CSX NASDAQ: CSX Executive Vice President and Chief Financial Officer Kevin Boone said the railroad remains focused on improving margins, capturing pricing tied to better service and using capital more efficiently, while cautioning that “one quarter doesn’t make a year.”
Speaking at an investor conference, Boone said CSX entered the year with a plan for low-single-digit revenue growth and 200 to 300 basis points of margin improvement. He said the company delivered against that plan in the first quarter and subsequently raised guidance, with the revenue update driven largely by fuel surcharge effects following higher oil prices, along with better trends in some markets tied to energy, chemicals and other areas.
Boone said the company is now targeting the higher end of its margin improvement range despite pressure from fuel surcharges. “Very happy with what we did in the first quarter,” he said. “A lot more to do.”
Pricing, Costs and Capital Efficiency Remain Priorities
Boone highlighted three areas of focus as he returns to the CFO role: revenue, costs and capital. On revenue, he said Chief Executive Officer Steve Angel has emphasized the need to “get value” for the service CSX is providing. Boone said revenue growth depends on both volume and price, and that pricing is needed to cover cost inflation.
On costs, Boone said CSX saw strong first-quarter performance across mechanical, engineering and transportation expenses. He said the finance organization is working to give operating teams better visibility and tools to identify savings and prevent costs from returning once efficiencies are found. Boone also said CSX is already building a pipeline of cost initiatives for 2027.
Capital efficiency is also a multi-year priority, particularly in maintenance capital. Boone said CSX is looking to use more data analytics in decisions about replacing track and rail, rather than relying primarily on physical inspection. He said the company is focused on improving return on invested capital, which he described as a metric aligned with compensation going forward.
Freight Demand Described as “Cautiously Optimistic”
Boone described the current freight environment as “cautiously optimistic.” He said first-quarter weather created volatility in January and February, but trends improved in March across many markets.
In merchandise, Boone said nearly every market is growing except forest products, which remains pressured by production rationalization and housing exposure, though it has shown sequential improvement. He also pointed to strength in chemicals, aggregates, metals and domestic coal. Boone said low-cost U.S. energy is benefiting chemical producers and could support domestic and international demand.
Boone said CSX is seeing benefits from a tighter trucking market, particularly in domestic intermodal and in markets such as forest products where customers can choose between truck and rail. He said the company is focused more on expanding the overall rail opportunity and converting truck volume than on major share shifts among railroads.
On coal, Boone said utility demand has been strong, supported by winter weather and demand tied to AI and power needs. International coal markets were described as stable, with potential upside if pricing improves.
Network Performance and Intermodal Growth
Asked about recent volume strength, including higher quarter-to-date carloads, Boone said improved operations, market conditions and demand trends are all contributing. He said Chief Operating Officer Mike Cory is not satisfied with current performance despite year-over-year improvement, adding that better service should lead to more wins.
Boone said CSX has capacity to grow across nearly every corridor. He noted that manifest traffic can often be added to existing trains, particularly as chemical customers increase shipments. On intermodal, he said the team has handled additional volume well and pointed to the Howard Street Tunnel as a growth opportunity.
Boone said CSX recently ran a double-stack train in that market and reiterated that the company previously outlined an opportunity for 75,000 to 125,000 additional loads. He said those gains would likely take two to three bid cycles to develop. Boone also cited opportunities tied to SMX service marketing Mexico into the Southeast.
AI and Data Tools Target Costs
Boone said CSX is using data and AI tools in areas such as crew management, pricing and vehicle fleet oversight. He said crew management is one area Cory is particularly focused on, with AI helping analyze workforce trends, retirements and staffing needs.
Boone also highlighted the company’s vehicle fleet, saying CSX has GPS devices and data tools to monitor maintenance and usage. He said CSX spent more than $13,000 per truck in maintenance last year and is using better monitoring to manage vendors and employee driving behavior. He said the company reduced miles driven by its vehicle fleet by 20% in the first quarter and recently had zero drivers recorded at 90 miles per hour or more, after previously seeing many such instances.
Boone said the broader goal is to create processes that keep costs from “creep[ing] back into the system.”
Leverage, CapEx and Buybacks
Boone said CSX’s leverage of about 3 times is on the higher end of where the company would like to be. He said credit rating agencies prefer a range of about 2.5 times to 2.75 times, which he described as a likely long-term operating area. He said leverage should come down substantially given the company’s guidance.
On capital spending, the moderator noted CSX’s target of $2.3 billion, down 20% year over year and equal to about 16% of revenue. Boone said there is “a lot of opportunity” to become more efficient with capital spending, while keeping safety as the primary focus. He said improved maintenance capital efficiency can free up investment for growth, technology and other areas.
Boone said CSX raised its free cash flow conversion guidance and said his goal is to move toward 100% conversion, though he added the company may not quite reach that level. On share repurchases, Boone said CSX will remain opportunistic and continue to be in the market each quarter, while preserving flexibility for market dislocations.
Boone closed by saying CSX’s leadership team is highly aligned around delivering results, though he again emphasized that the company must sustain its momentum beyond a strong first quarter.
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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