CSX Corporation Q1 FY2026 earnings call

• Safety: FRA injury rate improved by 13% with 9% reduction in people hours, train accident rate improved by over 30%. • Operational: Managed through severe winter storms, key metrics like train speed, dwell, cars online improved YOY; record first quarter fuel efficiency; intermodal terminals handled increased volume effectively; engineering and network groups improved productivity through more efficient work blocks and coordination. • Financial: Total revenue up, expenses down, operating income and EPS up; focused on cost control, efficiency savings, and capital discipline.

Total revenue increased 2% on 3% volume growth. Total expenses fell by 6% from steps to improve cost structure and network fluidity. Operating income increased 20%, with earnings per share up 26%. Merchandise volume flat YOY, revenue and RPU grew 2%; minerals growth led merchandise up 4% in volume; chemicals supported by higher frac sand and plastics; fertilizers saw gains; forest products volume down 9%. Intermodal revenue up 5% on 6% volume growth. Coal revenue declined 1% on 1% lower volume.

• Revenue: Now expects full-year revenue growth in the mid-single digits versus low single digits previously, driven by higher energy prices. • Operating margin: Anticipates year over year operating margin expansion of 200 to 300 basis points, now expecting results to trend toward the high end of that range. • Capital spending: Still expect total 2026 capital spending to be below 2.4 billion. • Free cash flow: Now anticipate free cash flow to grow by more than 60% compared to 2025.

• Market conditions remain uncertain; conflict in the Middle East and rising energy prices create concerns about inflationary pressure and potential effects on consumer sentiment. • Some markets like housing and automotive remain headwinds; forest products business still impacted by closures and weak demand. • Uncertainty around industry consolidation and its potential impact on the business.

Q: Chris Weatherby from Wells Fargo asked about productivity opportunities and upper end of operating margin expansion.

A: Steve Angel said over 100 initiatives in the plan, progress seen in first quarter, energy costs in crosshairs, and focus on delivering the plan.

Q: Ken Hexter from Bank of America asked about Howard Street Tunnel timing and scalability.

A: Mary Claire Kenney said last bridge to be complete in next week, unlocks additional capacity, efficiency on corridors, and new service areas to build over time.

Q: Stephanie Moore from Jefferies asked about macro and freight environment conservatism.

A: Mary Claire Kenney said baselined earlier, infrastructure investment positive, but housing and automotive still headwinds, with some positive in plastics and truck conversion opportunities.

Q: Scott Group from Wolf Research asked about PS&O line and sequential margin improvement.

A: Kevin Boone said PS&O has more opportunity, second quarter has costs like engine overhauls and higher fuel, but focus on delivering plan and building 2027 pipeline.

Q: Brian Ossenbeck from J.P. Morgan asked about gain on sale and dwell time.

A: Kevin Boone said no material gain expected in remainder of year, Mike Corey said productivity initiatives are broad, curfew execution improved, but some delays due to new methods, focusing on building right plan.

Q: Brandon Ogulinski from Barclays asked about driving higher ROIC.

A: Steve Angel said driving numerator (operating margins) and being prudent on capital spend, using predictive analytics for capital allocation.

Q: Tom Wadowitz from UBS asked about pricing side.

A: Mary Claire Kenney said same-store sales pricing better this year, discretionary pricing solid, intermodal international contracts different from truck market.

Q: Ari Rosa from Citigroup asked about M&A situation.

A: Steve Angel said focus on execution, merger process long, will manage challenges and opportunities.

Q: Richa Harnane from Deutsche bank asked about industrial development projects.

A: Mary Claire Kenney said projects vary, diverse pipeline, some larger and some smaller, excited about pipeline.

Q: Jonathan Chappelle from Evercore ISI asked about coal pricing.

A: Mary Claire Kenney said coal benchmark stable, domestic demand strong, but impact depends on utility closures and extensions.

Q: Jason Seidel from TD Cowan asked about productivity in Chicago and remainder of year.

A: Mike Corey said streamlining service in Chicago, cross-network productivity initiatives, engineering group driving efficiency, intermodal expansion in Atlanta.

Q: Walter Spracklin from RBC Capital asked about company-specific growth vs macro.

A: Mary Claire Kenney said pipeline remains strong, some projects ramp slower due to macro, but net positive for ID.

Q: Robbie Shanker from Morgan Stanley asked about cost headwinds and 2027 pivoting.

A: Kevin Boone said second quarter has costs like engine overhauls and transaction costs, pivoting to 2027 to create continuous improvement muscle.

Q: David Vernon from Bernstein asked about guidance disaggregation and headcount.

A: Kevin Boone said revenue upside largely from fuel, Mike Corey said comfortable with current headcount, monitoring T&E labor.