CSX Corp at UBS Global Industrials & Transportation Conference Summary

The following is excerpted from the question-and-answer section of the transcript.

Question: Thomas Wadewitz - UBS - Analyst : Okay. So it sounds like just bear in mind -- like full quarter, bear in mind, October was a bit of a drag. So you'd say the kind of November, December, you expect it to be up in kind of full quarter on track to be up. It sounds like broadly, kind of things tracking as you expected? Is that -- and then maybe even a little bit of strength in domestic intermodal is that fair?

Question: Thomas Wadewitz - UBS - Analyst : Okay. And then in terms of some of the headwinds that you had identified when you reported 3Q, those are still reasonable ways to think about, like you mentioned, the kind of $30 million revenue impact and total $50 million for hurricanes. That's still the right way to look at it.

Question: Thomas Wadewitz - UBS - Analyst : What about on fuel surcharge, I mean, fuel prices bounce around, is that kind of better or worse? Or is that -- REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 04, 2024 / 1:00PM, CSX.OQ - CSX Corp at UBS Global Industrials & Transportation Conference

Question: Thomas Wadewitz - UBS - Analyst : And primarily first half headwind, right?

Question: Thomas Wadewitz - UBS - Analyst : Okay. Let's see, on the peak season commentary. So you think -- I guess yesterday, we had Hub Group was here, and they talked about that there was strength early on and kind of some of the pull forward potentially and that related to concern about east coast ports strike. And they had actually seen some maybe a somewhat different group of customers that had strength later in the peak and so that they had seen what they were characterizing as an elongated peak. Your comments on constructive too. Is that for the peak season seems to be playing out pretty well.

Question: Thomas Wadewitz - UBS - Analyst : Right. Okay. Great. Maybe if we go into a little bit more on some of the areas where you're seeing current strength and what's behind that and kind of how long I think that continues. So chemicals is an area you've done really well with that, and that's continued to be strong. What's behind that? And is it something that as far as your visibility goes that you think that continues into '25? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 04, 2024 / 1:00PM, CSX.OQ - CSX Corp at UBS Global Industrials & Transportation Conference

Question: Thomas Wadewitz - UBS - Analyst : Right. Yes, you did a really helpful of giving us a lot of detail at the Analyst Meeting that was really well put together. If you're saying it's -- is it kind of 1 to 2 points in '25? Is that a reasonable way to think about the tail from industrial development in '25?

Question: Thomas Wadewitz - UBS - Analyst : Right, right. Okay. What about petroleum products, that's an area where there's been a fair bit of strength, I think years ago, that used to be like crude by rail and there was a big Philadelphia refinery, you serve a couple of trains a day at peak and whatever, and that's presumably -- that's not it, but what is it in petroleum products that seems to be driving some strength? And is that an area that can continue to grow? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 04, 2024 / 1:00PM, CSX.OQ - CSX Corp at UBS Global Industrials & Transportation Conference

Question: Thomas Wadewitz - UBS - Analyst : Okay. Do you think there's more to go in that area as you go in to '25? Or was that kind of favorable development or --

Question: Thomas Wadewitz - UBS - Analyst : Yes. Okay. Great. You commented on this a bit just in terms of saying falling interest rates are beneficial across a couple of different segments. But I don't know if you -- I mean you probably get this question and have some high-level thought. I know it's not necessarily clean. But as you think about the housing market and interest rates and can a new home can the existing home sales pick up and get activity of various white goods, consumer goods going in appliances or that can stimulate things or if it's just kind of new construction and you get other materials that go in. So that can be beneficial for freight broadly. How do you think about how much of the book is, I don't know, sensitive to housing or if you want to just say, well, interest rates come down and there are two different frames. But how do we think about that just in terms of the optimism if those areas improve?

Question: Thomas Wadewitz - UBS - Analyst : Great. Have you gotten kind of recent customer feedback in terms of like sentiment? I mean, obviously, the elections were pretty recent, and I think that could be -- you'd say, well, get that event and that uncertainty out of the way. And now maybe you have REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 04, 2024 / 1:00PM, CSX.OQ - CSX Corp at UBS Global Industrials & Transportation Conference optimism on what taxes do or regulation or things like that. But have you gotten customer input that would say, hey, we're a little more optimistic and how we're going to invest more, considering that at least the election is behind you.

Question: Thomas Wadewitz - UBS - Analyst : Okay. All right. But to hear you are hearing some kind of at least potential optimism. How do you think about the risk? So if you think a lot of discussion and there are a lot of -- I don't know what you want to call it noise, proposals, various things, negotiation on tariffs. And I want to get your sense of if there were tariffs put in place on Mexico and Canada, what's your exposure to those cross-border trade in those -- with those two countries?

Question: Thomas Wadewitz - UBS - Analyst : Okay. And it's like a percent of revenue. Yes. Okay. Okay Great. Let's see. In terms of the -- going back -- just swinging back a little bit to 4Q, what about how is the network running? I know October was tough. You kind of showed some resilience have come back to that. I know there are some headwinds in terms of not having some of the track available in a certain part of the network that takes a longer period of time to rebuild. But how would you say that the network is running in general in 4Q. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 04, 2024 / 1:00PM, CSX.OQ - CSX Corp at UBS Global Industrials & Transportation Conference

Question: Thomas Wadewitz - UBS - Analyst : Yes. Okay. Great. I should mention if there are any questions from the audience along the way. I know we already kind of covered some of the demand side, but we can swing back to that or wherever you want to jump in, please raise the hand. There's a mic at the back of the room. There is also on your table, you can scan a QR code if you want and send it to me on the iPad, which I'll place where I can see it. But so feel free to raise your hand if you want to jump in along the way, and I'll check back again a couple of times. How do you think about planning for headcount. I know there's the -- I guess I think of it as being kind of a 6-month lead time for planning for your T&E, if you want to train a conductor and you have them in the recourse and then getting them up on the system running, I think, broadbrush 6 months. I don't know if that's right. But presumably, you have a plan already for what you need next year. Do you think that head count needs to be up next year so you can handle potential growth that hopefully will develop? Or how do you think about that resource planning for next year?

Question: Thomas Wadewitz - UBS - Analyst : Right. On the head count side, you've -- Joe's -- one of his things that he's been, I think, very visible on is the CSX. And I guess it's on his license plate, right? So there you go, right. The -- but he's been very visible on that and very focused and one of the potential benefits to CSX over time would be just, obviously, the employees feeling good about things doing their job well, coming through to customer service. Also attrition is something that you think that could be a lower level of attrition. Is that happening? Have you seen like a change in attrition whether it's attrition within the training program or experienced employee attrition. So how do you think about that?

Question: Thomas Wadewitz - UBS - Analyst : Okay. What does the attrition look like for people who were read out of the program? Is that -- because I think you were saying the high level of attrition during the program maybe. But once the graduate.

Question: Thomas Wadewitz - UBS - Analyst : Okay. Yes, that makes sense. What are some other elements of the broader program I'm thinking of how like availability of the crews. So I mean, I guess it's kind of like you have a big SEC game, and you can have nobody wants to run the train that day or I don't know if that's the right example, I feel like what -- okay, maybe it's a good example. So is that something where you're saying, okay, the availability of crews has improved somewhat as you've invested in your people and invested in relationships with the employees.

Question: Thomas Wadewitz - UBS - Analyst : So is that if you look at -- you've taken a different approach on the union agreements this time around. And so the wages and benefits and other things kind of agreement on. And then the next thing after ratification is then you try to negotiate some of the, I guess, REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 04, 2024 / 1:00PM, CSX.OQ - CSX Corp at UBS Global Industrials & Transportation Conference work rules or local elements of the local agreements. Is it availability and kind of flexibility on labor that's important that you might want to get? Or how do we think about high level what you might want to achieve?

Question: Thomas Wadewitz - UBS - Analyst : Right. Okay. Makes sense. Just a reminder if there are any questions, please raise your hand or send in a question and I'll look for. Let's see. At the Analyst Meeting, you gave the 3-year frame and you talked about, I think it was a high single-digit earnings is kind of the right place to be and then some other parameters.

Question: Thomas Wadewitz - UBS - Analyst : Right, high single, little double. Yes, thank you. So high single to low double over the three-year time frame. You did identify that '25 has some headwinds, right? You didn't -- at that point, you didn't want to like make them put a fine point on them. But do you have any more comments or any more perspective to help us think about the magnitude of those headwinds in '25?

Question: Thomas Wadewitz - UBS - Analyst : So the $200 million headwind on the export coal is just the price impact. And so that's and kind of think about that as an EBIT impact, maybe but some offset maybe from the volume growth. Is that a reasonable way to frame that. Okay. Okay. And then on the -- how does the Howard Street Tunnel impact work? Like is there a volume -- I don't know if you want to say like, is this like a couple of trains a day that goes to that get affected? Or is it I don't know if it's a lot -- I don't have a good sense of like how dense that part of the network is. And then is there a volume impact where you say, "Hey, shippers are going to find an alternative temporarily." So we'll get a little bit of intermodal volume impact? Or is it just like, hey, we pay more to run whatever the alternative route is.

Question: Thomas Wadewitz - UBS - Analyst : Okay. And when you get on the other side of it, how meaningful is that to you to be debottleneck? I guess I don't necessarily have a lot of intuition of how much intermodal runs the I-95, how important that is to you. Obviously, if you do double-stack economics, that's a huge win. But how do we think about like what has opened up for you when you're on the other side of that.

Question: Thomas Wadewitz - UBS - Analyst : What are the markets that you would -- is that kind of like, I guess, Southeast going north? Is it North goes -- I mean, like -- and kind of the I guess as domestic intermodal or --

Question: Thomas Wadewitz - UBS - Analyst : Yes. Okay. Great. Let's see. So how are you thinking about pricing for next year? Are you optimistic? I mean, I know there's some sensitivity on truckload. There's your own good momentum on service and translating that to price. But how should we think about pricing and also whether there are kind of whether we should be optimistic about pricing accelerating or kind of stability is a good thing. Well, I think first, let's set coal pricing aside because we've got a talked about. But if we look at merchandise and intermodal, we feel good about next year. We're in the contract renewal cycle as we speak. I've said this before, we get -- I get visibility to where those contracts are repricing every single week, and I feel good about the trends. Inflation is -- has come down over the course of the year. We expect it to continue to moderate or stay stable to kind of where it is. So we will price ahead of inflation. The dollars of merchandise and [indiscernible] price will absolutely exceed the dollars of inflation. That's what's in our plan for next year. and that's spread contributory towards operating income next year. I wouldn't say there's going to be a reacceleration, but I think the trend that we've been seeing in the last several years will continue. How much sensitivity do you think there is to the trucking market? So I'd say, we think of our base case on truckload is next year's transitional, you get, call it, 3% to 5% price. And I think the input we've heard from nobody knows the answer, but we had like eight different private companies that are dinner on Monday night that are large truck brokers. And so people take a view. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 04, 2024 / 1:00PM, CSX.OQ - CSX Corp at UBS Global Industrials & Transportation Conference And they think 3% to 5% seems to make sense for truckload contract season. to kind of get that more in second half. How much of your book do you think is sensitive to that? Like if it's not 3% to 5%, what if it's 5% to 7%, do we see that come through for better price in second half with CSX? Or is that more like a hey, that's a read for better in '26.

Question: Thomas Wadewitz - UBS - Analyst : How much is the lag you think? Is it like a quarter lag? Or quarter.

Question: Thomas Wadewitz - UBS - Analyst : Okay. But -- and that's between like domestic intermodal and say, contract truckload?

Question: Thomas Wadewitz - UBS - Analyst : Okay. We're almost out of time, but I want to give you -- I don't know if you're the CFO. And so you look at costs, you look at what are the buckets, what can I do, right? So a couple of years ago, I think that the -- I want to say was Kevin when he was CFO, but like our overtime costs are kind of high, and this is an opportunity, right? And you went after it, and you captured it very nicely, and those numbers came down. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 04, 2024 / 1:00PM, CSX.OQ - CSX Corp at UBS Global Industrials & Transportation Conference Is there anything that you look at as you look through the numbers and say as a CFO, this is kind of an interesting bucket that over time, we can do a bit better.

Question: Thomas Wadewitz - UBS - Analyst : Excellent. Let's wrap things up there. Sean, thank you so much for joining us. Thanks for the insight.