CSX CEO Touts AI Efficiency, U.S.-Led Growth and Service Gains at Barclays Industrial Conference

Key Points

• CSX’s CEO said practical applications of AI (proposal prep, customer service, back-office and asset management) should improve efficiency and service, and he sees the U.S. as the primary long-term growth engine while not assuming a reindustrialization-driven boost in 2026 guidance.
• He highlighted operational progress — rebuilding a 60-mile Appalachian corridor in about a year and completing the Howard Street Tunnel for double-stacking — and said metrics like train velocity, dwell, trip compliance and on-time performance are improving, though consistency remains a customer concern.
• CSX expects low-single-digit volume growth and plans to meet targets through productivity, margin expansion and higher free cash flow, noting pockets of demand in minerals/aggregates, fertilizers, domestic coal and intermodal; management incentives were simplified to emphasize operating income growth, operating margin, safety with long-term pay tied to ROIC and TSR.

CSX NASDAQ: CSX CEO Steve discussed the rail industry’s operating priorities, the company’s near-term focus, and his broader views on industrial demand and artificial intelligence during a keynote conversation at the Barclays 43rd Annual Industrial Select Conference.

AI, industrial demand, and the U.S. as a growth market

Asked about “AI disruption” and reindustrialization themes amid several years of flat industrial production, Steve said he believes artificial intelligence is likely to deliver meaningful benefits to traditional industrial businesses through practical applications. He cited areas such as proposal preparation, customer service, back-office processes, asset management, and repair and service work as functions where AI could drive efficiency and improve service.

On reindustrialization and global growth, he said he sees limited growth engines outside the U.S., noting that China is not the growth engine it once was and that Europe has not historically been a sustained growth engine. He described India as growing, but not at the scale of China, the U.S., or the EU. In his view, “all roads lead back to the United States” for sustained growth potential, pointing to business tax policy and accelerated depreciation as factors that could support capital investment, while also saying tariff-related uncertainty may be causing companies to delay commitments.

Steve added that he did not build a reindustrialization-driven uplift into his 2026 guidance and does not expect it to arrive quickly, though he characterized the long-term outlook for the U.S. as favorable.

Early tenure impressions and CSX culture

Steve said he has been in the CEO role roughly four to five months and described railroading as unlike any other industry, calling railroads the “heartbeat of the American economy” with deep heritage and multi-generation employee tenure. He said that background was part of the attraction, citing his earlier career selling locomotives to railroads while at GE as one of the most enjoyable and interesting roles he held.

He said he came to CSX after “flunking retirement,” explaining that he prefers day-to-day operational engagement. On arriving at CSX, he described the workforce as a “great group of people” across Jacksonville, Florida and the broader East Coast network, adding that employees take pride in the company and are receptive to leadership focused on stabilizing and improving performance.

Network disruptions, major projects, and operational progress

Discussing recent network challenges, Steve pointed to the Appalachian flooding that wiped out a 60-mile rail corridor and said the company rebuilt the line from scratch in about a year. He said the corridor reopened by the end of September last year, restoring one of two key north-south connections for the railroad.

He also cited completion of the Howard Street Tunnel project, which he said enables double-stacking through that route, and referenced other major infrastructure work completed last year that he said improved fluidity and resilience compared with the prior year.

On customer feedback and service, Steve said there is “always opportunity” and emphasized that consistency matters. He said customers have told him that the issue is not cost or service “when you provide it,” but rather consistency of service. He described ongoing improvements in operating metrics such as train velocity, dwell time, trip compliance, and on-time performance, while noting the railroad is “nowhere near” its potential. He also credited the operations team for performance during severe winter weather across the eastern U.S.

Volume outlook and mix across end markets

On the industry’s long-term volume profile, Steve argued that CSX does not require high volume growth to deliver its targeted financial outcomes. He said the company’s guidance assumes low-single-digit volume growth alongside operating margin expansion and higher free cash flow, and he emphasized productivity and cost structure as key levers, saying he “trusts costs” even as he “loves growth.”

He discussed several end-market dynamics, including pressure in chemicals due to global oversupply from China and the sensitivity of chemicals demand to housing, automotive, and industrial activity. He also characterized forest products as mature and said CSX is seeing the full-year impact of pulp and paper plant closures that began in 2025. At the same time, he cited pockets of growth, including:

• Minerals/aggregates, which he tied to infrastructure activity in the Southeast.
• Fertilizers, which he said is benefiting from new phosphate production coming online.
• Domestic coal, which he said is doing “a little better.”
• Intermodal, which he said is growing year-over-year.

M&A perspective and management incentives

Steve addressed the pending merger application involving Union Pacific and Norfolk Southern in broader terms, drawing on his experience leading the Praxair-Linde merger. He stressed that large mergers are lengthy, shaped by regulatory review and stakeholder input, and he said regulators listen closely to customers. While he said consolidation can create risks and opportunities for other industry participants, he emphasized CSX is focused on “running the company well every day” and improving as a standalone business.

He also described changes to management incentives, saying CSX simplified its compensation structure to keep focus on the most important priorities. He said the key annual incentive metrics now include:

• Operating income growth
• Operating income margin
• Safety

For long-term incentives, he said performance shares are tied to return on capital and total shareholder return. Asked about an appropriate return on invested capital level, he said it should be “higher than what it is today” and emphasized continuous improvement over time.

On working with unions, Steve said he believes progress is achievable through respectful engagement and a balanced approach, emphasizing that sustainable performance requires safety, service, and an engaged workforce alongside financial improvement.

About CSX NASDAQ: CSX

CSX Corporation is a leading North American transportation company that provides rail-based freight services and supply-chain solutions. Its operating subsidiary, CSX Transportation, moves a wide range of goods for customers across multiple industries, using a combination of long-haul rail service, intermodal operations and terminal and yard services. The company focuses on delivering efficient, reliable freight transportation between major production centers, consumption markets and port gateways.

CSX's freight portfolio includes intermodal containers and trailers, bulk commodities, industrial products and specialized unit trains.

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