

Speaker #6: Thanks .

Speaker #2: Yeah . Good afternoon . So I'd say on the Howard Street tunnel we've talked a little bit about it before . But excited about this project .

Speaker #2: It's been a long time coming and the operating team really did a phenomenal job last year getting getting the work on our end , completed the last bridge should be complete in the next week or so , and then we will have , you know , double stack access .

Speaker #2: We've talked about it before . There's there's a couple things this unlocks for us . You know , one , it's additional capacity and efficiency on the east west corridor .

Speaker #2: So you think about going from Western US to Baltimore or vice versa . Even Chicago , you know , to and from Baltimore , it essentially doubles our capacity there .

Speaker #2: And it's also going to take about a day out of our current transit, so we're really excited about that. It also grants us the efficiency on the I-95 corridor.

Maryclare Kenney: We have really fast service, great service from Florida up into New Jersey and Baltimore. Once again, we'll have double the capacity there, and so we're excited to unlock that. The third component here is that it allows us to efficiently serve markets that we really couldn't before. We're adding connection points when you think about places like Atlanta up into the Northeast. When I say Northeast, New Jersey, Chambersburg, Philadelphia, places like that. That is newer service that we have not traditionally offered because we couldn't be efficient with that in the past. That will take some time to build. We've been talking to our channel partners and shippers for a while about this. They're very excited about it.

Speaker #2: So we have really fast service , great service from Florida up into new Jersey and Baltimore . Once again , we'll have double the capacity And so we're excited to to unlock that .

Speaker #2: But the third kind of component here is, it allows us to efficiently serve markets that we really couldn't before. And so, you know, we're adding connection points.

Speaker #2: When you think about places like Atlanta up into the northeast . And when I say northeast , you know , new Jersey , Chambersburg , Philadelphia , places like that .

Speaker #2: And so, that is a newer service that we have not traditionally offered, because we couldn't be efficient with that in the past. And so, that will take some time to build.

Speaker #2: You know , we've been talking to our channel partners and shippers for a while about this . They're very excited about it . You know , we're coming to the tail end of this year's bid season , but we're seeing some traction and that will continue to build over the course of the next the next year or so .

Maryclare Kenney: We're coming to the tail end of this year's bid season, but we're seeing some traction, and that will continue to build over the course of the next year or so. From my past experience, I tell you, new services typically takes a couple of good seasons to really see it get to full ramp.

Speaker #2: You know, from my past experience, I tell you, new services typically take a couple of bid seasons to really see it get to kind of full ramp.

Maryclare Kenney: Our next question comes from the line of Stephanie Moore with Jefferies. Your line is open.

Operator: Our next question comes from the line of Stephanie Moore with Jefferies. Your line is open.

Speaker #3: And our next question comes from the line of Stephanie Moore with Jefferies. Your line is open.

Stephanie Moore: Great. Thank you for the question. I wanted to maybe touch on what you're seeing from an overall macro and freight environment. I believe your guidance, at least the prior guidance, did not assume any kind of macro recovery. I'm assuming the current revenue guidance also doesn't assume any macro recovery. Just wanted to get your sense on what you're seeing in the market, the level of conservatism with that underlying assumption. Thanks.

Speaker #7: Great. Thank you for the question. I wanted to maybe touch on what you're seeing from an overall macro and freight environment.

Speaker #7: I believe your guidance, at least the prior guidance, did not assume any kind of macro recovery. I'm assuming the current revenue guidance also doesn't assume any macro recovery.

Speaker #7: Just wanted to get your sense on what you're seeing in the market—the level of conservatism with that underlying assumption. Thanks.

Maryclare Kenney: Yeah. I'll give a little update on the markets. I talked about some in the prepared remarks, but I'd say as we came into this year and we talked about back in January, we saw opportunities in a few markets, but we also saw broader headwinds with industrial production. Baselining what we said in January, we talked about areas around infrastructure investment we still felt very positive about. You think about aggregate side of the business, you think about metals that go into construction. Pipe, plate, rebar, those areas we felt good about. We felt good about our domestic intermodal business as well, with truck conversion opportunity and new services that we had launched. We said on the other side, though, a lot of our business is tied to housing and automotive, and those markets have been pretty bleak.

Speaker #2: Yes , I'll give a little update on the markets . I talked about some of the prepared remarks . But , you know , I'd say as we came into this year and we talked about back in January , you know , we saw opportunities in a few markets , but we also saw broader headwinds with industrial production .

Speaker #2: And so, kind of baselining what we said in January, we talked about areas around infrastructure investment. We still felt very positive about it.

Speaker #2: So you think about aggregate side of the business , you think about metals that go into construction . So pipe plate rebar , those areas , we felt good about , and then we felt good about our domestic intermodal business as well with truck conversion opportunity and new services that that we had launched .

Speaker #2: We said, on the other side, though, you know, a lot of our business is tied to housing and automotive, and those markets have been pretty bleak.

Maryclare Kenney: I would say as we sit here today, we haven't really seen improvement in either of those areas. Auto production still right now is forecast to be down about 2% this year. We've mentioned a few times we have a large plant on our network that is down for the year for retooling, and so that's another headwind for us. When you think about the housing side, it's affordability issue. Interest rates are still high, and they've bounced back up a little bit after everything that's happened in the Middle East. Those are still headwinds. Additionally, in our forest products business, we talked last year quite a bit about the fact that we had paper and pulp mill closures that we have to overlap, and we won't really surpass those until later this year. Those elements from the beginning of this year haven't changed.

Speaker #2: I would say , as we sit here today , we haven't really seen improvement in either of those areas . And so , you know , auto production still right now is forecast to be down about 2% this year .

Speaker #2: We've mentioned a few times we have a large plant on our network that is down for the year for retooling. And so that's another headwind for us.

Speaker #2: And when you think about the housing side, you know, affordability is an issue. Interest rates are still high, and they've bounced back up a little bit after everything that's happened in the Middle East.

Speaker #2: And so , you know , those are still headwinds . Additionally , in our forest products business , we talked last year quite a bit about the fact that , you know , we had Papen paper and pulp mill closures that we have to overlap and we won't really surpass those until later this year .

Speaker #2: So those elements from the beginning of this year haven't changed. I would tell you what I would say we have seen a bit of a difference in is, one, with the conflict in the Middle East.

Maryclare Kenney: I would tell you what I would say we have seen a bit of a difference in is one, with the conflict in the Middle East.

Maryclare Kenney: We saw improvement at the tail end of last quarter and into the beginning of this quarter in the plastics business. Feedstocks, domestic producers have opportunity, I think here. We're not sure how long that will last, but that has been a more positive upside than what we expected coming into this year when we originally had seen global oversupply in that area. The second area I'd mention is with higher fuel prices. That does increase the value proposition of rail. I'd say we're more optimistic today than what we were in January in terms of truck conversion opportunities, probably primarily in our domestic intermodal business, but some other areas too, like our forest product segment.

Speaker #2: We saw improvement at the tail end of last quarter and into the beginning of this quarter in the plastics business . And so , you know , feedstocks , domestic producers have opportunity .

Speaker #2: I think here, we're not sure how long that will last, but that has been a more positive upside than what we expected coming into this year.

Speaker #2: When we originally had seen global oversupply in that area . The second area I'd mention is , you know , with higher fuel prices , that does increase the value proposition of rail .

Speaker #2: And so, I'd say we're more optimistic today than we were in January in terms of truck conversion opportunities—probably primarily in our domestic intermodal business.

Speaker #2: But some other areas too, like our forest products segment.

Maryclare Kenney: Our next question comes from the line of Scott Group with Wolfe Research. Your line is open.

Operator: Our next question comes from the line of Scott Group with Wolfe Research. Your line is open.

Speaker #3: And our next question comes from the line of Scott Group with Wolfe Research. Your line is open.

Scott Group: Hey, thanks guys. I don't know, Steve or Kevin, we've seen just such massive inflation in that PS&O line in the last four years, and I guess you just touched on it a bit earlier, but like seeing some good progress in Q1 on lowering that. This $660 million, is this a good run rate or is there more opportunity to go on sort of fixing this PS&O line? Then maybe if I can, just like near term, there's just a lot of noise. We had a gain in Q1. We've got fuel moving around. Any thoughts on how to think about sort of sequential margin improvement from Q1 to Q2? Thank you guys.

Speaker #8: Hey , thanks , guys . So I don't know Steve or Kevin , you know , we've seen just such massive inflation in that snow line the last four years .

Speaker #8: And I guess you just touched on it a bit earlier . But like seeing some good progress in the first quarter on lowering that like , is this a good this 660 million , is this a good run rate or is there more opportunity to go on , on , on sort of fixing this snow line and then maybe if I can just like near term , there's just a lot of noise .

Speaker #8: We had a gain in Q1. We've got fuel moving around, and any thoughts on how to think about, sort of, sequential margin improvement from Q1 to Q2?

Speaker #8: Thank you guys

Kevin Boone: Yeah. PS&O, there's a lot of different things that are in there, and I would say Steve would say we're never done there. The procurement team continues to push our vendors for value, and that's going to continue here in earnest. As I mentioned before, there are a lot of different components. It was an area that I definitely, and the team definitely saw a lot of areas for improvement. In terms of the sustainability of this, we're going to continue to go after it, and as I mentioned earlier, Mike and team, along with the finance team and others, we're already pivoting to 2027 and looking at all the cost line items and seeing where there's opportunity, and so there's absolutely more to come on that. We're going to layer it in and be very, very thoughtful on how we think about those costs.

Speaker #5: Yeah . You know , the , you know , snow mix up , there's a lot of different things that are in there .

Speaker #5: And I would say . Steve would say , we're never done there . I have , you know , the procurement team continues to push our vendors for value .

Speaker #5: And that's going to continue here in earnest . But it's , you know , as I mentioned before , there are a lot of different components .

Speaker #5: It was an area that we , I definitely . And the team definitely saw a lot of areas for improvement in terms of the sustainability of this , we're going to continue to go after it .

Speaker #5: And as I mentioned earlier, Mike and team, along with the finance team and others, we're already pivoting to 2027 and looking at all the cost line items and seeing where there's opportunity.

Speaker #5: And so there's absolutely more to come on that we're going to layer it in and be very , very thoughtful on how that and how we think about those , those costs .

Kevin Boone: Those are things that we'll continue to identify here. Looking at Q2, I mentioned some of the things within PS&O that, obviously we won't have the real estate gain that occurred in Q1 of $44 million. I did mention the overhauls on the engine side, that'll be a little bit higher than what we saw in Q1. Transaction costs, related costs that I mentioned. I would also say fuel at the higher levels for Q2, which we anticipate being higher than what they were on average for Q1, will by default have some pressure on the margin side of those things too, just given where fuel prices are today. As I mentioned too, that only motivates the team to go after those costs, and drive more efficiency in those areas.

Speaker #5: But those are , those are things that we'll continue to identify here . Looking at second quarter , I mentioned some of the things with snow that obviously we won't have the real estate gain that occurred in the first quarter of 44 million .

Speaker #5: Did mention the overhauls on the engine side . That will be a little bit higher than what we saw in the in the first in first quarter transaction costs , related costs that I mentioned , I would also say fuel at the higher levels for the second quarter , which we anticipate being higher than what they were on average for the first quarter , will by default have some pressure on the margin side of those things to just given where fuel prices are today .

Speaker #5: But as I mentioned to you, that only motivates the team to go after those costs and drive more efficiency in those areas.

Kevin Boone: I do think the focus right now is to deliver the plan that we laid out here in Q4 and make sure that the team and everybody is being held accountable to that, and then starting to build a pipeline for the years ahead and making sure we have visibility to continue the cost efforts going forward.

Speaker #5: So I do think , you know , the focus right now is to deliver the plan that we laid out here in the fourth quarter and make sure that the team and everybody is being held accountable to that .

Speaker #5: And then starting to build the pipeline for the years ahead and making sure we have visibility to continue the cost efforts going forward.

Kevin Boone: Our next question comes from the line of Brian Ossenbeck with JP Morgan. Your line is open.

Operator: Our next question comes from the line of Brian Ossenbeck with JP Morgan. Your line is open.

Speaker #3: And our next question comes from the line of Brian Ossenbeck with JP Morgan. Your line is open.

Brian Ossenbeck: Hey, good afternoon. Thanks for taking the question. Maybe just one quick follow-up for Kevin to start the gain on sale. I know this can be bumpy. Is that sort of what you expected coming into the year, in terms of like a run rate for the rest of the quarters? How should we be thinking about that in the H2, I guess, since you said it's not going to occur into Q2? This is a broader question for Mike. Obviously, a lot of productivity gains are starting to come through, so maybe the dwell time being a little bit elevated in some of these terminals that we're looking at doesn't have as much of an impact as we might think from the outside looking in.

Speaker #9: Hey , good afternoon . Thanks for taking the question . Maybe just one quick follow up for Kevin to start the the gain on sale .

Speaker #9: I know this can be lumpy . Is that sort of what you expected coming into the year in terms of like a run rate for the rest of the the quarters ?

Speaker #9: You know , how should we be thinking about that in the back half of the year ? I guess since you said it's not going to recur into , into to .

Speaker #9: Q, and this is a broader question for Mike. Obviously, a lot of productivity gains are starting to come through, so maybe the dwell time being a little bit elevated in some of these terminals that we're looking at doesn't have as much of an impact as we might think from the outside looking in.

Brian Ossenbeck: Want to get your perspective because, while there's easier comps year over year and it's still improving out of tough weather, some of the areas are up quite a bit in terms of the dwell time. I don't know if that's Nick's perspective, if that's reworking some of the yard and the systems, but would like to hear your thoughts more on that point in particular. Thank you.

Speaker #9: But want to get your perspective because , you know , while there's easier comps year over year , and it's still improving , you know , out of tough weather , some of the areas are up quite a bit in terms of the dwell time .

Speaker #9: So I don't know if that's a mixed perspective , if that's reworking some of the , the art in the systems . But you know , like to hear your thoughts more on that point in particular .

Kevin Boone: All right. I'll take care of the real estate. I think we did anticipate this coming into the year, the $44 million. There's nothing in the plan or the forecast for anything of this size the remainder of the year. We always have some small things that come through, and Christina and her team do a great job of identifying those things, but nothing as material to this point. There's always things out there and whether we're able to convert them and pull them forward, we'll see, but not currently in the plan for this year.

Speaker #9: Thank you .

Speaker #5: All right . I'll take care of the the real estate . You know , I think we did anticipate this coming into the year .

Speaker #5: The 44 million . I wouldn't expect there's nothing in the the plan or the forecast for anything of this size . The remainder of the year .

Speaker #5: We always have some small things that that come through . And Christina and her team do a great job of identifying those things .

Speaker #5: But nothing as material to this point. There are always things out there. And whether we're able to convert them and pull them forward, we'll see.

Speaker #5: But not currently in the plan for this year. Yeah. Thanks for that.

Kevin Boone: Yeah. Thanks for the question, Brian. As Kevin talked about before, our productivity initiatives are really broad-based, and they're across all operations, and really the overall focus is on waste, cutting overhead, and especially improving our capital efficiency. We've been really disciplined with our work teams, our engineering work teams, start times, and the full completion of their allotted time. Just as an example, this year we've been close to 100% on our curfews, the track outages this year versus I'd say 70%, 60% the last preceding years. In some cases, we don't get the work done, and that's a safety liability, and then the overall cost is tremendous. In some cases, to get this work done this year, we've impacted our train and yard plans because we're instilling new methods of performing the work.

Mike Cory: Yeah. Thanks for the question, Brian. As Kevin talked about before, our productivity initiatives are really broad-based, and they're across all operations, and really the overall focus is on waste, cutting overhead, and especially improving our capital efficiency. We've been really disciplined with our work teams, our engineering work teams, start times, and the full completion of their allotted time. Just as an example, this year we've been close to 100% on our curfews, the track outages this year versus I'd say 70%, 60% the last preceding years. In some cases, we don't get the work done, and that's a safety liability, and then the overall cost is tremendous. In some cases, to get this work done this year, we've impacted our train and yard plans because we're instilling new methods of performing the work.

Speaker #10: Question , Brian . You know , as Kevin talked about before , our productivity initiatives are really broad based and they're across all operations and really the overall focus is on waste , cutting overhead .

Speaker #10: And , you know , especially improving our capital efficiency . So we've been really disciplined with our work teams , our engineering work teams , start times in the full completion of their allotted time .

Speaker #10: And , you know , just as an example , this year , we've been close to 100% on our curfews . The track outages this year versus , you know , I'd say 70% , 60% .

Speaker #10: The last preceding years , in some cases , we don't get the work done . And that's a safety liability . And then the overall cost is , is tremendous .

Speaker #10: So in some cases , to get this work done this year , we've impacted our training yard plans because we're installing new methods of performing the work .

Kevin Boone: Closing down a line or a portion of a yard for 24 hours and working continuously has caused some rerouting of trains and traffic, and it has caused delay. Now that's not our design, but it's more so a learning opportunity at this point to gain that efficiency to see if we can do it.

Mike Cory: Closing down a line or a portion of a yard for 24 hours and working continuously has caused some rerouting of trains and traffic, and it has caused delay. Now that's not our design, but it's more so a learning opportunity at this point to gain that efficiency to see if we can do it.

Speaker #10: So closing down a line or a portion of a yard for 24 hours and working continuously has caused some rerouting of trains and traffic .

Speaker #10: And it has caused delay . Now , that's not our design , but it's more so a learning opportunity at this point to gain that efficiency , to see if we can do it .

Steve Angel: The plan going forward is to build the right plan around the work that we're doing and the things we're learning from. The focus on the last 30 to 45 days on these efficiency opportunities has really started to show us where not only do we have to dig in and improve, but it's also showing us places that we need to maybe do some capital work. Some examples that we're actually in progress of doing, but our yard in Cincinnati, we're completing power switches this year, and we've started to begin the work in Nashville the same way. We've identified that work on sidings over some of our busy southern corridors to increase fluidity. Our focus is always on improving those operating metrics. As much as we're deeply engaged on safety and service, we're just driving equally as hard on the internal metrics.

Mike Cory: The plan going forward is to build the right plan around the work that we're doing and the things we're learning from. The focus on the last 30 to 45 days on these efficiency opportunities has really started to show us where not only do we have to dig in and improve, but it's also showing us places that we need to maybe do some capital work. Some examples that we're actually in progress of doing, but our yard in Cincinnati, we're completing power switches this year, and we've started to begin the work in Nashville the same way. We've identified that work on sidings over some of our busy southern corridors to increase fluidity. Our focus is always on improving those operating metrics. As much as we're deeply engaged on safety and service, we're just driving equally as hard on the internal metrics.

Speaker #10: And , you know , the plan going forward is to build the right plan about around the work that we're doing and the things we're learning from .

Speaker #10: So the focus on the 30 to 45 days on these efficiency opportunities started to show us where not only do we have to dig in and improve , but it's also , you know , showing us places that we need to maybe do some capital work .

Speaker #10: And so some examples that we're , we're actually in progress of doing , but our yard in Cincinnati , we're completing power switches this year .

Speaker #10: And we've started to begin the work in Nashville the same way we've identified work on sidings over some of our busy southern corridors to increase , increase fluid fluid activity .

Speaker #10: Our focus is always on improving those operating metrics, and as much as we're deeply engaged on safety and service, we're just driving equally as hard on the internal metrics.

Steve Angel: We're trying different things to create overall productivity. We're all very aware of the dwell and the train speed, and that is a huge focus for us, and we'll bring that back in line. We're not going to stop trying to get smarter and better in how we deploy all our costs. Thanks.

Mike Cory: We're trying different things to create overall productivity. We're all very aware of the dwell and the train speed, and that is a huge focus for us, and we'll bring that back in line. We're not going to stop trying to get smarter and better in how we deploy all our costs. Thanks.

Speaker #10: But we're trying different things to create overall productivity. And I'm very—we're all very aware of the dwell and the train speed.

Speaker #10: And that is a huge focus for us . And we'll bring that back in line . But we're not going to stop trying to get smarter and better in how we deploy all our costs .

Speaker #10: Thanks

Steve Angel: Our next question comes from the line of Brandon Oglenski with Barclays. Your line is open.

Operator: Our next question comes from the line of Brandon Oglenski with Barclays. Your line is open.

Speaker #3: And our next question comes from the line of Brandon Oglenski with Barclays . Your line is open

Brandon Oglenski: Hi, good afternoon, and thanks for taking the question. Steve, you're another quarter into the job here, and I know you and the team have aspirations here to drive higher return on invested capital. I guess this question is a little bit open-ended, but I'd like to get your input on it. As you look at it today, to drive a higher ROIC in the future, is it really asset productivity? Is it improved business mix or pricing, cost efficiencies, or all of the above? I would love to get some direction on that. Thank you.

Speaker #11: Hi . Good afternoon , and thanks for taking the question , Steve . You know , your another quarter into the job here .

Speaker #11: And I know you and the team have aspirations here to drive higher return on invested capital . I guess this question is a little bit open ended , but I'd like to , you know , get your input on it .

Speaker #11: You know , as you look at it today to to drive a higher ROI in the future , is it really like asset productivity ?

Speaker #11: Is it improved business mix, or pricing, cost efficiencies, or all of the above? I mean, we'd love to get some direction on that.

Speaker #11: Thank you

Steve Angel: Sure. As you know, you got a numerator and a denominator in return on invested capital, and I've had a lot of experience with this over the years. The best way to drive return on invested capital is to drive the numerator. That's improving our operating margins, our operating margin performance, and growing operating income. That's the top line. You've seen our guidance for the year. You've heard both Kevin and Mike talk about the fact that we're working on 2027 productivity initiatives as well as executing during 2026. That to me is really the secret to driving that top line to make sure that we build that productivity muscle so that we can count on that contribution year in, year out. Then on the capital, the denominator side, it is being more prudent in terms of how we spend capital. Certainly that has an impact.

Speaker #1: Sure . So , you know , as you know , you got a numerator and denominator in return on invested capital and , and I've , I've had a lot of experience with this over the years .

Speaker #1: The best way to drive return on invested capital is to drive the numerator and that's in improving our operating margins , our operating margin performance , growing , operating income .

Speaker #1: That's the top line . And you know , you've seen our guidance for the year . You've heard both Kevin and Mike talk about , you know , the fact that , you know , we're working on 2027 productivity initiatives as well as , you know , executing during 2026 .

Speaker #1: And that , that to me is really the secret to driving that , that top line to make sure that we build that productivity muscle so that we can count on that contribution year in , year out .

Speaker #1: And then on the capitals , the denominator side , it is being more prudent in terms of how we spend capital . Certainly that that has an impact .

Steve Angel: Mike talked about how we are performing our engineering work in concert with transportation so that we're much more efficient and effective in terms of how we execute some of these significant projects. I would say we were in a mode where we had lots of projects going on simultaneously, not really making the progress we needed and bringing them to conclusion. By working more in a block mode, we're able to execute large projects more quickly, more efficiently, spend less dollars, and get the benefit of that investment. That's just one example of what we're doing on the capital side. Kevin's heavily involved managing the capital funding process. We look at every project now. Every one has to stand on its own. We follow them individually. We're going to make sure we're executing the way we need to execute.

Speaker #1: We have Mike talk about how we are performing our engineering work in concert with transportation so that we're much more efficient and effective in terms of how we execute some of these significant projects.

Speaker #1: I would say we were in a kind of in a mode where we had lots of projects going on simultaneously , not really making the progress we needed and bringing them to conclusion .

Speaker #1: And by working more in a block mode, we're able to execute large projects more quickly, more efficiently, spend fewer dollars, and get the benefit of that investment.

Speaker #1: So that's just one example of what we're doing on the capital side. Kevin's heavily involved, managing the capital funding process. We look at every project.

Speaker #1: Now everyone has to stand on its own. We follow them individually. We're going to make sure we're executing the way we need to.

Speaker #1: We need to execute . And then , you know , really longer term , when you look at capital spend , you know , I think predictive analytics can play a major role in terms of making sure that , you know , we focus our capital spend certainly in the infrastructure side , and we can focus the capital spend and we can prioritize that spend based on what's needed , not necessarily what we think we need to do from a maintenance standpoint , but what the analytics and the data tells us .

Steve Angel: Really longer term, when you look at capital spend, I think predictive analytics can play a major role in terms of making sure that we focus our capital spend, certainly on the infrastructure side. We can focus the capital spend, and we can prioritize that spend based on what's needed, not necessarily what we think we need to do from a maintenance standpoint, but what the analytics and the data tells us we need to prioritize in terms of our spend. As we move down that path, as we do a better job with that, I would expect that our overall capital spend would be lower year-over-year because we're spending the money on the right things, as opposed to what we believe, based on our experience, we need to spend the money.

Speaker #1: We need to prioritize in terms of our spend . And , you know , as we move down that path , as we do a better job with that , I would expect that , you know , our overall capital spend would be lower year over year because we're spending the money on the right things as opposed to what what we believe based on our experience , we need to spend the money .

Steve Angel: All that's kind of a long answer to say that's how I think about return on invested capital. We said we want to be best in class in a lot of metrics. That's one of them. The way to do that is continue to drive that numerator north, grow our earnings year over year, manage our capital spend very effectively, and that's how we'll do it.

Speaker #1: So all that's kind of a long answer to say that , you know , that's , that's how I think about return on invested capital .

Speaker #1: We've said we want to be best in class on a lot of metrics. That's one of them. And the way to do that is to continue to drive that, you know, Numerator North, grow our earnings year over year, and manage our capital spend very effectively.

Speaker #1: And that's how we'll do it.

Steve Angel: Our next question comes from the line of Tom Wadewitz with UBS. Your line is open.

Operator: Our next question comes from the line of Tom Wadewitz with UBS. Your line is open.

Speaker #3: And for the next question, it comes from the line of Tom Wadewitz with UBS. Your line is open.

Tom Wadewitz: Yeah, good afternoon. I wanted to ask a bit about on the pricing side. There's been a pretty substantial and rapid tightening in the spot market in truck, and I think contract rates going up quite a bit too. For Mary Claire or broader, how should we think about the time lag between that? Is there that and what you could see in Intermodal or Merchandise in pricing? Is there some of that that can benefit you in H2? Or is this really like, it's great to see, but we should expect more pricing in 2027? I guess maybe just within the quarter, are you seeing any kind of change in underlying pricing in Merchandise? I know you talked about mix being a headwind, but just is that kind of similar to what it's been or any change there? Thank you.

Speaker #12: Yeah . Good afternoon . I wanted to ask a bit about the pricing side . There's been a pretty , you know , pretty substantial and rapid tightening in the spot market .

Speaker #12: In truck . And I think contract rates going up quite a bit to you know , for Mary Claire or broader . How do you how should we think about the time lag between that .

Speaker #12: Is there you know , that and what you could see in intermodal or merchandise in pricing ? Is there some of that that can benefit you in second half , or is this really like it's great to see , but you know , we should expect more pricing in 27 .

Speaker #12: And then I guess maybe just within the quarter , are you seeing any kind of change in underlying pricing in merchandise ? I know you talked about mix being a headwind , but just like , is that kind of similar to what it's been or any change there ?

Maryclare Kenney: Yeah. Thanks for the question. We talked about pricing last quarter as well, and I'd say, it's an area I looked at as I came into this role, and I think we've said before that, we expect on a same-store sales basis pricing to be better this year than what we saw last year. We deliver an important service product for our customer, and it's important that we ensure that we're pricing appropriately and getting the value for the service that we deliver. I'd say as I look at merchandise pricing over the course of this year, discretionary pricing, what we can touch, has been solid. That will benefit us as we get later into this year and certainly into next year. We've mentioned before, of our total book, it's only 50% or so that we can touch on at any given year.

Speaker #12: Thank you

Speaker #2: Yeah . Thanks for the question . So , you know , we talked about pricing last quarter as well . And I'd say , you know , it's an area I looked at as I came into this role .

Speaker #2: And I think we've said before that , you know , we expect on a same store sales basis , pricing to be better this year than what we saw last year .

Speaker #2: You know , we deliver an important service product for our customer and it's important that that we ensure that , you know , we're we're pricing appropriately and getting the value for the service that we deliver .

Speaker #2: You know , I'd say it's , I look at merchandise pricing over the course of this year , discretionary pricing . You know what we can touch has been solid .

Speaker #2: And that will benefit us as we get later into this year . And certainly into next year . We've mentioned before , you know , of our total book , it's only 50 or so percent that we can touch on any given year .

Maryclare Kenney: We can't touch everything at the same time, and so there is a lag effect. I'd say as you think about the intermodal side of the business, we continue to focus on price there just as we do in other markets, but it is different than other segments. For example, when you think about international intermodal, it's pretty heavily concentrated. It's primarily contracted under long-term deals, and it's not really highly correlated to changes in the truck market. That's a little bit of a different area for us. Our next question comes from the line of Ari Rosa with Citigroup. Your line is open.

Speaker #2: And so we can't at any given time. So we can't touch everything at the same time. And so there is a lag effect.

Speaker #2: I'd say , as you think about the intermodal side of the business , you know , we continue to focus on price there just as we do in other markets .

Speaker #2: But it is different than other segments . And , you know , for example , when you think about international intermodal , it's pretty heavily concentrated .

Speaker #2: It's primarily contracted under long term deals , and it's not really highly correlated to changes in the truck market . And so , you know , that's a little bit of a different area for us

Operator: Our next question comes from the line of Ari Rosa with Citigroup. Your line is open.

Speaker #3: And our next question comes from the line of Ari Rosa with Citigroup . Your line is open

Ari Rosa: Hi, good afternoon. Congrats on some strong results here. Steve, I'm curious, just an update on the M&A situation. Last year, we heard a lot of concern that a transcon merger could leave CSX at a competitive advantage, or, I'm sorry, a competitive disadvantage. Clearly, a lot of good progress going on, but as we step back and think about kind of what the business looks like a year from now, two years from now, three years from now, to what extent is that a concern? What steps are you taking to kind of position the business for that? Maryclare talked about the kind of build in the intermodal business that's opened up by the Howard Street Tunnel and some of the opportunities there.

Speaker #13: Hi . Good afternoon . Congrats on on some strong results here , Steve . I'm curious , just an update on the M&A situation .

Speaker #13: Last year we heard a lot of concern that a TransCon merger could leave CSX at a competitive advantage—or, I'm sorry, a competitive disadvantage.

Speaker #13: Clearly a lot of good progress going on . But as we step back and think about kind of what the business looks like a year from now , two years from now , three years from now , to what extent is that a concern ?

Speaker #13: What steps are you taking to kind of position the business for that? Mary Claire talked about the kind of build in the intermodal business that's opened up by the Howard Street Tunnel and some of the opportunities there.

Ari Rosa: Just give us your updated thoughts on kind of where vulnerabilities might lie and how CSX is kind of positioned for that future if it does unfold.

Speaker #13: Just give us your updated thoughts on kind of where vulnerabilities might lie and , and how CSX is kind of positioned for that future .

Speaker #13: If it does unfold

Steve Angel: Number one is doing what we're doing today and continuing to execute at a high level in the base business. Mary Claire talked about some of the growth, opportunities that we have, of which there are quite a few. Obviously, there's uncertainties out there in the market and so forth, but we feel pretty good about our growth opportunities. We feel pretty good about how we're operating, our focus on capital, et cetera. A lot of things are going positively in that light. The way I think about the merger, and again, you've heard me say this before, it's a long process. The one I was involved with took three years from beginning to end, so a lot of time is going to elapse between now and some conclusion, whatever that is.

Speaker #1: Number one is doing what we're doing today . And , and continuing to execute , you know , at a high level on the base business .

Speaker #1: Mary Claire talked about some of the growth opportunities that we have, of which, you know, there are quite a few. Obviously, there are uncertainties out there in the market and so forth.

Speaker #1: But , you know , we feel pretty good about our growth opportunities . We feel pretty good about how we're operating . Our focus on capital , etcetera , etcetera .

Speaker #1: So a lot of things are going positively in light . You know , the way I think about the merger and again , you've heard me say this before , you know , it's a long process .

Speaker #1: The one I was involved with took three years from beginning to end . So a lot of time is going to elapse between now and some conclusion , whatever that is I would look at any industry consolidation and say that , you know , if you're in that industry , there's going to be some challenges .

Steve Angel: I would look at any industry consolidation and say that, if you're in that industry, there's gonna be some challenges you got to go manage. There's gonna be some opportunities to capitalize on. I suspect if this merger goes through, we'll see both. It's gonna take a good bit of time. We don't know what the end result's going to be. I think in the interim, we're just gonna focus on execution and make sure that, whatever happens down the road, we'll be going into that situation from a position of strength. That's always been my philosophy, and that's where we'll be.

Speaker #1: You’ve got to go manage; there are going to be some opportunities to capitalize on. And I suspect if this merger goes through, you know, we’ll see both.

Speaker #1: But it's going to take, you know, a good bit of time. We don't know what the end result is going to be.

Speaker #1: I think in the interim we're just going to focus on execution and make sure that, you know, whatever happens down the road, we'll be going into that situation from a position of strength.

Speaker #1: And that's always been my philosophy . And that's where we'll be

Matthew Korn: Our next question comes from the line of Richa Harnain with Deutsche Bank. Your line is open. Hi. Thanks for the time, everyone. I wanted to ask about the 21 projects that are expected to contribute. I think, Maryclare, you said 33,000 in annual carload at full ramp. When do you expect to get to full ramp? If you have a total of 100 projects expected for the year, will the incremental 80 or so have the same impact as the 21? I mean, at that contribution level, we could get to very strong carload growth implied on an annual basis. I just wanted to make sure I wasn't missing anything or understanding the cadence of that. If we can drill into that'd be great. Thanks. Yeah, thanks for the question. I'd say every project's a little bit different, right?

Operator: Our next question comes from the line of Richa Harnain with Deutsche Bank. Your line is open.

Speaker #3: In our next question comes from the line of Richard Haanen with Deutsche Bank . Your line is open . Hi .

Richa Harnain: Hi. Thanks for the time, everyone. I wanted to ask about the 21 projects that are expected to contribute. I think, Maryclare, you said 33,000 in annual carload at full ramp. When do you expect to get to full ramp? If you have a total of 100 projects expected for the year, will the incremental 80 or so have the same impact as the 21? I mean, at that contribution level, we could get to very strong carload growth implied on an annual basis. I just wanted to make sure I wasn't missing anything or understanding the cadence of that. If we can drill into that'd be great. Thanks.

Speaker #14: Thanks for the time , everyone . So I wanted to ask about the 21 projects that are expected to contribute . I think , Mary Claire , you said 33,000 in annual carloads at full ramp .

Speaker #14: When do you expect to get to full ramp ? And if you have a total of 100 projects expected for the year , will the incremental 80 or so have the same impact as the 21 ?

Speaker #14: I mean, at that contribution level, we could get to very strong carload growth implied on an annual basis. So I just wanted to make sure I wasn't missing anything.

Speaker #14: Understanding the cadence of that . If we can drill into that , that'd be great . Thanks .

Maryclare Kenney: Yeah, thanks for the question. I'd say every project's a little bit different, right?

Speaker #2: Yeah . Thanks for the question . So I'd say every project is a little bit different , right ? And so when we talk about the 21 projects that are across multiple different business units , and when I think about our industrial development efforts last year , what we've seen this year , what we've got in the future pipeline , they vary .

Maryclare Kenney: When we talk about the 21 projects that are across multiple different business units, and when I think about our industrial development efforts last year, what we've seen this year, and what we've got in the future pipeline, they vary. There are some larger projects. Last year, we talked about an auto plant that came online that over time, once it gets up to full ramp, will be pretty sizable. It started out with one vehicle, and so it will take time for that to ramp. We also have other projects when you think about some of our areas where it's a few thousand carloads, right? It's smaller in scale, smaller in revenue. The good thing about this is it's a pretty diverse pipeline, and we're excited about that. It's not heavily correlated or concentrated in one particular area.

Speaker #2: There are some larger projects . Last year we talked about an auto plant that came online that over time , once it gets up to full ramp , will be pretty sizable .

Speaker #2: You know , start out with with one vehicle . And so it will take time for that to ramp up . We also have other projects .

Speaker #2: When you think about some of our areas where , you know , it's a few thousand carloads , right ? It's it's smaller in scale , smaller in revenue .

Speaker #2: And so the good thing about this is it's a pretty diverse pipeline . And we're excited about that . It's not , you know , heavily correlated or concentrated in one particular area .

Matthew Korn: As we think about changes in the market, that gives us a benefit, as we think about the future. We're excited about it. I'd say that's probably all we're going to give from a guidance perspective at this point on ID, but we're certainly excited about the pipeline that we see, and it's an area that we'll continue to develop as we go forward. Our next question comes from the line of Jonathan Chappell with Evercore ISI. Your line is open. Thank you. Good afternoon. Maryclare, the one segment we probably haven't touched on from a pricing or yield perspective is Coal, up about 3% sequentially. That's the first time in several years, basically flat year over year, also the first time since 2022. Is this a function of some of the index headwinds finally easing? Is it a mix?

Maryclare Kenney: As we think about changes in the market, that gives us a benefit, as we think about the future. We're excited about it. I'd say that's probably all we're going to give from a guidance perspective at this point on ID, but we're certainly excited about the pipeline that we see, and it's an area that we'll continue to develop as we go forward.

Speaker #2: And so, as we think about changes in the market, that gives us a benefit as we think about the future. So we're excited about it.

Speaker #2: I'd say , you know , that's probably all we're going to get from a guidance perspective at this point on on ID , but we're certainly excited about the the pipeline that we see .

Speaker #2: And it's an area that we'll continue to develop as we go forward.

Operator: Our next question comes from the line of Jonathan Chappell with Evercore ISI. Your line is open.

Speaker #3: And our next question comes from the line of Jonathan Chappell with Evercore ISI . Your line is open .

Jonathan Chappell: Thank you. Good afternoon. Maryclare, the one segment we probably haven't touched on from a pricing or yield perspective is Coal, up about 3% sequentially. That's the first time in several years, basically flat year over year, also the first time since 2022. Is this a function of some of the index headwinds finally easing? Is it a mix?

Speaker #15: Thank you . Good afternoon . Mary Claire , the one segment we probably haven't touched on from a pricing or yield perspective is Kol up about 3% sequentially .

Speaker #15: That's the first time in several years , basically flat year over year . Also the first time since 22 . Is this a function of some of the index headwinds ?

Speaker #15: Finally easing ? Is it a mix benefit ? Is it , you know , some of the commodity price volatility kind of helped coal maybe vis a vis oil and a long way of getting to is this kind of the start of a recovery or when you think about coal rpu for the rest of year , think about one .

Jonathan Chappell: ... benefit? Is it some of the commodity price volatility kind of helped coal, maybe vis-à-vis oil? A long way of getting to, is this kind of the start of a recovery? When you think about coal RPU for the rest of this year, think about Q1 and extrapolate that.

Speaker #15: Q and extrapolate that

Maryclare Kenney: Yeah. Thank you. I'd say, we talked about, on our last call, the fact that on the export coal side, last year, we saw the benchmarks come down throughout the course of the year. By the time we got to Q4, they were pretty substantially lower than where they started in January of the year. What I'd say is what I've seen from Q4 into Q1 of this year is the primary benchmark that we're tied to on the high vol side, it's been relatively stable. We had probably the biggest year-over-year impact in the first quarter. As we saw those benchmark prices come down last year, that gap will close some if benchmarks stay where they are today, which is our current expectation and what's kind of in our forward thoughts.

Speaker #2: Yeah . Thank you . So I'd say , you know , we talked about on our last call , the fact that , you know , on the export coal side , last year , we saw the benchmarks come down throughout the course of the year .

Speaker #2: So, by the time we got to the fourth quarter, they were pretty substantially lower than where they started, you know, in January of the year.

Speaker #2: What I'd say is, what I've seen from fourth quarter into first quarter of this year is the primary benchmark that we're tied to on the high-vol side has been relatively stable.

Speaker #2: So , you know , we we had probably the biggest year over year impact in the first quarter . And as we saw those benchmark prices come down last year , that gap will close some if benchmarks stay where they are today , which is is our current expectation and what's kind of in our our forward thoughts , I would say on the domestic side of the business , you know , we do see good demand out there .

Maryclare Kenney: I would say on the domestic side of the business, we do see good demand out there. There's strong demand for power. Data centers and continued investment in that infrastructure is going to continue to pull on the power. We feel good about domestic demand. We've mentioned before, there's a couple utilities on our network that are planned to close this quarter, but with the power demand that's out there right now, we expect there could be some extensions associated with those. How we see domestic overall market strong, but in terms of impact for us, part of it will be determined on whether or not we see these closures come about or we see the extensions on those facilities.

Speaker #2: So there's strong demand for power data centers, and continued demand in that infrastructure is going to continue to pull on the power.

Speaker #2: So we feel good about domestic demand . We've mentioned before there's a couple utilities on our network that are planned to close this quarter .

Speaker #2: But with the power demand that's out there right now, we expect there could be some extensions associated with those. And so, how we see the domestic overall market is strong, but in terms of impact for us, part of it will be determined on whether or not we see these closures come about, or we see the extensions on those facilities.

Maryclare Kenney: Our next question comes from the line of Jason Seidl with TD Cowen. Your line is open.

Operator: Our next question comes from the line of Jason Seidl with TD Cowen. Your line is open.

Speaker #3: And our next question comes from the line of Jason Seidl with TD Cowan . Your line is open

Jason Seidl [Managing Director, Industrials: Hey, thank you, operator. Questions for Mike. Mike, we have the bridges opening up here to enable you guys to run double stack, and you've made some changes on freight flows around Chicago. What else is sort of on track for the remainder of the year that'll help productivity and obviously push margins?

Jason Seidl: Hey, thank you, operator. Questions for Mike. Mike, we have the bridges opening up here to enable you guys to run double stack, and you've made some changes on freight flows around Chicago. What else is sort of on track for the remainder of the year that'll help productivity and obviously push margins?

Speaker #16: Hey , thank you . Operator . Questions for for Mike . Mike , you know , we have the bridge's opening up here to enable you guys to run double stack and you've made some changes on freight flows around Chicago .

Speaker #16: What else is sort of on track for the remainder of the year? That'll help productivity and obviously push margins.

Jason Seidl [Managing Director, Industrials: Thanks, Jason. Well, in Chicago, just to clarify, we're just streamlining our service by really running direct from origin points on CSX to our connecting carriers and belt lines for processing to other carriers. We've always used belt carriers to forward traffic, and now we're combining all the traffic that comes from outside of Chicago through Chicago with a belt carrier. It just reduces handlings, reduces time on all the traffic, and on the reverse, it works the same way. Across the rest of the network, what we're really looking at, as I said earlier, is a cross-section of productivity initiatives. We've got some really good teamwork going on. Our engineering group is delivering quite a bit of efficiency that we see extrapolating out through the year, and they're working extremely good with our network group.

Mike Cory: Thanks, Jason. Well, in Chicago, just to clarify, we're just streamlining our service by really running direct from origin points on CSX to our connecting carriers and belt lines for processing to other carriers. We've always used belt carriers to forward traffic, and now we're combining all the traffic that comes from outside of Chicago through Chicago with a belt carrier. It just reduces handlings, reduces time on all the traffic, and on the reverse, it works the same way. Across the rest of the network, what we're really looking at, as I said earlier, is a cross-section of productivity initiatives. We've got some really good teamwork going on. Our engineering group is delivering quite a bit of efficiency that we see extrapolating out through the year, and they're working extremely good with our network group.

Speaker #10: Thanks , Jason . Well , in Chicago , just to clarify , we're just streamlining our service by really running direct from origin points on CSX to our connecting carriers and belt lines for processing to other carriers .

Speaker #10: We've always used belt carriers to forward traffic, and now we're combining all the traffic that comes from outside of Chicago through Chicago with a belt carrier.

Speaker #10: It just reduces Handlings , reduces time on all the traffic , and on the reverse , it works the same way . So across the rest of the network , what we're really looking at , as I said earlier , is a cross section of productivity initiatives .

Speaker #10: And we've got some really good teamwork going on. Our engineering group is delivering quite a bit of efficiency that we can extrapolate out through the year.

Speaker #10: And they're working extremely good with our network group . So Casey Albrecht , Doug Hawerchuk are really driving . We learn more efficiencies every day .

Jason Seidl [Managing Director, Industrials: Casey Albright, Doug Hrechak are really driving. We learn more efficiencies every day, Jason. I'll put it that way. The things that we don't know are what we're going after. On the intermodal side, really speeding up to Mary Claire's earlier points about offering faster service lanes, getting that new business. We're going to be putting expansion into our Atlanta terminal, Fairburn in Atlanta. Carrie Crozier and the team driving some good results there. Look, we're looking for as much productivity in terms of reducing handling, speeding up traffic, and getting rid of these inefficiencies that have been inside of all of operations, not just through dwell and train speed, but there's a lot more that's out there that's within the entire group that we're going after.

Mike Cory: Casey Albright, Doug Hrechak are really driving. We learn more efficiencies every day, Jason. I'll put it that way. The things that we don't know are what we're going after. On the intermodal side, really speeding up to Mary Claire's earlier points about offering faster service lanes, getting that new business. We're going to be putting expansion into our Atlanta terminal, Fairburn in Atlanta. Carrie Crozier and the team driving some good results there. Look, we're looking for as much productivity in terms of reducing handling, speeding up traffic, and getting rid of these inefficiencies that have been inside of all of operations, not just through dwell and train speed, but there's a lot more that's out there that's within the entire group that we're going after.

Speaker #10: Jason . I'll put it that way . The things that we don't know are what we're going after . And on the intermodal side , really speeding up to Mary Claire's earlier points about offering faster service lanes , getting that new business .

Speaker #10: We're going to be putting expansion into our Atlanta terminal. Fairburn and Atlanta—Cory Crozier and the team are driving some good results there.

Speaker #10: Look , we're looking for as much productivity in terms of reducing handling , speeding up traffic and getting rid of these inefficiencies that have been inside of all of our operations , not just through dwell and train speed , but there's a lot more that's out there that's within the entire group that we're going after

Jason Seidl [Managing Director, Industrials: Our next question comes from the line of Walter Spracklin with RBC Capital. Your line is open.

Operator: Our next question comes from the line of Walter Spracklin with RBC Capital. Your line is open.

Speaker #3: And our next question comes from the line of Walter Spracklin with Capital. Your line is open.

Walter Spracklin: Yeah. Thanks so much. Good afternoon. Mary Claire, this question is for you. I noticed that obviously you touched on the pipeline of projects that you have in the works, and I'm just trying to separate what you would get in terms of growth from company specific projects in total versus what you're seeing in terms of pressure in the macro. Obviously, the net is that you're guiding for flat. Just curious if that's plus 2 on projects, minus 2 on macro, or something less or more than that. Again, just trying to isolate for your company specific growth so that hopefully when the market improves and we see some macro improvement, we can layer your company specific opportunities on top of that.

Speaker #15: Thanks so much .

Speaker #17: Good afternoon . So , Mary Claire , this question is for you . I noticed that obviously you touched on the the pipeline of projects that you have in the works .

Speaker #17: And I'm just trying to separate what you would get in terms of growth from company-specific projects in total versus what you're seeing in terms of pressure in the macro.

Speaker #17: Obviously, the net is that you're guiding for flat. Just curious if that's plus two on projects, minus two on macro, or something less or more than that.

Speaker #17: Again , just trying to isolate for your company specific growth so that hopefully when the . Market improves and we see some macro improvement , we can layer your company specific opportunities on top of that

Maryclare Kenney: Yeah. Thank you. I would say, we've told you about the projects that we've got in the pipeline. When I think about where we've been, we've added good, strong business over the course of the last several years through ID, and we expect that to continue. I think we've received questions over time around what broader macro forces that impacted industrial development. What I'd say on our side is our pipeline has continued to remain strong. We have seen in a few areas where projects have ramped a little bit slower than what we originally expected due to the macro economy. I think what we have to take into account here, and without kind of getting into the specifics of one versus the other, we had closures that impacted our network last year as well.

Speaker #2: Yeah . Thank you . So , so I would say , you know , we've , we've told you about the projects that we've got in the pipeline .

Speaker #2: You know , when I think about where we've been , we've added good , you know , strong business over the course of the last several years through ID .

Speaker #2: And we expect that to continue . I think , you know , we've we've received questions over time around , you know , what with broader macro forces is that impacted industrial development .

Speaker #2: And what I'd say on our side is, our pipeline has continued to remain strong. We have seen, in a few areas, where projects have ramped a little bit slower than what we originally expected due to the macro economy.

Speaker #2: I think what we have to take into account here, and without kind of getting into the specifics of one versus the other, you know, we had closures that impacted our network last year as well.

Maryclare Kenney: That was primarily concentrated, and we talked about those in the pulp and paper mill side of the business. As some of our customers were driving efficiency within their own business

Speaker #2: And so that was primarily concentrated . And we talked about those in the the pulp and paper mill side of the business as some of our customers were , were driving efficiency within their own business , but still , net of that , we see incremental opportunity with ID .

Maryclare Kenney: Still net of that, we see incremental opportunity with ID. I can't project the full future in terms of will we see something else happen this year in the matter of a closure. For right now, we think this is certainly a net positive for us.

Speaker #2: And so , you know , I can't project the , the , the full future in terms of will we see something else happen this year in a matter of a closure ?

Speaker #2: But for right now, we think this is certainly a net, net positive for us.

Maryclare Kenney: As a reminder, it is star one if you would like to ask a question. Our next question comes from the line of Ravi Shanker with Morgan Stanley. Your line is open.

Operator: As a reminder, it is star one if you would like to ask a question. Our next question comes from the line of Ravi Shanker with Morgan Stanley. Your line is open.

Speaker #3: And as a reminder, it is star one if you would like to ask a question. Our next question comes from the line of Ravi Shankar with Morgan Stanley.

Ravi Shanker: Hi, great. Thanks. Just a two-parter for Kevin. I think you highlighted some cost headwinds in your commentary, incentive comp, and a couple of other things. Can you just give us a little more color there on quantity and timing of those items? And also, you guys have said a couple of times that you're pivoting to 2027 in the productivity actions. Can you just unpack that a little bit more? Is that because the 2026 cake is pretty much baked and any incremental gains are going to come in 2027? Or is it because the nature of those actions are more long-term?

Speaker #3: Your line is open .

Speaker #18: Great , thanks . Good afternoon everyone . Just a two parter for for Kevin . I think you highlighted some cost headwinds in your commentary incentive comp and a couple of other things .

Speaker #18: Can you just give us a little more color there on the quantity and timing of those items? And also, you guys have said a couple of times that you're pivoting to 2027 on the productivity actions.

Speaker #18: Can you just unpack that a little bit more kind of . Is that because the 2026 cake is pretty much baked and kind of any incremental gains are going to come in 27 ?

Speaker #18: Or is it because the nature of those actions are more long-term?

Kevin Boone: Yeah. Well, first, just kind of unpacking the Q2 commentary. The things I would like to point out, again, the engine overhauls that we pointed out, some additional costs with obviously transaction costs. Then, I did highlight that on the fuel side with the higher fuel price, you'll see some of that flow through from the margin profile. Outside of that, probably not going to be a little bit more specific, but I would say probably from a PS&O perspective on a sequential basis, not the normal seasonality that you would see there based on some of those items I discussed. Why I'm talking about and why the team is talking about the efforts around 2027 is yes, we do have a plan in place for 2026. Are we going to hopefully find things, as Mike said, he's finding things all the time? Yes.

Speaker #5: Yeah . You know , well , first , just kind of unpacking the second quarter commentary , you know , the things I would like to point out again , you know , the engine overhauls that we we pointed out some additional costs with obviously transaction costs and then , you know , I did , did highlight that on the fuel side with the higher fuel price , you'll see some of that flow through from the margin profile .

Speaker #5: And so outside of that , probably not going to be a little bit more specific , but I would say probably from a so and perspective on a sequential basis , not the normal seasonality that you would see there based on some of those items , I discussed , you know , why , why I'm talking about and why the team is talking about , you know , the efforts around 2027 is , yes , we do have a plan in place for 26 .

Speaker #5: Are we going to hopefully find things , as Mike said , he's finding things all the time . Yes . What we want to do is create a , you know , a muscle as as Steve said , in a cadence of continuous improvement .

Kevin Boone: What we want to do is create a muscle, as Steve said, and a cadence of continuous improvement. Obviously those things that we want to do in 2027, we got to start now and have a plan together by the middle of the year so we can execute on that and obviously build momentum. We talk about exit rates in any given year, and we want to build an exit rate end of 2026 and into 2027 to make sure we're delivering on year-over-year improvement consistently. That's going to be something that the team is focused on for the remainder of this quarter and going into next year. Obviously the 100+ initiatives that we have for this year, we got to make sure we stay on track and continue to add to those as well.

Speaker #5: And so, obviously, those things that we want to do in 2027, we've got to start now and have a plan together by the middle of the year so we can execute on that.

Speaker #5: And obviously build momentum . And , you know , we talk about exit rates in any given year . And we want to build an exit rate and in in the 26 and 27 to make sure we're delivering on year over year improvement consistently .

Speaker #5: And so that's going to be something that the team is focused on for the remainder of this quarter, and going into next year.

Speaker #5: And, you know, obviously with the 100-plus initiatives that we have for this year, we've got to make sure we stay on track and continue to add to those as well.

Kevin Boone: Our next question comes from the line of David Vernon with Bernstein. Your line is open.

Operator: Our next question comes from the line of David Vernon with Bernstein. Your line is open.

Speaker #3: And our next question comes from the line of David Vernon with Bernstein. Your line is open.

David Vernon: Hey, guys. Thanks for taking the question. If we think about the framework for the guidance, the 5% top line, obviously we're including fuel. I'm just wondering if you're also getting a little bit more optimistic or less optimistic on the volume side, and if there's any disaggregation between sort of price and quantity in the updated guidance. Mike, when you look at the headcount of the staffing level you're at right now, are you at a level where you feel comfortable being able to handle low single digit growth? Are we going to be needing to kind of refill the talent pool a little bit? I'm just wondering how you're thinking about a headcount underlying the guidance that you gave us today.

Speaker #19: Hey , guys . Thanks for taking the question . So if we think about the the framework for the guidance , you know , the 5% top line , obviously , we're fuel .

Speaker #19: I'm just wondering if you're all getting a little bit more optimistic or less optimistic on the volume side . And if there's any disaggregation between sort of price and quantity in the updated guidance and then , you know , Mike , when you look at the headcount of the staffing level you're at right now , you know , are you at a level where you feel comfortable being able to handle sort of low single digit growth , or are we going to be needing to kind of refill the , the , the talent pool a little bit ?

Speaker #19: I'm just wondering how you're thinking about headcount underlying the guidance that you gave us today.

Kevin Boone: On the revenue side, I think Mary Claire and both Steve kind of highlighted that the majority of our upward pressure on our guidance in terms of the revenue or upside that we talked about is largely around the fuel side of things and energy costs. Those are impacting positively some markets. Certainly, there's a lot of moving parts to the economy right now. We're watching that. Mary Claire did touch on that we exited Q1 positively, and we'll see if that continues. We're hopeful that continues. A small amount of that has been embedded in our forward guidance. Then I'll throw it over to Mike.

Speaker #5: On the revenue side , I think Mary Claire and both Steve kind of highlighted that the majority of our upward pressure on our guidance in terms of the revenue or upside that we talked about is largely around the fuel side of things and energy costs .

Speaker #5: But , you know , those are impacting positively . Some markets . Certainly there's a lot of moving parts to the economy right now .

Speaker #5: We're watching that . But you know , Mary Claire did touch on that . We exited the first quarter positively . And we'll see if that continues .

Speaker #5: We're hopeful that continues . And you know some of that small amount of that has been embedded in our forward guidance . And then I'll throw it over to Mike .

Kevin Boone: Yeah, David. Look, we feel comfortable right now with our current headcount levels. We may see an uptick in the T&E labor in Q2 to Q3, where we see generally a little bit of higher volume and some peak vacation time. We're going to continue to carefully manage our attrition levels. We're always looking for ways to be effective and productive with our workforce. We're staying very close with Mary Claire and her team to ensure we're hiring for volume where we need it. We're comfortable right now, though.

Mike Cory: Yeah, David. Look, we feel comfortable right now with our current headcount levels. We may see an uptick in the T&E labor in Q2 to Q3, where we see generally a little bit of higher volume and some peak vacation time. We're going to continue to carefully manage our attrition levels. We're always looking for ways to be effective and productive with our workforce. We're staying very close with Mary Claire and her team to ensure we're hiring for volume where we need it. We're comfortable right now, though.

Speaker #10: Yeah . David , look , we feel comfortable right now with our current headcount levels . We may see an uptick in in the T&E labor in Q2 to Q3 , where we see generally a little bit of higher volume in some peak vacation time .

Speaker #10: But we're going to continue to carefully manage our attrition levels . And we're always looking for ways to be effective and productive with our workforce .

Speaker #10: But we're staying very close with Mary Claire and her team to ensure we're hiring for volume where we need it. So we're comfortable right now, though.

Kevin Boone: Ladies and gentlemen, that concludes our question and answer session, as well as today's call.

Operator: Ladies and gentlemen, that concludes our question and answer session, as well as today's call.

Speaker #3: And, ladies and gentlemen, that concludes our question and answer session, as well as our time together today.

Q1 2026 CSX Corp Earnings Call

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