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    CSX
    Earnings call· Dec 2025(Q4 FY25)

    CSX CORP CSX

    Jan 22, 2026 Source

    Executive summary

    CSX Q4 FY25 — Cost Structure Optimization and Margin Expansion

    CSX navigated a challenging demand environment in Q4 FY25 with modest volume growth and revenue decline, while taking significant steps to optimize its cost structure. The company delivered strong operational performance and safety improvements, positioning itself for future margin expansion and free cash flow growth despite a soft macroeconomic outlook for 2026. Management also replaced prior multi-year targets with a 2026-specific guidance.

    Highlights

    5

    • Total volume increased 1% in Q4 FY25.

    • Intermodal revenue grew 7% year-over-year on a 5% increase in volume.

    • FRA injury and accident rates showed meaningful full-year declines, with Q4 posting the year's best metrics.

    • Ending rail headcount finished the quarter down over 3%.

    • Free cash flow is expected to grow at least 50% compared to 2025.

    Concerns

    5

    • Reported operating income and earnings per share were lower year-over-year by 9% and 7%, respectively.

    • Q4 results included approximately $50 million in expenses ($31M separation costs, $21M technology impairments) related to cost structure adjustments.

    • Revenue declined 1% in Q4 FY25, driven by negative business mix headwinds and weaker export coal pricing.

    • Merchandise volume and revenue were both down 2%, with chemicals volume down 6% and forest products volume down 11%.

    • Automotive volume decreased 5% year-over-year due to supply constraints.

    Guidance & targets

    4
    CategoryTargetConfidence
    Full-year 2026 Revenue Growth
    low single-digit
    high materiality
    Medium
    Full-year 2026 Operating Margin Expansion
    200 to 300 basis points
    high materiality
    High
    Full-year 2026 Capital Expenditures
    below $2.4 billion
    high materiality
    High
    Full-year 2026 Free Cash Flow Growth
    at least 50%
    high materiality
    High

    Segment performance

    5
    SegmentRevenueYoYQoQMargin
    Total
    Revenue decline driven by business mix headwinds and coal pricing, leading to a 2% decline in total revenue per unit.
    Volume: up 1%
    		down 1%———
    Merchandise
    Continues to face market-driven headwinds, with softness in industrial chemicals and forest products due to plant closures and inflation/tariff pressures. Minerals and fertilizers showed strength.
    Volume: down 2%Revenue per unit: modestly higher (affected by mix as growth was strongest in low RPU areas such as minerals and fertilizers)Chemicals volume: down 6%Forest Products volume: down 11%
    		down 2%———
    Automotive
    Impacted by supply constraints with chips and metals, limiting output at facilities, though some manufacturers gained momentum.
    Volume: down 5%
    		————
    Intermodal
    Drove growth this quarter, winning new domestic and international business by offering faster transit times and more connectivity.
    Volume: up 5%
    		up 7%———
    Coal
    Domestic growth supported by utility demand. Export revenue impacted by widening discount for East Coast met coal indices versus Australian pricing.
    Volume: up 1%Domestic tonnage: up 6% (driven by utility volume, power demand, higher natural gas prices)Export tonnage: down 3% (impacted by derailment)Revenue per unit: down 6% (primarily due to decline in met coal benchmark pricing)
    		down 5%———

    Operational metrics

    7
    Expenses related to cost structure adjustments
    $50 million
    Q4 FY25

    Included in Q4 results to optimize workforce and technology portfolio.

    Expenses increase (excluding goodwill impairment)
    $73 million3% YoY
    Q4 FY25

    Excluding the 2024 goodwill impairment.

    Ending rail headcount
    down over 3%YoY
    Q4 FY25

    As part of aligning to the current business environment.

    Revenue per unit
    down 2%YoY
    Q4 FY25

    Driven by business mix headwinds and coal pricing.

    Inflation
    3% to 3.5%
    FY26

    Overall inflation expectation for FY26, with labor inflation consistent with prior year and non-labor inflation expected to be lower.

    Non-recurring charges from 2025
    $150 million
    FY25

    Comprised of severance, technology write-off, and costs related to Blue Ridge and Howard Street Tunnel, which will not repeat in 2026.

    Price yield
    higherhigher than FY25 vs FY24
    FY26 vs FY25

    Expected to improve in 2026 compared to 2025, with new structures in place and contracts being re-evaluated.

    Industry KPIs

    10
    MetricValueDetails
    Safetymeaningful declinesdirectional
    Volume1%%
    Operating ratio200 to 300 bps expansionbps
    Network fluiditysubstantial improvementdirectional
    Merger synergy metricslong processdirectional
    Pricing vs rail inflationhigherdirectional
    Fuel surcharge diesel priceconsistent with current levelsdirectional
    Intermodal truckload volume5%%
    Labor productivity headcountdown over 3%%
    Tariff trade policy revenue impactaffected by mixdirectional

    Product announcements

    1
    ProductTypeDetails
    Howard Street Tunnel double-stack capabilitymilestone

    Capital programs

    2
    Blue Ridge projectcomplete

    The Blue Ridge project is complete, contributing to focused efforts on capital discipline.

    Howard Street Tunnelnearing completion

    Benefit: Double-stack capability, new connectivity, improved service

    The first of two bridges for double-stack capability is complete, with volume expected to start moving in Q2 FY26.

    Risks & headwinds

    6
    Subdued demand and limited growth opportunitiesQ4 FY25, persisting into 2026

    subdued demand and limited growth opportunities persisting across many of our key markets

    Mitigation: Cost structure adjustments, productivity initiatives, service improvements to win business.

    Negative business mix and weaker export coal pricesQ4 FY25

    Revenue down 1%, total revenue per unit down 2%

    Mitigation: Focus on price management, growth initiatives in intermodal.

    Softness in chemicals and forest products marketsQ4 FY25

    Chemicals volume down 6%, Forest Products volume down 11%

    Mitigation: Winning incremental business, benefits from new facilities ramping up in 2026.

    Automotive market supply constraintsQ4 FY25

    Volume down 5%

    Mitigation: None explicitly stated, but some manufacturers gained momentum through the quarter.

    Risk of slowdown in imports after pull forward2026

    discussed_not_quantified

    Mitigation: None explicitly stated.

    Potential for severe winter stormQ1 FY26

    discussed_not_quantified

    Mitigation: Extensive preparations including senior coverage, equipment pre-positioning, modified operating plans, applying lessons learned from previous events.

    What to watch in Q1 FY26

    5

    Operating Margin Expansion

    FY26, with Q1 expected to be strong
    Current200 to 300 bps guidance for FY26
    TargetProgress towards best-in-class OR

    Why it matters

    Demonstrates effectiveness of cost structure optimization and productivity initiatives, crucial for long-term shareholder value.

    We expect to deliver year-over-year operating margin expansion in the range of 200 to 300 basis points.

    Q&A highlights

    6

    What is the base OR for 2025 for the 200-300 bps improvement, and what is the outlook for pricing initiatives to exceed cost inflation in 2026?

    Kevin Boone clarified the 2025 base excludes the goodwill charge. Steve Angel stated price yield will be higher in 2026 vs. 2025 than in 2025 vs. 2024, with new structures being implemented by Maryclare. He expects it will take about a year to touch all contracts for price adjustments.

    “price yield will be higher in 2026 over 2025 than it was in 2025 over 2024.”

    asked by Tom Wadewitz · answered by Stephen Angel

    2 min read6 chapters

    Detailed Narrative

    01

    Cost Structure Optimization and Efficiency Initiatives

    CSX implemented significant cost structure adjustments in Q4 FY25, incurring $50 million in charges ($31 million for workforce separation, $21 million for technology impairments). These actions led to a 3% reduction in ending rail headcount and are part of over 100 diverse savings initiatives aimed at driving efficiencies in labor and non-labor spending, with a particular focus on the PS&O line. Management expects these efforts to contribute significantly to operating margin expansion in 2026.

    02

    Strong Operational Performance and Safety Improvements

    The company achieved meaningful full-year declines in FRA injury and accident rates, with Q4 FY25 being the best quarter for safety metrics. Operational performance also saw substantial improvement from Q1 to Q4, with better velocity, cars online, dwell times, and trip plan compliance. This enhanced network fluidity and customer service are considered essential for success and position CSX to respond when industrial demand increases.

    03

    Mixed Revenue and Volume Dynamics

    Total volume increased 1% in Q4 FY25, but revenue declined 1% due to negative business mix and weaker export coal prices, resulting in a 2% decline in total revenue per unit. Merchandise volume and revenue were both down 2%, impacted by softness in chemicals (-6% volume) and forest products (-11% volume). In contrast, intermodal revenue grew 7% on a 5% increase in volume, driven by new business wins and improved transit times.

    04

    Howard Street Tunnel Double-Stack Capability

    The first of two bridges for the Howard Street Tunnel double-stack capability project is now complete. This milestone is expected to enable new connectivity from the Southeast to the Northeast and improve service from Chicago to Baltimore. Customers are already bidding for volume to begin moving double-stack through the tunnel in Q2 FY26, with management anticipating growth from this initiative in the current year and beyond.

    05

    Macroeconomic Outlook and Strategic Focus

    Management anticipates low single-digit revenue growth for FY26, assuming flat industrial production and modest GDP growth, with no meaningful improvement in macroeconomic conditions. The company's strategy focuses on controllable factors such as price management, productivity, and operational efficiency to drive operating margin expansion. The goal is to create operating leverage to deliver higher incremental margins when market conditions eventually improve.

    06

    Long-Term Targets Replaced with 2026 Guidance

    CSX has replaced its previous 2025-2027 multi-year targets with a 2026-specific guidance, citing the changed macroeconomic environment. CEO Stephen Angel expressed confidence in the company's ability to achieve best-in-class operating margins over time⏳ through execution on core fundamentals. However, he prefers to demonstrate consistent progress over a few quarters before re-establishing longer-term goals, emphasizing a focus on sustainable productivity.

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