CSX Q2 Earnings Call Highlights

Key Points

• CSX raised its full-year 2026 outlook after a strong second quarter, now expecting mid- to high-single-digit revenue growth, more than 350 basis points of operating margin expansion, and over 80% free cash flow growth.
• Second-quarter results were boosted by higher volumes and record revenue, with total volume up 6% and revenue up 10%; operating income rose 17% and EPS increased 23% even with fuel cost pressure.
• Intermodal led growth across the business, while management said service metrics still need improvement, especially dwell and trip-plan performance, though they expect sequential operating improvement ahead.

CSX NASDAQ: CSX raised its full-year 2026 outlook after reporting a second quarter marked by higher volumes, record revenue and expanded margins, with executives saying stronger demand and cost controls helped offset fuel-related headwinds.

President and CEO Steve Angel said CSX made progress toward its goal of “best-in-class performance,” while acknowledging that network fluidity and service remain areas for improvement. For the quarter, total volume increased 6% and revenue rose 10% to what Angel described as a new quarterly record. Operating income and earnings per share both grew by double digits.

“Our priority is achieving profitable growth, not gaining market share for its own sake,” Angel said. He added that CSX is focused on adding business that increases operating income, expands margins and generates good returns on invested capital.

Financial Results Show Margin Expansion Despite Fuel Costs

Chief Financial Officer Kevin Boone said total revenue increased 10%, supported by higher fuel surcharge revenue, volume growth and higher pricing across merchandise, intermodal and coal markets. Total expenses rose 6%, but non-fuel expenses declined 2%.

Operating income increased 17%, and operating margins improved 240 basis points despite 160 basis points of fuel price headwinds. Earnings per share increased 23% in the quarter.

Second-quarter expenses increased by $138 million from the prior year. Boone said fuel expense rose $177 million due to higher diesel prices, partially offset by what the company described as record fuel efficiency. Labor costs increased $40 million, including nearly $90 million of combined pressure from higher incentive compensation and inflation. Those increases were mostly offset by savings from a 6% lower headcount across management and craft employees.

Boone said train and engine headcount will increase modestly in coming months to support service as demand improves, while CSX expects to use process improvements and technology to absorb attrition elsewhere in the business.

The company also continued to reduce purchased services and other expenses. Boone cited $23 million in lower third-party services spending within operations, helped by better use of internal maintenance functions and reviews of contractor activity. Intermodal terminal costs per lift fell 12% as the company absorbed higher volumes more efficiently.

Safety and Productivity Improve, But Dwell Rises

Chief Operating Officer Mike Cory said CSX made progress in safety and productivity even as volumes grew faster than expected. The company’s FRA injury rate improved 19% from the prior year, while its train accident rate improved 30%. Cory said total people hours declined 7%.

Average velocity improved 3% year over year, but dwell increased. Cory said the company saw tightness in some parts of the network due to stronger demand and seasonal reductions in employee availability.

“Our service metrics aren’t where we want them to be, and particularly terminal dwell and trip plan performance,” Cory said during the question-and-answer portion of the call. He said the issue was not structural and that CSX expects sequential improvement in operating and service metrics.

Cory said CSX increased average tonnage per merchandise train by 5% and improved workforce productivity. He said the company plans only a modest increase in headcount and will avoid overcorrecting in a way that gives back productivity gains.

Intermodal Leads Volume Growth

Chief Commercial Officer Maryclare Kenney said commercial and operations teams handled volumes that exceeded expectations. She said favorable market trends that began narrowly broadened through the spring, contributing to growth across the business.

Merchandise volume rose 4% year over year, while revenue increased 8%. Merchandise revenue per unit excluding fuel increased 1%, as pricing helped offset negative mix. Chemicals volume grew 8%, supported by plastics exports and demand for waste-by-rail. Metals and equipment revenue increased 14% on 3% higher volume, helped by new plate mill production and favorable mix from military and equipment moves. Forest products volume was flat from a year earlier, which Kenney said was a significant improvement from the first quarter.

Intermodal was the largest contributor to unit growth. Revenue increased 26% on 9% higher volume, while revenue per unit rose 16%, driven by fuel surcharge. Kenney said domestic intermodal growth benefited from new service offerings, tighter truck capacity and truck-to-rail conversions. She also cited faster service and expanded network capacity enabled by the Howard Street Tunnel.

Coal revenue increased 9% on 4% higher volume. Export tonnage increased 12%, driven by mine restarts and strong tonnage through Curtis Bay. Domestic tonnage declined 2% as lower natural gas prices and normalized customer inventories tempered demand.

Guidance Raised for 2026

CSX raised its 2026 outlook based on year-to-date performance and expectations for the rest of the year. The company now expects:

• Full-year revenue growth in the mid- to high-single-digit range;
• Operating margin expansion of more than 350 basis points;
• Free cash flow growth of more than 80%;
• Capital spending of less than $2.4 billion, unchanged from the prior outlook.

Kenney said the second-half outlook remains encouraging, with opportunities tied to new service offerings, industrial development projects, investments in transload and terminal networks, and truck-to-rail conversions. She said tighter truck supply and higher rates are reinforcing rail’s value proposition, particularly in forest products, waste, metals and domestic intermodal.

Still, Kenney flagged potential moderation in some markets. Automotive is starting the second half softer after strong second-quarter production, with normalized inventories and summer shutdowns ahead of new model launches in the fourth quarter. Plastics volumes in chemicals could also moderate after first-half pull-forward activity.

On pricing, Kenney reiterated that CSX expects same-store sales pricing to be stronger in 2026 than in 2025. She said truck capacity tightened over the past few months, particularly after regulatory enforcement, and that CSX has seen acceleration in domestic intermodal spot pricing and some recent rail asset contract renewals. However, she declined to provide a 2027 pricing outlook.

Angel said CSX continues to see opportunities in operations, pricing and productivity. “All businesses, great businesses, have opportunities for improvement, and we’re no different than anyone else,” he said.

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.

This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to contact@marketbeat.com.