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    CSX
    Earnings call· Jun 2026(Q2 FY26)

    CSX CORP CSX

    Jul 22, 2026 Source

    Executive summary

    CSX Q2 FY26 — Record Revenue and Strong Profit Growth Driven by Volume and Efficiency

    CSX delivered a strong second quarter, achieving record revenue and double-digit profit growth, driven by robust volume expansion across its business units and continued operating efficiency. The company successfully managed increased demand while improving safety metrics and maintaining cost discipline. Management is focused on enhancing network fluidity and service consistency in the second half, with a modest increase in T&E headcount planned to support service product improvements, while also pursuing long-term productivity initiatives for 2027 and beyond.

    Highlights

    5

    • Volume increased 6% year-over-year, leading to a new quarterly record for revenue.

    • Total revenue increased 10% year-over-year.

    • Operating income increased 17% year-over-year, with operating margins improving 240 basis points.

    • Earnings per share grew 23% in the quarter.

    • FRA Injury Rate improved by 19% and Trade and Accident Rate improved by 30% year-over-year.

    Concerns

    4

    • Operating margins faced a 160 basis points headwind from higher fuel prices.

    • An increase in Dwell time was observed due to stronger-than-expected volume growth and seasonal reductions in employee availability.

    • Merchandise RPU, excluding fuel, declined 1% year-over-year due to mix effects.

    • Potential for momentum to slow in Automotive and Chemicals markets in the second half of the year.

    Guidance & targets

    4
    CategoryTargetConfidence
    Full-year 2026 Revenue Growth
    mid- to high single digits
    high materiality
    High
    Full-year 2026 Operating Margin Expansion
    greater than 350 basis points
    high materiality
    High
    Full-year 2026 Free Cash Flow Growth
    greater than 80%
    high materiality
    High
    Full-year 2026 Capital Spending
    less than $2.4 billion
    medium materiality
    High

    Segment performance

    4
    SegmentRevenueYoYQoQMargin
    Total
    Record revenue achieved. Strong performance despite 160 bps fuel price headwinds on operating margins.
    Volume: Up 6% YoYRevenue per unit: Up 4% YoYRevenue per unit excluding fuel: Down 1% YoY
    		Up 10%10%—Operating margins improved 240 bps
    Merchandise
    Strength was broad-based across Merchandise with 6 of 7 business units growing or holding flat. Solid pricing helped offset negative mix in RPU ex-fuel.
    Volume: Up 4% YoYRPU excluding fuel: Up 1% YoYRPU including fuel: Up 4% YoYChemicals volume: Increased 8% YoYMetals and Equipment revenue: 14% growth YoYMetals and Equipment volume: 3% higher YoYForest products volume: Flat YoY
    		Grew 8%8%——
    Intermodal
    Largest contributor to unit growth, driven by fuel surcharge and diverse domestic business. New service offerings and expanded network capacity positioned well for growth.
    Volume: Up 9% YoYRPU: Up 16% YoY
    		Up 26%26%——
    Coal
    RPU primarily due to strong domestic contract renewals. Export tonnage driven by mine restarts and record tonnage through Curtis Bay. Domestic tonnage declined due to lower natural gas prices and normalized customer inventories.
    Volume: 4% higher YoYRPU: Increased 4% YoYExport tonnage: Increased 12% YoYDomestic tonnage: Declined 2% YoY
    		Grew 9%9%——

    Operational metrics

    14
    Total expenses increase
    $138 millionYoY
    Q2 FY26

    Total second quarter expenses increased compared to the prior year.

    Fuel expense increase
    $177 millionYoY
    Q2 FY26

    Increase in fuel expense driven by higher diesel price net of savings from fuel efficiency.

    Labor costs increase
    $40 millionYoY
    Q2 FY26

    Labor costs increased year-over-year, primarily due to incentive compensation and inflation.

    Incentive compensation and inflation impact on labor costs
    nearly $90 million
    Q2 FY26

    Combined impact from higher incentive compensation and inflation on labor costs.

    Third-party services spend reduction
    $23 million
    Q2 FY26

    Spend on third-party services across operations team was lower, benefiting from better utilization of internal maintenance functions and detailed reviews of contractor activity.

    Intermodal terminal cost per lift reduction
    12%
    Q2 FY26

    Demonstrated ability to efficiently absorb higher volumes.

    Gain on sale
    approximately $93 million
    H1 FY26

    Analyst asked about $93 million gain on sale in Q2, management clarified it was less in Q2 but around that amount for the first half of the year, included in operating margin expansion guidance.

    Efficiency gains
    —
    Q2 FY26

    Analyst asked about $54 million of efficiency gains; management discussed strong incremental margins and cost discipline but did not confirm the specific dollar figure.

    Volume growth rate
    6.5%
    early Q3 FY26

    Analyst noted units running up early in the third quarter.

    Total people hours decline
    7%YoY
    Q2 FY26

    Decline in total people hours even as FRA Injury Rate improved.

    Fuel Efficiency improvement
    improvedYoY for 4th straight quarter
    Q2 FY26

    Improved fuel efficiency for the fourth straight quarter due to improved locomotive utilization and maximizing Trip Optimizer.

    GTMs per unit of horsepower increase
    increasedfor 6th quarter in a row
    Q2 FY26

    Increased GTMs generated per unit of horsepower for the sixth consecutive quarter.

    Tonnage per train
    moved morecompared to a year ago
    Q2 FY26

    Employees moved more tonnage per train compared to the prior year.

    Average tonnage per merchandise train increase
    5%
    Q2 FY26

    Increased average tonnage per merchandise train.

    Industry KPIs

    4
    MetricValueDetails
    Safety19%%
    Network fluidity3%%
    Pricing vs rail inflationat or above plan
    Labor productivity headcount6%%

    Product announcements

    1
    ProductTypeDetails
    Howard Street Tunnelexpansion

    Deals & partnerships

    1
    CPKCNew service offering for cross-border intermodal (SMX)

    Partnership with CPKC on SMX, a new service offering for cross-border intermodal. Saw good volumes since program started over a year ago, with acceleration into this year and continued week-over-week growth. Improved service and added additional lanes are expected to drive further growth into next year's bid season.

    Risks & headwinds

    6
    Fuel price headwindsQ2 FY26

    160 basis points impact on operating margins

    Mitigation: Management expects the net fuel impact to be less going forward, as the fuel lag seen in Q2 should go away.

    Increased Dwell timeQ2 FY26

    Increased

    Mitigation: Taking clear steps to improve consistent availability of crews and effective management of resources, expecting sequential improvement in service metrics. Modest increase in T&E headcount to support service product.

    Seasonal reductions in employee availabilityQ2 FY26 (summer months)

    Created tightness in certain areas of the network

    Mitigation: Employees are now back from vacations, and any contemplated headcount increases will be very modest. Service metrics are already improving.

    Moderation in Chemicals and Automotive volumesSecond half of 2026

    Chemicals plastics volumes expected to moderate following pull-forward activity in H1; Automotive production outlook down just under 2% for the year, with softer start to H2 due to normalized inventories and summer shutdowns.

    Mitigation: Monitoring trends closely; however, overall market fundamentals are seen as better than at the start of the year, with other areas like intermodal and infrastructure-tied merchandise showing strength.

    PS&O expense increases in H2Second half of 2026

    Expect fewer property gains and insurance recoveries, as well as higher costs for locomotive overhauls in the second half relative to the first.

    Mitigation: Management is focused on continuous improvement and cost discipline, with ongoing initiatives to drive productivity.

    Union wage increaseStarting July 1

    3.75% union wage increase

    Mitigation: Largely offset by sequential step lower in incentive compensation expense.

    What to watch in Q3 FY26

    5

    Network Fluidity and Service Metrics

    next quarter
    CurrentIncreased Dwell, Average Velocity improved 3% YoY
    TargetSequential improvement in operating and service metrics, more consistent fluidity

    Why it matters

    Improved network fluidity and service consistency are key to supporting profitable growth and customer satisfaction, especially with increased volumes.

    So bottom line, the quarter showed that we can handle stronger volumes and do it safely and efficiently. And while we [indiscernible] on those two things to continuously improve our next step is really to convert that into more consistent fluidity and service.

    Q&A highlights

    5

    When can we expect to see the benefits of tightening truck market on pricing, especially in Intermodal, given the current freight environment?

    Management expects same-store sales pricing to be stronger in 2026 than 2025. Truck capacity tightened recently, particularly in the last couple of months. While the domestic intermodal bid season for 2026 is ending, they've seen acceleration in the domestic spot segment and recent rail asset contract renewals. International intermodal is less correlated to the truck market due to long-term contracts.

    “I do think it's important on the Intermodal side to remember that not all areas of that business have the same market dynamics. For example, I'd tell you, international, I think I've mentioned this before, is heavily concentrated. It's competitive, and it's primarily contracted under long-term deals. So that is not highly coordinated to the truck market as you might see on domestic.”

    asked by Stephanie Moore · answered by Maryclare Kenney

    2 min read5 chapters

    Detailed Narrative

    01

    Volume Growth and Network Fluidity

    CSX experienced stronger-than-expected volume growth of 6% year-over-year in Q2 FY26, which contributed to record revenue. This growth, however, created tightness in certain areas of the network due to seasonal reductions in employee availability. While average velocity improved 3% year-over-year, dwell times increased. Management is taking steps to improve crew availability and expects sequential improvement in service metrics as the year progresses, aiming for consistent fluidity and service to support productive growth.

    02

    Cost Control and Productivity Initiatives

    The company demonstrated strong cost discipline, with non-fuel expenses reducing by 2% despite higher incentive compensation and inflation. Savings were realized from a 6% lower headcount and a $23 million reduction in third-party services spend in operations. Management is actively building out its 2027 plan for efficiencies, focusing on in-sourcing activities and leveraging process improvements and technology to absorb attrition and drive further productivity gains beyond 2026.

    03

    Commercial Strategy and Market Dynamics

    CSX's commercial initiatives and network investments drove solid volume growth, with a focus on profitable growth rather than market share for its own sake. The company observed favorable trends in select markets, broadening through the spring, leading to strong volume across business units. Tighter truck capacity and higher fuel costs are increasingly highlighting the value proposition of rail, creating opportunities for intermodal and merchandise conversions, particularly in forest products, waste, and metals.

    04

    Segment Performance Highlights

    Merchandise volume grew 4% with 8% revenue growth, driven by strength across most units, including an 8% increase in Chemicals and 14% revenue growth in Metals and Equipment. Intermodal was the largest contributor to unit growth, with revenue up 26% on 9% higher volume, benefiting from new service offerings and expanded network capacity like the Howard Street Tunnel. Coal revenue grew 9% on 4% higher volume, supported by strong domestic contract renewals and increased export tonnage.

    05

    Pricing Strategy and Future Outlook

    Underlying core pricing remains at or above plan, with same-store sales pricing expected to be stronger in 2026 than in 2025. While the domestic intermodal bid season is nearing its end for 2026, the tightening truck market has shifted dynamics, leading to acceleration in the spot segment and recent rail asset contract renewals. Management is continuously evaluating market conditions to ensure pricing reflects the value of service provided, with a focus on surgical decisions for profitable business and good returns on capital.

    AI-generated summary of the company’s earnings call. Not investment advice.