CSX Corp Q1 2025 Earnings Call Summary

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

Question: Thomas Wadewitz - UBS Securities - Analyst : Yeah. Good afternoon. Wanted to see if you could, I guess, I don't know, break down into maybe high level, but the buckets of the operational challenges. You're obviously making the strategic move with Howard Street Tunnel and the investment there, and that's in effect. Is that half of the challenge on the operating side? Or how do you view that? Was that a greater impact? And then you talked about weather. I don't know how big that is. I guess the other piece would seem to be -- I don't know if there's some that's from like longer train strategy that maybe there's noise related to that or maybe just not as good execution. But just wanted to see if you could attribute a little bit more and then also give a sense of how quickly maybe you can see improvement in any operating performance?

Question: Brandon Oglenski - Barclays Capital - Analyst : Mike, maybe if we can follow up there. So it sounds like this is going to take maybe longer than a quarter to resolve and you might need to see lower levels of demand to push through here. But I guess thinking about this from a margin perspective -- and sorry, maybe the question is more for Sean. But normally, you see like a 400 basis point improvement from 1Q to 2Q operating ratio or operating margin however you want to look at it, is that on the table here? Or with these additional resources maybe taking a longer time to recover, is that off the table at this point?

Question: Jonathan Chappell - Evercore ISI - Analyst : Sean, I'm going to stick with that topic a little bit here. I mean in Investor Day and in January, you laid out a bunch of one-offs specific items for this year. That $45 million that you laid out on Slide 12, is that all incremental to what you'd identified in January? And is that all ring-fenced to 1Q, so we know what an appropriate starting point is for 2Q? Or I guess is there some overrun? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 16, 2025 / 8:30PM, CSX.OQ - Q1 2025 CSX Corp Earnings Call And Mike just mentioned another flooding situation last week. So just again, trying to figure out how much of this is incremental to the already one-off things and how we think about 2Q starting going forward?

Question: Ariel Rosa - Citi Investment Research - Analyst : Great. So you mentioned some of the lost customer contracts. I was just hoping maybe you could quantify that? And then either Joe or Kevin, if you could talk about where customer conversations are on the tariff impact and how you see customers positioning for the policy uncertainty that we're working through right now, I think that would be helpful.

Question: Brian Ossenbeck - JPMorgan - Analyst : So maybe just to clarify the revenue opportunities that -- is that still sitting there that you can go after again and just wasn't very picked up on service? Or did you potentially lose it and then just getting back to normal. So first clarification. And then secondly, maybe, Sean, if you can update us on the guidance you gave last quarter, which was the low end of the target mid-single to high single-digit EPS -- or I'm sorry, EBIT growth from the Investor Day for this year when you back out the the normalization that you called out? So given everything that's happened, just wanted to see if you could update us on that as well.

Question: Christian Wetherbee - Wells Fargo Securiites - Analyst : Sean, maybe a quick follow-up on that and then one for Kevin. I guess just to make sure I understand, I think you guys talked about potentially growing profit in the back half of the year. I guess when you think about that, is that something that is maybe a little bit harder to do with the uncertain volume environment and maybe thinking about that separate from some of the costs that you're carrying from the service challenges that you're facing? And I guess just for Kevin, when you -- I think you said in the remarks earlier that maybe something on the intermodal side had changed a bit in early April. Just want to get a sense of what that was or if I heard that correctly?

Question: Ken Hoexter - BofA Global Research - Analyst : Joe, maybe just talking about that same thing, the big picture here on volume. You're talking positive volume growth and 1Q was mentioned to be trough. But I guess if we start thinking about the maybe a cliff of volumes, it seems like if China is down 20%, 25%, when you mentioned things like, hey, we can pick up some industrial activity, I presume that's longer term? Or are you suggesting that there are things near term that can offset that? And then just a quick number question for Mike, that the on-time arrivals of 55% an origination of 68%, is that adjusted for the construction projects? Or is that just weather impacts? I'm just trying to understand what normal would look like.

Question: Jordan Alliger - Goldman Sachs - Analyst : I just wanted to come back to the industrial development. It seemed pretty optimistic. I'm just curious, I know it's still early probably with the tariffs and potential boost to domestic industrial production. But are you starting -- are you actually hearing that maybe there's some thought about accelerating decisions to go ahead? And then secondly, have you thought about the previous tailwind you talked about for the projects long term, I think it was about 2%. I mean are you thinking maybe there could be some potential upside to that?

Question: Jason Seidl - TD Cowen - Analyst : I wanted to focus a little bit on the intermodal side and how we should think about the reported yields going forward? Because if you take a look at the international trade, the booking numbers are down pretty drastically. So there could be a shift coming your way soon. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 16, 2025 / 8:30PM, CSX.OQ - Q1 2025 CSX Corp Earnings Call And one of the major intermodal players was talking about at least some of the slightly disappointing numbers on the pricing side of the domestic market. So I was hoping that's something maybe you can work through that with us for the modeling purposes.

Question: Ravi Shanker - Morgan Stanley - Analyst : Just a couple of housekeeping items here. Can you just remind us of the updated coal contracts, if there is a floor to pricing on the benchmark price I think there was before or not? And second, any color on the other revenues in a little bit of a step down here? What's a good run rate for the rest of the year?

Question: Daniel Imbro - Stephens Inc - Analyst : Yeah. Hey, good evening. Thanks, guys. Maybe want to take it on the cost side a little bit here. On headcount, specifically, I think volume has been softer to start the year. I think last quarter, the expectation was maybe flattish head count this year. Sean, can you just talk about how volume dependent that headcount trajectory is through the year? Could you flex it lower if volume remained underwhelming? And then similarly, I think you baked most of your union contracts now for the back half of the year. So how should we be thinking about maybe comp per head inflation as we move through the year?

Question: Richa Harnain - Deutsche Bank - Analyst : I guess just one on the revenue opportunity that was left behind, I guess, can you quantify that maybe further? Like -- and how easy, I appreciated the comments around the Net Promoter Scores being still very, very good despite some of the disruptions you faced in the first quarter. But how easy is that share shift opportunity to come back to your network?

Question: Walter Spracklin - RBC Capital Markets - Analyst : Kevin, you called out a favorable partner alignment in your international intermodal side as an opportunity. Can you expand a bit on that? And if that's going to create any additional opportunities? Has any of those partner alignments perhaps get a little bit more or get deeper or if you can expand them to other partners as well?

Question: David Vernon - Bernstein - Analyst : So Mike, as you think about the resiliency part of restoring service levels, is this a resource issue? Is it just a scheduling issue and a lack of weather issue? I'm just wondering if you're going to be able to get the service metrics back on track here before some of the work is done in like Howard Street or whether we're going to be living with these challenges for the rest of the year?

Question: Bascome Majors - Susquehanna Financial Group - Analyst : As you work through a lot of disruptions, many of them out of your control, some of them chosen like Howard Street and dig out and also face a demand picture that's more uncertain today than it was a month ago. I mean, clearly, 2025 is going to be a challenging year in a lot of ways. But Joe, as we look to next year, is 2026 the year that investors should judge the financial output of your strategy? Or do you think it makes more sense to look to 2027 and year three of the three-year plan to really get a clean comp and enough time to really have the outcomes that you've driven?

Question: Jeffrey Kauffman - Vertical Research Partners - Analyst : A question more for Kevin, and it might be a tough one to answer, but if you were to try to put some circles around buckets of pre-ship or some tariff accelerated related business you may have seen, what's your best shot at that?

Question: Ivan Yi - Wolfe Research - Analyst : Good evening. This is Ivan Yi on for Scott. Thanks for the time. Last question related to tariffs again. What -- roughly what percent of your volumes or revenues are, in fact, tied to China? I imagine it's mostly international intermodal. But is there any material China exposure in any other commodity segment? Thank you.