CSX Corp Q3 2024 Earnings Call Transcript

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

Question: Brian Patrick Ossenbeck - JPMorgan Chase & Co - Analyst : Hey, good afternoon. Thanks for taking the question. Just wanted to ask a big picture question about price/cost and your ability or how strongly you think you can get back to a positive spread and price/cost. Next year you have the labor negotiations that have already set a price for increase on the headcount side or sorry, on the average comp side. So you can give us a little sense in terms of how those conversations are going with customers. Now that that marker has already been set in the market. And if there's anything on the other side, you hope to get out of those negotiations when you work towards more of the work rest tools. Thank you.

Question: Ari Rosa - Citi - Analyst : Great. Thank you so much for taking the question. So, I'm curious, obviously we're dealing with a loose tracking market. It's been that way for a while. In terms of upside to intermodal pricing for next year, maybe you could give us some indication on how those conversations are progressing with customers and then obviously 1% revenue growth is a little bit soft. Is there anything you can do in terms of mix to maybe accelerate that beyond that kind of low, single digit type number whether it's focusing more on the merchandise side or again fixing that mix on the intermodal pricing. Thanks. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 16, 2024 / 8:30PM, CSX.OQ - Q3 2024 CSX Corp Earnings Call

Question: Jonathan B. Chappell - Evercore ISI Institutional Equities - Analyst : Thank you. Good afternoon. Sean, you threw a lot of numbers at us on the short term stuff. $200 million from fuel and coal and then the $50 million from the hurricane impact. I know it's still early in the quarter. I know there's a lot that can happen. But when you take those things mix in kind of a softer auto and metals, when you talk about revenue being down moderately and operating margin, reducing, so I'm guessing that's deteriorate. Sequentially, what kind of magnitude are we looking at there? Are we talking about tens of basis points or substantially greater based on what you see today?

Question: Scott Group - Wolfe Research - Analyst : Hey, thanks, afternoon. So, Mike, as you're trying to balance service and efficiency, any thoughts on head count trends from here and overall sort of cost trends? And then, Sean, I know you had a comment about the comp per employee stepping up sequentially, any thoughts on how to think about that going forward?

Question: Tom Wadewitz - UBS Investment Bank - Analyst : Great. Yeah, good afternoon. Wanted to just -- two questions really for Kevin. How do you think about the sensitivity of you're doing this multiyear work and industrial development, a lot of -- kind of, I guess, a long-time horizon work? Do you think there's some degree of sensitivity those projects to the cycle? It does seem like you talked about a mixed outlook, and it seems like there have been some weakening in certain markets in 3Q, is that something that people slow down projects? And I don't know if there is some kind of election-related impact. But just wanted to see if you could offer any thoughts about maybe how cycle and other uncertainty might affect how rapidly projects come on in '25, '26. Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 16, 2024 / 8:30PM, CSX.OQ - Q3 2024 CSX Corp Earnings Call

Question: Brandon Oglenski - Barclays - Analyst : Hey, good afternoon and thanks for taking the question. Joe, I know you addressed this with the first one, but maybe I think it's worth coming back to the new five-year agreement that you guys signed with, I think, 3.5% inflation locked in. A lot of investors just question like why go early there, especially as inflation is coming down, like couldn't you get a better deal if you waited? But in your response, you said like there's things we're looking to do differently here. And I know when you came to this industry two years ago, you said, look, labor relations are something I want to focus on. So, can you elaborate on what you hope to get out of this on the other end?

Question: Chris Wetherbee - Wells Fargo - Analyst : Hey, thanks, good afternoon guys. I know it sounds like fourth quarter from a margin standpoint, difficult to make year-over-year headway given some of the headwinds that you're talking about which makes sense. I guess when you think about it for a full year, I think that probably means sort of little margin in '24. I know I'm asking you guys to look out a little bit here, but kind of conceptually, with the environment that we have today with sort of weakness in some areas, maybe some strength in some company-specific strengths in other parts of your network. Is this the type of environment that you think you can consistently grow margins in? I guess what are the sort of puts and takes that you think you need to see as we move into '25 for that to continue to happen or resume to happen again?

Question: Daniel Imbro - Stephens - Analyst : Hey, good evening guys. Thanks for taking our questions. I guess, Kevin, I wanted to dig into just the volume growth side. I mean you mentioned some share wins in truck to rail conversions. I'm curious if you can just add more color around maybe the cadence of wins or what categories they fell into during the quarter. And then I think there's some concerns out among investors around merchandise pricing. So, I'm curious how is merchandise pricing out in the market today? And are you seeing business that you're winning being more price competitive than past bids? Or there's any change in that as you win this business? Thanks.

Question: Jordan Alliger - Goldman Sachs - Analyst : Yeah. Hi, just a question. You indicated in your remarks that you're seeing a modest improvement or uptick or something along those lines for domestic intermodal. I'm wondering if you can give a little more color on that kind of looking now relative to international, which I know had been really driving things in intermodal. And is it enough to sort of move the needle on your yield for intermodal at this point?

Question: Stephanie Moore - Jefferies - Analyst : Great. Good afternoon. Thank you. I was hoping you could talk a little bit about some of the diverted volumes that you called out ahead of just the labor negotiations and potential strike in the East Coast. Maybe if you could talk about the impact that you did see during the quarter? And then kind of what you're hearing and seeing now in terms of those volumes returning back to normal flows and normal to the East Coast? Thanks.

Question: Ken Hoexter - Bank of America - Analyst : Hey, great, good afternoon. Maybe you talk a little bit about export coal demand and the stability in the market given the growing importance and volatility, how stable can we look at this level of demand? Because obviously, we talked about the benchmark pricing and what happens on the yield side. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 16, 2024 / 8:30PM, CSX.OQ - Q3 2024 CSX Corp Earnings Call And then Joe, Mike, you mentioned the service levels multiple times. How do we align the service levels with what we get to see, which is the erosion in the on-time originations and arrivals down into the low 70s, upper 60s, maybe you can just walk us through that? Thanks.

Question: Ben Nolan - Stifel - Analyst : Yeah. Thanks for taking the question. Yes. I wanted to ask a little bit just on pricing. It seems like the one area or one of the areas where we actually have been able to get a little bit better pricing is on the chemical side. Is that -- chemical specifically, is that just a function of a healthy market where there is some pricing ability? Is it maybe starting to see some impact from quality or just maybe talk through how the chemical part of the business is evolving? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 16, 2024 / 8:30PM, CSX.OQ - Q3 2024 CSX Corp Earnings Call

Question: Jason Seidl - TD Cowen - Analyst : Thank you gentlemen. Good afternoon. I appreciate you squeezing me in here. I wanted to talk a little bit about intermodal yields. I mean there was a lot of movement of freight from the East Coast to the West Coast in anticipation of the port strike. Do you see that switching back? And if so, what sort of impact should we expect on the yields? And then I guess I'd throw a quick one here, too. How are you feeling going to that January 15 date the ILA, do you think it could be Strike fears 2.0?

Question: Walter Spracklin - RBC Capital Markets - Analyst : Yeah, thanks very much and good afternoon everyone. Just curious on the competitive marketplace. I know there was a lot of discussion on truck, but I know your main competitor on the rail side is affecting quite some meaningful changes that is leading to impacts on their service. I'm wondering if you're seeing that come up in the marketplace at all? Are you seeing any -- is there any larger contracts that are coming up that you see as either an opportunity or a risk here? Just to get a better handle on how much of an improvement in your competitors operations is affecting or impacting you in terms of winning or losing business in the marketplace.

Question: David Vernon - Sanford Bernstein - Analyst : Hey, good afternoon guys. So, Joe, it sounds like you invested a lot in the culture part of the equation. I'm wondering if you can share some perspective on how some of the churn rates or turnover rates, however you guys measure them internally, internal Net Promoter Scores, that kind of stuff, has changed as a result of those investments?