CSX Q1 FY26 earnings call CSX

Total expenses fell 6% / $153M YoY, including over $100M of year-over-year efficiency savings plus real estate and the lapping of prior-year network-disruption costs, partly offset by inflation and higher fuel. Labor costs were 1% lower as a 5% headcount reduction and a $10M overtime reduction offset inflation. PS&O savings were broad-based — increased accountability for discretionary spend, eliminating waste, and improved asset utilization (e.g., the vehicle fleet is 7% smaller than end-2024, including turning in costly equipment rentals that cut both opex and capital). The result: operating income +20% and EPS +26% on only 2% revenue growth.

The FRA injury rate improved 13% YoY even with 9% fewer people-hours, and the train accident rate improved over 30%. CSX managed through severe Midwest/Northeast winter storms while posting favorable YoY comparisons against 2025's Blue Ridge reconstruction and Howard Street Tunnel disruptions. Train speed, dwell, and cars online all improved YoY, though dwell remains elevated at some terminals as engineering work temporarily reroutes traffic. Record Q1 fuel efficiency of 0.97 gallons/1,000 GTMs (0.93 in March, best since 2021) underscored the network gains.

Total volume rose 3% and revenue 2%, with RPU down 1% on mix. Merchandise volume was flat with revenue and RPU up 2%; minerals led at +4% volume (cement, salt), chemicals gained on frac sand (data-center-driven natural gas production) and plastics, and fertilizers rose on Bone Valley phosphate exports. Forest Products dragged at -9% on weak housing and tough closure comps. Intermodal revenue rose 5% on 6% volume growth (RPU -1% on shorter-haul inland ports). Coal revenue slipped 1% on 1% lower volume, with RPU aided by a favorable Southern utility mix.

CSX's industrial-development pipeline holds ~600 active projects. In Q1, 21 projects went into service, expected to add ~33,000 annual carloads at full ramp. For 2026, ~100 projects are expected to enter service — many approved 3-4 years ago — contributing roughly 50% more full-ramp volume than 2025's 85 projects. Named Q1 wins: Keystone Terminals (Jacksonville, synthetic gypsum), Martin Marietta (Green Cove Springs aggregate, full ramp by end of Q2), and Diamond pet foods (Indiana). The pipeline is diversified across business units rather than concentrated.

The Howard Street Tunnel double-stack clearance project is nearing completion, with the last bridge expected complete within a week. It doubles East-West and I-95 corridor capacity, removes about a day of transit, and enables previously uneconomic Southeast-to-Northeast connections that will take a couple of bid seasons to fully ramp. CSX is also completing infrastructure on the former Meridian & Bigbee railroad to launch improved SMX service with CPKC, offering truck-competitive transit between the Southeast, Dallas, and Mexico.

Management framed ROIC improvement as primarily driven by the numerator — growing operating income and margins — supported by the 2026/2027 productivity build. On the denominator, capital is being deployed more selectively: every project must stand on its own, engineering work is executed in 'block mode' with transportation to finish large projects faster and cheaper (near-100% curfew execution this year vs 60-70% historically), and predictive analytics is expected to prioritize infrastructure spend, lowering capital over time^⏳.

On the potential TransCon merger among peers, CEO Steve Angel emphasized executing at a high level^🎣 in the base business to enter any consolidation scenario from a position of strength. He characterized mergers as multi-year processes (his prior experience took three years start to finish) carrying both challenges and opportunities, and noted CSX is incurring consolidation-related advisory/transaction costs that will weigh on Q2 expenses.