Christian Wetherbee

Chris Wetherbee asked about the LTL freight business, specifically the impact of duplicative costs related to the upcoming spin-off on the projected EBIT decline, and whether market weakness or temporary spin-related costs are the primary drivers.

Answer

John Dietrich, EVP and CFO, FedEx, clarified that $25 million in separation costs were incurred in Q2. He stated that $100 million of the $300 million projected EBIT decline for FedEx Freight is attributable to separation costs, including accelerated salesforce hiring and IT expenses, with the remainder due to broader market conditions.

Chris Wetherbee asked if there's a direct correlation between 4% revenue growth and the low end of the EPS guidance (17.2%), and requested further clarification on the $300 million in direct trade-related expenses.

Answer

EVP & CFO John Dietrich advised against making a direct linear connection between specific revenue growth and the low end of the EPS range, emphasizing the dynamic nature of the operating environment. He clarified that the $300 million in direct trade-related expenses covers customs clearance, related staffing, and administrative costs incurred to adapt to the current trade environment.

Chris Wetherbee asked for a breakdown of the $170 million international headwind expected in Q1, specifically the impact from de minimis rules versus other trade issues, and what events could change this dynamic later in the year.

Answer

EVP & CCO Brie Carere stated that the vast majority of the headwind is from the China-to-U.S. lane, with the impact of de minimis being the primary driver. President & CEO Raj Subramaniam added that the trade environment is dynamic and likely to evolve over the next 30 to 60 days, which is why the company is only providing Q1 guidance.

Chris Wetherbee requested a breakdown of the $170 million international headwind guided for Q1, asking about the impact from de minimis rules versus other factors and what events could change this dynamic through the year.

Answer

EVP & CCO Brie Carere attributed the headwind primarily to the Transpacific lane, with the vast majority stemming from de minimis impacts on China-to-U.S. trade. EVP & CFO John Dietrich added that other global trade negotiations contribute to uncertainty. President & CEO Raj Subramaniam noted the environment is dynamic and likely to evolve in the next 30-60 days.

Christian Wetherbee of Wells Fargo asked what is needed to stabilize and improve FedEx Freight margins, given the strong underlying pricing environment but volume pressures.

Answer

EVP and CCO Brie Carere stated that FedEx is well-positioned to capture growth and incremental profit when B2B demand returns. She anticipates sequential revenue improvement and a 'quite a good margin' in Q4. EVP and CFO John Dietrich added that focusing on service will help capture more volume, which will favorably impact density and margins.

Christian Wetherbee of Citigroup Inc. asked for details on the fiscal year 2025 guidance reduction, questioning the specific drivers behind the cut and the expected earnings cadence between the third and fourth quarters.

Answer

EVP and CFO John Dietrich explained the guidance was revised from $20-$21 to $19-$20 per share because expected volumes and revenue did not materialize amid a soft industrial economy. Dietrich noted that while Q3 will benefit from ramping DRIVE savings and a favorable Cyber Week shift, these will be more than offset by an increased headwind from the expired U.S. Postal Service contract. He affirmed that Q4 is traditionally the strongest quarter and this dynamic is expected to continue.

Christian Wetherbee asked if earnings in the second quarter could be up sequentially from the first quarter. He also inquired about the expected capture rate for the recently announced peak season surcharges and any early customer feedback.

Answer

EVP and CFO John Dietrich confirmed that the company sees an opportunity for sequential quarter-over-quarter profit improvement. EVP and CCO Brie Carere stated she feels confident about the surcharge capture rate, as many are pre-negotiated, and believes customers understand the need for broader surcharges this year due to the condensed peak shopping season.

Chris Wetherbee inquired about RXO's ability to control operating expenses, specifically direct OpEx and labor expenses, in the current weaker market, and potential future opportunities for cost reduction. He also asked Drew Wilkerson about the demand environment, where future demand might originate, and a potential percentage for capacity rationalization.

Answer

Jamie Harris, CFO of RXO, stated that the company has taken $155 million in total cost actions and continues to seek opportunities through automation, process improvement, and real estate footprint optimization. Drew Wilkerson, Chairman and CEO of RXO, mentioned monitoring interest rates, housing, and automotive sectors for demand recovery, and highlighted expansion in technology and high cargo value verticals. He estimated that capacity rationalization could be 15-20% of the fleet, excluding private fleets and large carriers, if current enforcement persists.

Chris Wetherbee sought to quantify how much of the truckload volume decline was due to the customer optimization exercise and asked for an outlook on peak season demand, including any influence from UPS.

Answer

CEO Drew Wilkerson reiterated that the optimization process is "largely done" as it was tied to the Q2-implemented bid season. Regarding peak season, he said it's too early to call but that the company is confident in Q3 to Q4 EBITDA growth. He confirmed a strong relationship with UPS and that RXO is meeting its volume commitments from the Coyote acquisition.

Christian Wetherbee asked about the dynamics influencing the Q2 brokerage gross margin range and sought clarity on the expected EBITDA progression through the rest of the year.

Answer

CSO Jared Weisfeld noted that a softer market could improve gross profit per load, similar to the 20% improvement seen from January to March. For the rest of the year, he highlighted that Q3 will see the full run-rate benefit of contract rate increases, but the biggest variables remain volume and gross profit per load. CFO James Harris added that synergy realization will ramp up in the back half of the year.

Christian Wetherbee asked for insight into the expected sequential progression of gross profit per load throughout 2025 and the quarterly cadence for realizing the updated cost synergy target.

Answer

CSO Jared Weisfeld detailed that gross profit per load is expected to see a modest decrease from Q4 to Q1, with January being the low point, followed by improvement through the quarter. The trajectory beyond Q1 will depend on the shape of the market recovery. CFO Jamie Harris stated that of the remaining synergies, $25-$30 million in savings will be realized in 2025, with the majority of the technology-related synergies benefiting the P&L in 2026.

Chris Wetherbee asked about XPO's Q4 tonnage outlook based on normal seasonality and provided comments on the broader LTL pricing environment, competitive landscape, and contract renewals, especially given concerns about truckload rates.

Answer

CSO Ali Faghri indicated that October tonnage was down 3% year-over-year, and normal seasonality would imply full Q4 tonnage being down in a similar range, potentially slightly higher due to tougher comps later in the quarter. CEO Mario Harik affirmed a constructive industry pricing environment, with contract renewals accelerating in Q3. He cited cost inflation, significant industry capacity reduction (10% fewer terminals, 5-6% fewer doors since pre-COVID), and customer concerns about future capacity as factors supporting stable LTL pricing.

Chris Wetherbee asked about normal seasonality for Q4 tonnage, the broader LTL pricing environment, and the competitive landscape, including contract renewals.

Answer

Ali Faghri (CSO, XPO) projected Q4 tonnage to be down year-over-year in a similar range to October's 3% decline, potentially slightly higher due to tougher comps. Mario Harik (CEO, XPO) described a constructive industry pricing environment, with contract renewals accelerating in Q3. He attributed this stability to cost inflation, significant industry capacity reduction (10% fewer terminals, 5-6% fewer doors vs. pre-COVID/Yellow), and customers prioritizing capacity and service.

Chris Wetherbee of Wells Fargo asked about the outlook for labor productivity in the second half of the year and whether a better volume environment is necessary to achieve further progress.

Answer

CFO Kyle Wismans responded that XPO continues to expect productivity improvements even in a challenged tonnage environment, as demonstrated by the 1% improvement in labor cost per shipment in Q2. He highlighted that tech-enabled initiatives on the dock and in P&D, along with efficiencies from new larger service centers, will continue to drive labor productivity momentum regardless of the volume backdrop.

Christian Wetherbee of Wells Fargo asked about customer feedback regarding the potential impact of tariffs on Q2 volumes and inquired about the potential for share buybacks in 2025 given the new authorization.

Answer

Executive Mario Harik noted that recent customer surveys indicate a more cautious tone for the second half of the year, with expectations for flattish demand, but he has not seen significant tariff-related pull-forwards. CFO Kyle Wismans explained that capital allocation prioritizes organic investment and deleveraging, with the new $750 million authorization providing flexibility to opportunistically repurchase shares with excess cash.

Christian Wetherbee of Wells Fargo asked for customer feedback on the potential impact of tariffs on Q2 volume and inquired about the strategy for share buybacks under the new authorization.

Answer

CEO Mario Harik shared that recent customer surveys indicate a more cautious tone for the second half, with expectations of flattish demand, but no significant tariff-related pull-forwards have been observed yet. CFO Kyle Wismans explained that the $750 million buyback authorization provides flexibility to opportunistically return excess cash to shareholders after funding organic growth and deleveraging.

Inquired about the specifics of customer conversations that are driving pricing outperformance, the sustainability of this trend through 2025, and the company's definition of normal seasonality for Q1 tonnage.

Answer

Pricing outperformance stems from a mix shift towards higher-margin local business and new premium services, not just rate increases. The company is bridging the service gap with competitors, aiming to price 100-200 bps above cost inflation. Normal Q1 tonnage seasonality is typically flattish sequentially from Q4, implying a mid-single-digit year-over-year decline.

Christian Wetherbee from Wells Fargo asked about the profitability of the newly opened service centers and their contribution to incremental margins and the long-term OR goal.

Answer

Executive Mario Harik stated that the new sites are expected to be profit-neutral in 2024 and become accretive in 2025. He highlighted that these facilities are already driving low-to-mid-single-digit efficiency gains in their respective markets and are generating incremental margins of 40% or more, positioning the company for significant operating leverage in a recovery.

Chris Wetherbee asked for an expansion on C.H. Robinson's productivity opportunity, particularly beyond 2026, questioning if there are inherent limitations that would cause a deceleration from the projected double-digit productivity in 2026 to a single-digit baseline, despite ongoing innovations and the 'early innings' commentary.

Answer

CEO Dave Bozeman and CFO Damon Lee explained that C.H. Robinson's productivity strategy involves a baseline of mid-single-digit annual gains from its lean operating model, supplemented by 'waves of productivity' from fundamental innovations like Gen AI and Agentic AI, which drive double-digit increases. They clarified that while double-digit gains are not perpetual, the company is still in the 'early innings' of lean deployment across the enterprise, and for technology-driven productivity, NAST is in the 'third inning' while Global Forwarding is in the 'first inning,' suggesting significant long-term opportunity.

Chris Wetherbee asked for an expansion on C.H. Robinson's productivity opportunity, particularly beyond 2026, questioning if there are inherent limitations that would cause a deceleration from the projected double-digit productivity in 2026 to a single-digit baseline, despite ongoing innovations and the 'early innings' commentary.

Answer

CEO Dave Bozeman and CFO Damon Lee explained that C.H. Robinson's productivity strategy involves a baseline of mid-single-digit annual gains from its lean operating model, supplemented by 'waves of productivity' from fundamental innovations like Gen AI and Agentic AI, which drive double-digit increases. They clarified that while double-digit gains are not perpetual, the company is still in the 'early innings' of lean deployment across the enterprise, and for technology-driven productivity, NAST is in the 'third inning' while Global Forwarding is in the 'first inning,' suggesting significant long-term opportunity.

Chris Wetherbee asked about the long-term potential for NAST operating margins, noting that at 38%, they are approaching mid-cycle targets despite being at the bottom of the freight cycle.

Answer

President and CEO Dave Bozeman highlighted that the company's productivity gains are evergreen and part of their operating model, leading to higher highs and lows. Michael Castagnetto, President of North American Surface Transportation, added that these gains are sustainable and that the company is in the early innings of unlocking further efficiencies through new technologies like AgenTeq AI.

Christian Wetherbee of Wells Fargo asked a broader question about how C.H. Robinson is positioning itself for potential import softness and whether there are additional short-term productivity levers to pull if volumes weaken.

Answer

CEO David Bozeman responded that the company's current strategy is designed to work in all market cycles and that the most important levers are the ones already being executed daily: disciplined volume and pricing decisions and a relentless focus on efficiency. He highlighted that with personnel being two-thirds of operating expenses, the company's dynamic workforce planning process allows it to actively manage costs in any environment.

Christian Wetherbee asked how C.H. Robinson is balancing its priorities between gross profit margin opportunities and operating margin expansion, particularly as NAST truckload volume declined 6.5% in a challenging market.

Answer

CEO David Bozeman and President of North American Surface Transportation Michael Castagnetto explained that the company is prioritizing the 'quality of volume' and maintaining pricing discipline. Castagnetto highlighted that new tools enabled them to expand gross margins even in a rising cost environment. They emphasized that their operating model provides the flexibility to pivot and capture volume when the market inflects, while maintaining discipline to drive higher lows.

Christian Wetherbee noted the multi-quarter decline in NAST headcount and asked if the company is now at an equilibrium level, or if further reductions are possible if the freight market remains weak into 2025.

Answer

Michael Zechmeister, President of NAST, explained that workforce planning is now driven by productivity gains from technology and the operating model, rather than just market conditions. He expects to decouple headcount from volume growth but would not say they have hit a floor. CEO Dave Bozeman added that this model allows employees to focus more on high-value customer problem-solving.

Chris Wetherbee inquired about CPKC's strategic approach in the current M&A landscape, specifically exploring opportunities to leverage relationships with other railroads in the near term.

Answer

President and CEO Keith Creel confirmed CPKC is actively exploring alliances with Western and Eastern competitors to create merger-like benefits without the associated risks. He highlighted the strategic importance of the enhanced Meridian Speedway, which will connect Atlanta to Dallas in about 30 hours by early 2026, creating a unique, truck-competitive product for industrial traffic.

Chris Wetherbee inquired about CPKC's strategy in the current M&A landscape, including opportunities to leverage other relationships and how the company views the landscape over the next several quarters.

Answer

President and CEO Keith E. Creel confirmed CPKC is actively exploring alliances with non-applicants (Western and Eastern competitors) to create merger-like benefits without the associated risks. He highlighted the strategic importance of the enhanced Meridian Speedway, which will connect Atlanta to Dallas in about 30 hours by early 2026, offering a truck-like competitive product for industrial heartland traffic.

Chris Wetherbee from Wells Fargo asked for an expansion on CPKC's strategic role and perspective on the proposed UP-NS merger, covering commercial opportunities, potential strategic actions, and the company's regulatory stance.

Answer

CEO Keith Creel stated that CPKC sees undeniable commercial opportunities to partner with other railroads and attract customers concerned about the merger's risk. He emphasized that CPKC will be a 'loud voice' in the regulatory process to ensure the high standards of the 2001 merger rules are met, including enhancing competition and considering downstream effects on the entire industry. Creel noted that the proposal could trigger an industry endgame, making the STB's review critical for the future of the North American rail network.

Christian Wetherbee of Wells Fargo & Company asked for clarification on the high end of the guidance range and sought an outlook for the operating ratio (OR) for Q2 and the full year.

Answer

EVP & CFO Nadeem Velani confirmed the top end of volume guidance may be impacted by tariffs, bringing it closer to 5%. He projected sequential OR improvement from Q1 and expressed confidence in achieving a sub-60% OR for the full year, driven by strong volumes, favorable comps, and operational efficiencies.

Christian Wetherbee inquired about the 2025 revenue ton-mile (RTM) outlook, asking for the expected cadence between the first and second half and a breakdown between merger-related synergies and underlying core business growth.

Answer

EVP and Chief Marketing Officer John Brooks detailed the mid-single-digit RTM growth forecast, attributing 2-3% to synergies and 2-3% to the base organic business, without relying on a significant macro-economic tailwind. He noted a strong start to 2025, with potential to outperform in the first half due to favorable comparisons in the bulk franchise. Key synergy drivers highlighted include international intermodal growth via Port of St. John and Lazaro, new automotive partnerships, and the new intermodal service with CSX into the U.S. Southeast.

Christian Wetherbee asked for an assessment of the risks from potential railroad reform in Mexico and for more detail on the expected Q4 operating ratio improvement.

Answer

President and CEO Keith Creel expressed encouragement regarding Mexico's new administration, noting their vision supports freight rail and environmental goals, making CPKC part of the solution. EVP and CFO Nadeem Velani elaborated on the Q4 outlook, citing the absence of Q3's one-time headwinds like the labor disruption and a major derailment. He projected a potential sequential operating ratio improvement of 500 basis points, driven by strong operating leverage from a robust bulk outlook, particularly in grain.

Chris Wetherbee from Wells Fargo inquired about the October demand environment, specifically the 11.6% tonnage decline, and sought guidance on the fourth quarter's top-line performance and operating ratio expectations given current trends.

Answer

Adam Satterfield, CFO, explained that the operating ratio is expected to increase sequentially by 250-350 basis points in Q4 2025, compared to a normal 200-250 basis point increase, due to continued revenue softness and underperforming seasonality in October tonnage.

Chris Wetherbee asked about the October demand environment, including tonnage trends, and sought guidance on the fourth quarter operating ratio given current revenue softness.

Answer

Adam Satterfield, CFO, explained that October tonnage was underperforming seasonality, leading to an expected sequential operating ratio increase of 250 to 350 basis points for Q4, compared to a normal 200-250 basis point increase, due to revenue uncertainty.

Chris Wetherbee of Wells Fargo & Company inquired about the expected sequential progression of Old Dominion's operating ratio from Q2 to Q3 2025, given the challenging tonnage environment.

Answer

EVP & CFO Adam Satterfield projected a sequential increase in the operating ratio of 80 to 120 basis points for Q3, which is higher than the ten-year average. He attributed this to the annual wage increase effective September 1, ongoing pressure from fringe benefit costs, and the assumption of relatively flat sequential revenue per day.

Chris Wetherbee of Wells Fargo asked for Old Dominion's outlook on its third-quarter operating ratio, considering the challenging tonnage environment and typical seasonal patterns.

Answer

EVP & CFO Adam Satterfield responded that while the 10-year average for Q3 is flat to up 50 basis points, he anticipates an 80 to 120 basis point increase this year, assuming flattish revenue. He attributed this to pressure from the annual wage increase in September, rising fringe benefit costs, and higher overhead expenses.

Christian Wetherbee asked for confirmation that April's softness was concentrated early in the month and inquired about the weight-per-shipment assumptions underlying the Q2 yield forecast.

Answer

CFO Adam Satterfield confirmed that after a drop-off in the first week of April, trends stabilized. He noted that weight per shipment is currently down slightly more than seasonally normal but hopes to see it recover. He explained that a sustained increase in weight per shipment is a key indicator of an improving economy and a precursor to building network density.

Christian Wetherbee asked for confirmation that April's softness was concentrated early in the month and inquired about the underlying weight per shipment assumptions for Q2.

Answer

CFO Adam Satterfield confirmed that after a drop-off in the first week of April, trends stabilized. He noted that while weight per shipment is down sequentially, he hopes for a recovery, as it is a key indicator of an improving economy and is critical for building network density and driving strong incremental margins.

Christian Wetherbee requested an update on the LTL pricing environment, noting the solid revenue per hundredweight in Q4 and a potential acceleration in Q1.

Answer

CFO Adam Satterfield confirmed a healthy pricing environment, with Q4 revenue per hundredweight excluding fuel up 3.8%, in line with expectations. He noted January's 4.5% increase was partly influenced by a lower weight per shipment but expects the full quarter to align with normal seasonality of 3.6% to 4.0% growth.

Christian Wetherbee inquired about the relationship between the truckload and LTL markets, particularly regarding the volume of freight that may have shifted to truckload and the potential for it to return to LTL.

Answer

CFO Adam Satterfield opined that a significant amount of LTL freight moved to the truckload market following the Yellow bankruptcy, partly due to lower TL rates. He believes this freight will ultimately return to the more efficient LTL network, creating a future volume opportunity for ODFL both directly and indirectly as competitors absorb that freight.

Chris Wetherbee asked about the trajectory of domestic margins, considering revenue per piece growth, cost mix, and yield management, and sought insights into the 2026 domestic margin outlook amidst the Amazon glide down.

Answer

Brian Dykes, CFO, expressed satisfaction with Q3 revenue quality and Amazon glide down progress, noting that 2026 guidance would be provided in January. He highlighted the sequential increase in Amazon volume during peak, continued drawdown in the first half of next year, ongoing cost takeout, and anticipated economic benefits from GroundSaver strategic actions in the latter half of 2026. Carol Tomé, CEO, added that the acquisition of Andlauer Healthcare Group is expected to close in November, accelerating UPS's healthcare strategy.

Chris Wetherbee asked about the outlook for domestic margins, considering the strong revenue per piece growth and the ongoing Amazon glide-down, specifically seeking a sense of the 2026 domestic margin perspective.

Answer

Brian Dykes, CFO, expressed satisfaction with Q3 revenue quality and Amazon glide-down progress, noting that 2026 guidance would be provided in January. He highlighted the continued Amazon drawdown, anticipated economic benefits from Ground Saver in the second half of 2026, and the upcoming Andlauer Healthcare Group acquisition as factors influencing future margins.

Christian Wetherbee asked if the Q2 mid-teens margin guidance for the International segment represents a new run-rate, especially given that the profitable China-U.S. lane is facing pressure.

Answer

CFO Brian Dykes clarified that while shifting trade flows create a short-term profit headwind, the long-term expectation for international margins remains in the mid-to-high teens. CEO Carol Tomé added that Q1 margins were temporarily suppressed by investments in European weekend delivery, which will be lapped later in the year, providing a future margin tailwind.

Christian Wetherbee asked if the Q2 mid-teens margin guidance for the International segment represents a new normal, given that the highly profitable China-U.S. trade lane is facing pressure.

Answer

CFO Brian Dykes clarified that while shifting trade flows create a near-term profit headwind, the long-term margin target for the International segment remains in the mid-to-high teens. CEO Carol Tomé noted that Q1 margins were also suppressed by investments in European weekend delivery, which will be lapped later in the year, providing a future margin tailwind.

Christian Wetherbee of Wells Fargo sought assurance that the current strategic changes would not lead to flat or declining earnings over a multi-year period, asking specifically if earnings could grow in 2026.

Answer

CEO Carol Tomé affirmed it was a fair question and committed to providing a more detailed long-term outlook later in the year. She stated definitively that UPS is growing profit dollars, not just margin, and that this growth will continue into 2026 as cost-out initiatives accelerate. CFO Brian Dykes reinforced this, highlighting the $1 billion in savings from 'Efficiency Reimagined' and the plan to expand domestic operating margin in every quarter of 2025, with that pace accelerating into 2026.

Christian Wetherbee asked for details on the U.S. domestic cost-per-piece improvement, its sustainability into Q4, and the longer-term trend given ongoing network and headcount initiatives.

Answer

An executive, likely CFO Brian Dykes, attributed the strong Q3 cost performance to lapping the labor contract, which normalized wage inflation, and pulling forward savings from 'Fit to Serve' and 'Network of the Future'. He guided for Q4 cost-per-piece to be up about 1%. Executive Nando Cesarone added that 45 operational closures and increased automation (now 63% of hub volume) led to an 11 million hour reduction.

Chris Wetherbee of Wells Fargo asked about the potential for Operating Ratio (OR) improvement in 2026, distinguishing between controllable cost-side productivity and revenue-dependent factors, and how the $600 million cumulative efficiency target translates into OR benefits. He also touched upon claims expense and safety initiatives.

Answer

President and CEO Mark George stated that the focus for 2026 will be on controlling costs, including labor productivity, fuel efficiency, and managing every P&L line item, while acknowledging that revenue volatility will put short-term pressure on OR. Chief Financial Officer Jason Zampi noted that nearly $500 million in productivity over the past couple of years has kept the cost profile flat despite inflation. Chief Operating Officer John Orr highlighted significant safety progress, including a 7.8% improvement in FRA personal injury ratio and a 27.7% improvement in train accident ratio year-to-date, aided by technology like new wheel integrity systems that have prevented over 40 derailments.

Chris Wetherbee asked about the potential for Operating Ratio (OR) improvement in 2026, distinguishing between controllable cost-side factors and revenue dependency, and how the $600 million cumulative productivity target translates to OR. He also touched on claims expense and safety initiatives.

Answer

President and CEO Mark George stated the focus remains on controlling costs (employment levels, fuel efficiency, P&L line items) while acknowledging revenue headwinds may pressure OR. CFO Jason Zampi noted that nearly $500 million in productivity over recent years has kept the cost profile flat despite inflation. He explained claims volatility, with frequency decreasing but cost per incident rising due to social inflation and older claim resolutions. Chief Operating Officer John Orr detailed safety investments, including the Thoroughbred Academy and new wheel detection technology, which has prevented over 40 derailments.

Christian Wetherbee inquired about the drivers behind the strong yield performance in merchandise and intermodal, asking if it's a Norfolk Southern-specific recovery due to improved service or a reflection of broader market strength.

Answer

CCO Ed Elkins attributed the merchandise pricing success to improved service, which is increasing customer trust and creating more opportunities. For intermodal, he noted pricing is flattish, and the company is taking what the market allows. CEO Mark George and CCO Ed Elkins both added that falling seaborne metallurgical coal prices are a significant headwind that masks some of the core pricing strength.

Christian Wetherbee from Wells Fargo & Company inquired about merchandise and intermodal yields, asking if recent strength was due to a Norfolk Southern-specific service recovery or broader market dynamics.

Answer

Chief Commercial Officer Ed Elkins attributed merchandise pricing success to improving service building customer trust, while describing intermodal pricing as 'flattish.' Both Elkins and President and CEO Mark George emphasized that lower export coal pricing remains a significant headwind to overall revenue per unit performance.

Chris Wetherbee asked for a breakdown of the sources for the planned $150 million in 2025 productivity savings and inquired about the long-term potential for operating ratio (OR) improvement over the next few years.

Answer

CEO Mark George expressed confidence in exceeding the $150 million target and noted a long-term path to a 60% range OR, especially with an economic recovery. COO John Orr detailed that savings will come from higher operational standards, improved asset utilization (cars, locomotives), and aligning headcount with GTMs. Mark George added that savings would appear across the P&L in areas like compensation, materials, fuel, and purchased services.

Chris Wetherbee asked about Norfolk Southern's ability to carry its Q3 momentum into Q4 and sought clarity on the fourth-quarter operating ratio (OR) outlook.

Answer

CEO Mark George confirmed strong cost momentum but noted concerns in auto and steel markets. COO John Orr detailed ongoing operational improvements driving costs down. An executive, likely CFO Jason Zante, reaffirmed the 64-65% second-half OR guidance but projected a sequential Q4 uptick due to non-recurring fuel recoveries, seasonality, and hurricane costs, which will be partially offset by strong productivity.

Christian Wetherbee of Wells Fargo & Company asked about the outlook for headcount and whether further reductions should be anticipated as operational progress continues through the second half of the year.

Answer

John Orr, COO, clarified the focus is on 'rightsizing the service' and eliminating waste like overtime, not simply headcount reduction, noting a hiring freeze is in effect. Mark George, CFO, confirmed the company is on track to achieve its previously guided 2% year-over-year reduction in T&E headcount by year-end, even while handling more volume.

Chris Wetherbee asked Steve Angel about inbound strategic opportunities and CSX's positioning to leverage customer responses to industry consolidation as a standalone entity.

Answer

Steve Angel, President and CEO, stated that running the business effectively ensures strong customer service. He noted opportunities, potentially spurred by merger discussions, to collaborate with partners and shift truck volume to rail, which is already showing success.

Chris Wetherbee from Wells Fargo & Company asked for more detail on the second-half volume outlook, specifically the key opportunities that will help CSX achieve its full-year growth target, and for a perspective on peak season.

Answer

EVP & CCO Kevin Boone pointed to several factors for second-half growth: easier year-over-year comparisons, the resolution of Q2 customer outages in chemicals and forest products, strong fundamentals in fertilizers, and the expected restart of two export coal mines in Q4. He described the growth drivers as being diversified across multiple markets.

Christian Wetherbee inquired about the likelihood of achieving profit growth in the second half of the year amid volume uncertainty and asked for clarification on a comment about changing intermodal trends in early April.

Answer

CFO Sean Pelkey noted that year-over-year profit growth in the second half is more achievable due to easing commodity price headwinds and easier comps from last year's hurricane impacts. EVP and CCO Kevin Boone clarified that intermodal volumes accelerated in late March and April, likely due to some tariff-related pull-forward.

Christian Wetherbee sought to understand the dynamics between low to mid-single-digit volume growth and the expected EBIT performance, and asked for the pricing outlook for 2025 versus 2024.

Answer

EVP and CFO Sean Pelkey reiterated the impact of the $350 million in headwinds. EVP and CCO Kevin Boone added that Merchandise pricing strategy remains consistent, leveraging service, but noted that lower met coal prices are a key difference from last year. He also mentioned encouraging signs of stabilization in Intermodal contractual rates.

Christian Wetherbee asked about CSX's ability to consistently grow margins into 2025, given the challenging Q4 outlook and the current mixed economic environment.

Answer

CFO Sean Pelkey responded that while it's early for 2025 guidance, the long-term setup is supportive of margin growth due to a strong service product and network capacity. However, he identified potential 2025 headwinds from lower fuel prices and network disruptions from construction, with a potential tailwind from a firmer trucking market. He stressed that the primary goal remains operating income growth.

Chris Wetherbee asked about the $20 million in cost savings achieved in the quarter as part of the $100 million initiative, seeking details on segment-specific impacts and examples, as well as the progression towards the total goal. He also inquired about the sequential decline in container count.

Answer

CFO Brad Delco explained that cost progress was seen across all business areas, including efficiency, asset utilization, and productivity, with the majority of the $100 million savings expected in 2026. President of Intermodal Darren Field clarified that the container count decline was minor, due to equipment reaching its useful life and some conversions from leased trailers to containers in dedicated accounts.

Chris Wetherbee inquired about the progress of J.B. Hunt's cost reduction initiative, specifically the $20 million in savings achieved in the quarter towards the $100 million goal. He asked for a segment breakdown, specific examples, and the expected progression of these savings. Additionally, he questioned the sequential decline in container count and its alignment with the company's strategy.

Answer

CFO Brad Delco explained that cost reduction progress was evident across all business areas, driven by efficiency, productivity, and improved asset utilization, with the majority of the $100 million savings expected in 2026. President of Intermodal Darren Field clarified that the slight container count decrease was due to equipment reaching its useful life and strategic use of containers in dedicated accounts, not a significant change in direction.

Chris Wetherbee from Wells Fargo asked for clarification on the newly announced $100 million cost savings initiative, questioning if it was separate from previously discussed capacity-related costs and how the savings would be allocated across business segments and over what timeframe.

Answer

EVP & CFO John Kuhlow clarified that the $100 million initiative is a continuation of efforts to address costs from excess capacity and includes improvements in asset utilization. He stated the savings would be distributed proportionately to the spending levels in each segment, with most benefits realized in 2026 and beyond.

Christian Wetherbee of Raymond James asked for an update on the Intermodal bid season, questioning the likelihood of securing rate increases in 2025 and how the business mix might influence yields.

Answer

Darren Field, President of Intermodal, responded that the company is 'mildly pleased' with bid season, having successfully filled some empty network legs. However, he cautioned that the environment remains competitive, rate increases are not across the board, and some business was lost due to pricing discipline. Field also noted that strong growth in the Eastern network (13%) versus Transcon (4%) will impact revenue per load due to shorter lengths of haul.

Christian Wetherbee asked for clarification on the Q1 2025 operating income guidance, questioning if the projected 20-25% sequential decline applied to the entire business and what specific factors were driving it.

Answer

Brad Delco, an executive at J.B. Hunt, confirmed the guidance applies to the consolidated business and reflects normal seasonality, excluding the unique pandemic years. He stated the commentary was intended to align market expectations with the company's view and declined to provide a more detailed breakdown of the drivers.

Christian Wetherbee asked about the drivers behind some Eastern Intermodal freight converting from truck despite pricing pressures, and about the durability of repositioning costs from strong West Coast growth.

Answer

Darren Field, President of Intermodal, said Eastern conversions are small but consistent, driven by sustainability goals and excellent service levels. He noted that if network imbalances persist, the associated costs must be factored into customer economics. CEO Shelley Simpson added that improved bid compliance will help solve these imbalances over time.

Chris Wetherbee from Wells Fargo asked if organic revenue growth could reaccelerate to upper-single-digit rates in 2026 and beyond, driven by the Wincanton acquisition and other opportunities. He also questioned the company's go-forward strategy for share buybacks.

Answer

CEO Malcolm Wilson confirmed the Wincanton deal will be a significant growth driver, citing its own 10% revenue growth and the potential to expand GXO's aerospace and defense presence in Europe. CFO Baris Oran addressed capital allocation, stating that while the company sees its shares as attractive, the primary focus is on high-return organic growth opportunities. He noted GXO will balance buybacks with maintaining its investment-grade credit rating and leverage levels.

Christian Wetherbee from Wells Fargo & Company asked how tariff discussions are impacting customer conversations and the sales pipeline. He also requested color on the expected acceleration of organic revenue growth throughout the year.

Answer

CEO Malcolm Wilson reported no material impact from tariffs on the sales pipeline, which is up 13% year-over-year to $2.5 billion. CFO Baris Oran confirmed that organic growth is expected to accelerate, driven by an 8% contribution from wins, offset by a 5% churn, with 1.5% from pricing and flat volume assumptions.

Christian Wetherbee of Wells Fargo questioned why GXO wasn't more insulated from customer adjustments, asking about contract protections and renewal timing. He also asked about the lower free cash flow conversion guidance for 2025.

Answer

CEO Malcolm Wilson explained the adjustments were a 'one-off event' where GXO proactively worked with a few large customers to optimize their networks, noting contracts are back-to-back, preventing financial damage. CFO Baris Oran clarified the 2025 free cash flow conversion target of 25-35% (midpoint 30%) is consistent with 2024's actual performance, which was impacted by approximately $70 million in transaction and integration costs for the Wincanton acquisition, some of which will continue into 2025.

Christian Wetherbee of Wells Fargo & Company inquired about the drivers for sequential margin improvement in Q4, the potential impact of Wincanton synergies, and what the significant growth in the sales pipeline indicates for future business conversion.

Answer

CEO Malcolm Wilson clarified that Wincanton integration and synergies are not expected to impact Q4 margins, with the integration likely delayed to Q2 2025 pending CMA review. CFO Baris Oran explained that margin expansion is driven by improved utilization of multi-tenant warehouses and internal efficiency programs. Wilson added that the growing pipeline reflects increased customer confidence, a resurgence in strategic e-fulfillment projects, and GXO's expansion into new verticals like aerospace.

Chris Wetherbee from Wells Fargo sought clarity on the updated 2025 EPS guidance, asking what factors led to trimming the high end and what risks are contemplated at the low end. He also inquired about the expected shape of earnings for the second half and the strength of the dedicated pipeline.

Answer

CFO Darrell Campbell explained the high end of guidance was trimmed due to unresolved trade policy uncertainty and a less sustained spot rate recovery in July. The low end reflects potential cost inflation and market softness. CEO Mark Rourke described the dedicated pipeline as 'robust' and at a level that has historically led to future fleet growth, with several large, late-stage opportunities in progress.

Christian Wetherbee asked for clarification on whether Schneider expects year-over-year EPS growth in every quarter of 2025 and requested details on the expected net fleet growth in the Dedicated segment, considering recent churn.

Answer

CFO Darrell Campbell clarified that while the company expects year-over-year growth in price and margin for the remainder of the year, they do not provide quarterly guidance. CEO Mark Rourke explained that Dedicated fleet growth expectations have moderated due to some churn and new asset efficiency initiatives, such as increased slip seating, which will reduce the net tractor count while improving productivity. He confirmed that total tractor count in Dedicated is still expected to grow from Q1 levels.

On behalf of Chris Wetherbee, an analyst asked for details on the rate assumptions in the full-year guidance and how the truckload margin should perform given the higher mix of dedicated business.

Answer

CEO Mark Rourke explained that price improvement is a key factor in the guidance range but did not provide a specific number. Management noted the low end of guidance assumes conditions similar to a normalized Q4 2024. Rourke also stated that dedicated margins can still improve through better backhaul opportunities in a rising market and internal initiatives to boost asset productivity.

On behalf of Chris Wetherbee from Wells Fargo & Company, Rob asked about the potential for margin expansion in the upcoming year, considering the balance between a competitive environment, cost inflation, and ongoing rate restoration efforts in the network business.

Answer

CEO Mark Rourke indicated that while it's early for 2025 guidance, he sees positive signs for margin improvement. He pointed to continued capacity exiting the market, with truck lender defaults reaching levels not seen since the 2008-2009 financial crisis. He also noted a favorable shift in customer sentiment towards asset-based carriers in anticipation of a market recovery, which he believes will be a positive contributor to 2025 performance.

Chris Wetherbee of Wells Fargo inquired about ArcBest's ability to outgrow the industry, asking for details on the type of freight being acquired, the depth of that freight pool, and the sustainability of its volume outperformance.

Answer

President & CEO-Elect Seth Runser attributed the outperformance to growth in core business, having added over 100 new core LTL accounts. He stated the strategy is based on finding ways to serve customers across solutions, which strengthens the pipeline. Runser emphasized a focus on disciplined, profitable growth and efficiency, positioning the company well for when market demand improves.

Christian Wetherbee asked about the historically low weight per shipment, questioning whether it was purely a market phenomenon or if ArcBest's own strategies were a contributing factor.

Answer

President Seth Runser attributed the decline to the soft macro environment, a higher mix of lighter shipments, and the impact of the weak housing market on heavier U-Pack household moves. He also noted some freight migration to the truckload market but emphasized that the company's strategy is focused on growing its core LTL business pipeline.

Christian Wetherbee asked how a potential industrial recovery with lower weight per shipment might affect incremental margins and how the company views the overall weight per shipment dynamic for the year.

Answer

Chief Strategy Officer Christopher Adkins acknowledged that sluggish industrial production, soft truckload demand, and fewer household moves have pressured weight per shipment. He stated that a recovery in any of these areas would be beneficial for profitability. President Seth Runser added that the company has built a scalable operation with significant operating leverage. He expects good incremental margins as volume returns, as it will build density in the network and fill existing capacity, and each opportunity is priced for the value it brings.

Christian Wetherbee from Wells Fargo asked about the LTL-to-truckload freight shift and the path to profitability for the Asset-Light segment, questioning if improvement depends solely on the freight cycle.

Answer

President Seth Runser stated he expects freight to shift back to LTL when the truckload market normalizes. For Asset-Light profitability, he outlined a strategy independent of the cycle, including improving account profitability with new tools, shifting mix to SMB customers, cost control, and growing the profitable managed solutions business.

Christian Wetherbee of Wells Fargo asked for management's view on the optimal tractor age for the fleet and requested a calculation of the 'clean' run-rate operating margin for the TTS segment in Q2, adjusted for temporary items.

Answer

Chairman & CEO Derek Leathers stated that the current fleet age of 2.4 years is appropriate, reflecting a patient strategy amid regulatory and tariff uncertainty, and they can operate within a +/- 0.2 year range. CFO Chris Wikoff calculated a more normalized Q2 TTS adjusted OI margin of approximately 3.9%, after adding back an estimated 40 basis point headwind from startup costs and a 70 basis point headwind from the year-over-year net impact of fuel.

Christian Wetherbee requested more detail on the new Dedicated contract wins, including their size and customer verticals, and asked if the company could return to positive EPS in the second quarter.

Answer

CEO Derek Leathers attributed the Dedicated success to new talent and a strategic push to diversify into new verticals beyond traditional retail. CFO Chris Wikoff stated that returning to positive EPS in Q2 is the goal, which would require significant sequential improvement. He pointed to optimism in Dedicated and Logistics revenue, coupled with an accelerated pace of cost reductions from the company's enhanced $40 million savings program, as key drivers.

Christian Wetherbee of Wells Fargo inquired about the short-term fleet allocation strategy between One-Way and Dedicated, and the competitive dynamics within the Dedicated market.

Answer

CEO Derek Leathers stated the company will remain nimble, but the strategic focus is on growing the Dedicated fleet rather than One-Way until rates improve significantly. Regarding competition, Leathers sees opportunity as demand improves, noting that some newer competitors who were aggressive on price may now be vulnerable. He also highlighted the potential to convert private fleets into Dedicated customers as they face equipment renewal decisions.

Chris Wetherbee sought to clarify the sequential earnings progression into Q4, asking if the $0.05 of extraordinary Q3 costs should be considered a one-time event. He also asked if the Q4 Dedicated fleet outlook should be based on the Q3 average or end-of-period truck count.

Answer

Chairman & CEO Derek Leathers explained that while he cannot guarantee the anomalous health claims won't recur, history suggests a repeat at that magnitude is unlikely, setting up for moderate sequential improvement. Both Mr. Leathers and EVP, Treasurer & CFO Chris Wikoff advised using the end-of-period truck count for the Dedicated fleet, which was up 80 trucks sequentially, as it better reflects late-quarter new business and fleet expansions.

Chris Wetherbee of Wells Fargo requested an update on volume trends, specifically asking for July's tonnage performance and any insights on what Saia is hearing from its customers and end markets.

Answer

EVP & CFO Matthew Batteh provided monthly Q2 metrics and stated that July month-to-date shipments per day were down about 2.25% while tonnage was trending around flat. He noted no significant changes in customer sentiment compared to June. President & CEO Frederick Holzgrefe added that Saia's Los Angeles region stood out as a bit softer, partly due to the company's own pricing actions.

Christian Wetherbee of Citigroup Inc. commented on Saia's opportunity to reprice new business after onboarding it and observing its specific characteristics throughout the year.

Answer

President and CEO Fritz Holzgrefe agreed, stating that based on top-line metrics and peer comparisons, there is a significant opportunity to ensure Saia is compensated for its high service levels. He affirmed the company's unrelenting focus on pushing for better pricing, acknowledging that while the current environment gives customers choices, Saia has a long runway for pricing optimization.

Christian Wetherbee of Wells Fargo questioned the full-year operating ratio (OR) improvement guidance of 80-100 basis points, which is below the previously discussed 100-150 range, and asked about the drivers behind rising weight per shipment.

Answer

CEO Fritz Holzgrefe explained that the 80-100 basis point OR improvement guidance assumes the current macroeconomic environment persists. He stated that if the industrial economy improves, Saia could potentially beat that target and achieve the 100-150 basis point range or higher. He attributed the rising weight per shipment to a strategic focus on freight profile and providing differentiated service, rather than a macro shift.

Christian Wetherbee of Wells Fargo asked for an update on the operating performance of recently opened facilities, referencing a prior comment about them running at a 95 OR. He also inquired about Saia's interest in acquiring more real estate assets that may become available.

Answer

CEO Fritz Holzgrefe was pleased with the progress, highlighting that the large facilities opened in Q2 were already profitable and contributing. He explained that the integrated network allows larger terminals to enhance the value of smaller, end-of-line ones. Regarding future assets, Holzgrefe stated that while the company will be an opportunistic participant in the market, the primary focus is on creating value from the current 214-terminal footprint.

Christian Wetherbee of Wells Fargo & Company referenced CEO Jim Vena's prior comments about doing 'what's possible' and asked what makes the current landscape conducive to major industry changes and how other stakeholders might receive such moves.

Answer

CEO Jim Vena emphasized that Union Pacific makes diligent, well-researched decisions, not flippant ones. He stated that achieving a high level of operational excellence, safety, and service allows the company to explore what's possible next. He noted the decision to announce discussions was a prudent step after significant homework, but declined to comment on specifics of ongoing negotiations.

Christian Wetherbee of Stephens Inc. asked for a more detailed framework around the 2025 guidance, seeking potential outcomes for earnings or operating ratio given rising economic uncertainty.

Answer

CEO Vincenzo Vena acknowledged the uncertainty from tariffs, the economy, and interest rates but affirmed the company is standing by its 3-year guidance. He highlighted the railroad's strong operational foundation and agility. CFO Jennifer Hamann added that the team has conducted scenario planning and is prepared to adjust to different demand environments.

Christian Wetherbee of Wells Fargo sought perspective on international intermodal shifts on the West Coast and the outlook for pricing, given the company's service recovery and broader market inflation.

Answer

EVP of Marketing and Sales Kenny Rocker acknowledged some volume pull-ahead is occurring in international intermodal. On pricing, he reiterated that it was accretive to margins in Q4 2024 and is expected to remain so in 2025, driven by the commercial team's ability to sell a strong service product and align price with the value delivered to customers.

Chris Wetherbee of Wells Fargo & Company inquired about the intermodal outlook and how potential changes in business mix might influence the company's Q4 performance.

Answer

CFO Jennifer Hamann stated that mix pressures from high international intermodal volumes are expected to continue into Q4. She also highlighted that lower fuel surcharge revenue would be a significant factor. EVP Kenny Rocker noted that while international intermodal volumes will remain elevated year-over-year, they are beginning to moderate sequentially.

Chris Wetherbee of Wells Fargo & Company inquired about the overall supply and demand balance in the freight market, asking for Knight-Swift's perspective on inventory levels, consumer trends, and the pace of capacity exiting the industry.

Answer

CEO Adam Miller stated that while capacity is exiting slowly, the trend is continuing. He noted that recent discussions around potential peak season projects suggest that one-way capacity at scale is becoming more valuable. Miller conveyed a cautiously optimistic outlook, suggesting the worst of the market downturn is likely over and that a slow tightening of supply and demand is underway, despite a typically soft start to the third quarter.

Christian Wetherbee asked for a perspective on truckload market capacity, questioning if the potential demand weakness in the coming months would be sufficient to bring the market into a more favorable balance.

Answer

Executive Adam Miller responded that a weaker spot market is a catalyst for capacity to exit, noting that data from a large load board showed truck postings were down 28% year-over-year in March, indicating supply is leaving. Executive Brad Stewart added that the market was already behaving as if it were fairly balanced before the recent tariff uncertainty, so it wasn't starting from a point of being far out of balance, suggesting a new equilibrium could be found without massive capacity rationalization.

Christian Wetherbee asked about the sustainability of cost improvements in the Truckload segment and the potential for margin expansion, noting the company is achieving better results at a lower revenue per mile than in the past.

Answer

Executive Andrew Hess detailed the sustainability of cost controls, citing future runway for utilization improvement, permanent overhead reductions, and refined processes for managing variable costs. Executive Adam Miller added that they believe Truckload margins can return to historical cycle norms, targeting an operating ratio in the mid-80s in a normalized market and the upper 70s in the best of times.

Christian Wetherbee of Wells Fargo & Company asked about the integration progress at U.S. Xpress and whether a stronger freight market is necessary to unlock the acquisition's value.

Answer

Executive Adam Miller conceded the integration has been challenging in a weak market. While cost synergies are progressing well, the primary hurdle is closing the significant rate-per-mile gap on the revenue side. He stated that a stronger market environment would enable them to close this gap much more rapidly and achieve the originally projected margin expansion.

Chris Wetherbee asked about the RTM guidance for the second half of the year, questioning what needs to change to drive growth and how the RTM outcome relates to the revised EPS guidance.

Answer

Interim Chief Commercial Officer Janet Drysdale explained that volumes are expected to accelerate as refinery outages resolve and the grain crop begins in September. CEO Tracy Robinson added that the company is proactively managing costs to protect margins amid volume and mix shifts, pointing to the 50 basis point margin improvement in Q2 as evidence of this discipline.

Christian Wetherbee asked about the expected cadence of the operating ratio (OR) for the remainder of the year, following operational improvements seen in March and April.

Answer

CEO Tracy Robinson stated that CN does not provide quarterly OR guidance. She noted that last year's labor issues represented a couple hundred basis points of headwind that will not be repeated. Robinson emphasized that quarterly OR will depend on volume levels and unpredictable events like weather, but the team has become adept at managing disruptions and recovering quickly.

Christian Wetherbee inquired about the roughly 200 basis points of discrete headwinds from 2024 and what that implies for the potential Operating Ratio (OR) improvement in 2025, including first-half versus second-half dynamics.

Answer

President and CEO Tracy Robinson confirmed the company aims to recapture the 200 basis points of margin impact from 2024's one-off challenges. She stated that margin improvement will be driven by labor stability, operational discipline, productivity efforts, and pricing above inflation, but noted the ultimate OR performance will depend on volume levels.

Christian Wetherbee from Wells Fargo asked for specifics on the levers being pulled for resource alignment and how the company is thinking about 2025 earnings growth in the context of its long-term CAGR target.

Answer

President and CEO Tracy Robinson noted that a softer macro outlook is driving resource adjustments. Chief Network Operations Officer Patrick Whitehead detailed these actions, including reducing FTEs, parking locomotives, and returning leased railcars. Tracy Robinson added that the goal is to balance cost reduction with growth capacity, with more details on 2025 to come in January.