Jonathan Chappell

Jon Chappell questioned the deceleration in XPO's year-over-year revenue per shipment growth in Q4, despite 12 consecutive quarters of sequential improvement, and sought assumptions for 2026, particularly regarding accessorials and the pricing environment.

Answer

Ali Faghri, Chief Strategy Officer, XPO, affirmed expectations for strong pricing improvement in 2026, with revenue per shipment projected to be up in the mid-single-digit range, aligning with overall yield growth. He noted that weight per shipment is expected to be roughly flat year-over-year, contributing to an improving trend for revenue per shipment. Faghri emphasized that the sequential improvement in revenue per shipment is expected to continue through 2026, driven by ongoing initiatives in local customers (targeting 30% of business from current 25%) and premium services (aiming for 15%+ from current 12%), indicating a long runway for above-market yield and pricing growth.

Jonathan Chappell noted XPO's 12 consecutive quarters of sequential revenue per shipment improvement but observed a deceleration in year-over-year growth in Q4 2025. He asked about 2026 assumptions and whether this indicated harder incremental accessorial impact or a softer pricing environment.

Answer

Ali Faghri, Chief Strategy Officer of XPO, projected mid-single-digit revenue per shipment growth for 2026, with weight per shipment expected to be roughly flat. He anticipated continued sequential improvement, driven by initiatives like increasing local customers (targeting 30% from 25%) and premium services (targeting 15%+ from 12%), indicating sustained pricing momentum.

Jonathan Chappell asked for a breakdown of cost line items, specifically how purchased transportation insourcing impacts costs and how AI initiatives affect salaries and wages.

Answer

Mario Harik (CEO, XPO) clarified that purchased transportation insourcing provides only a modest net cost benefit, as savings are largely offset by increased salary, wage, benefit, and depreciation expenses. He emphasized that productivity, measured as labor hours per shipment, improved by 2.5 points in Q3 despite declining shipments, driven by AI and field execution, which offsets wage inflation.

Jonathan Chappell asked for a breakdown of XPO's cost line items, specifically how purchased transportation (PT) insourcing and AI-driven productivity initiatives impact salaries and wages, and overall cost improvement potential for the next year without volume growth.

Answer

CEO Mario Harik clarified that PT insourcing provides only a modest net cost benefit, as reductions in PT expense are largely offset by increased salary, wages, and benefits from new hires, and higher depreciation/maintenance from added equipment. He emphasized that the primary driver of cost outperformance is productivity, citing a 2.5-point improvement in labor hours per shipment in Q3 despite declining shipments, and expects this to compound with ongoing AI and field execution initiatives.

Jonathan Chappell from Evercore ISI sought clarification on the tonnage outlook, asking if the 8% year-over-year decline in July is expected to moderate to a mid-single-digit decline for the full third quarter as comps get easier.

Answer

Chief Strategy Officer Ali Faghri confirmed that tonnage comps get easier in August and September. He stated that while July tonnage was down around 8%, the company expects the year-over-year tonnage declines to moderate through the quarter, resulting in a full Q3 tonnage decline that is less than the July figure.

Jonathan Chappell of Evercore ISI asked for an update on XPO's full-year tonnage and margin guidance given market changes, the outlook for Q2 operating ratio improvement, and what cost levers could be pulled if tonnage deteriorates further.

Answer

Executive Mario Harik stated that XPO expects to deliver 150 basis points of margin improvement for the year, even with negative tonnage, due to strong yield and cost management. If tonnage falls to mid-single digits, the company still anticipates 100 basis points of improvement. For Q2, he expects sequential operating ratio improvement to be at or above the high end of the typical 250-300 basis point range. Harik added that with two-thirds of costs being variable, XPO can flex labor and leverage linehaul insourcing to manage a softer environment.

Jonathan Chappell of Evercore ISI asked for an update on XPO's full-year tonnage and margin guidance, the outlook for Q2 sequential operating ratio (OR) improvement, and available cost levers if tonnage weakens further.

Answer

CEO Mario Harik stated that XPO expects to deliver 150 basis points of year-on-year margin improvement even with negative full-year tonnage, citing strong yield and cost management. He noted that if tonnage were to fall by mid-single digits for the year, the company would still anticipate about 100 basis points of OR improvement. For Q2, Harik expects OR improvement to be at or above the high end of the typical 250-300 basis point sequential range. He also highlighted that two-thirds of costs are variable, allowing for flexibility through labor management and linehaul insourcing.

Jonathan Chappell of Evercore ISI questioned the sustainability of the accelerating revenue per shipment trend, asking if the initial opportunities have been exhausted.

Answer

CFO Kyle Wismans asserted that significant opportunity remains, describing the initiatives as being in the 'early innings.' He cited strong contract renewals, a long-term plan to grow accessorial revenue to 15% of total revenue (from over 10% now), increasing traction from new premium services, and a favorable mix shift towards higher-yielding local accounts.

Jon Chappell asked about the reconciliation between increasing spot market exposure and the potential for a stronger time charter market, given fleet consolidation and customer demand for reliability. He also inquired if the demand commentary focused on ton-mile demand, disruptions, or underlying robust consumption, especially with global oil demand growth stabilizing around 1%.

Answer

Svein Moxnes Harfjeld, President and CEO, confirmed that end-users are actively seeking time charters across various tenors at rates above previous terms, driven by concerns over reliability and ship access due to consolidation. He noted rumors of a 1-year charter at $85,000/day. Regarding demand, Mr. Harfjeld clarified that the 1% global liquids demand growth translates to approximately 2.5% growth for seaborne crude oil transportation, emphasizing the impact of distances and production growth from regions like Guyana and Brazil.

Jon Chappell asked about reconciling DHT's increased spot market exposure with the commentary on fleet consolidation driving demand for time charters and associated premiums. He inquired if better time charter opportunities might make the spot exposure increase short-term. He also asked if the positive demand commentary was primarily driven by ton-mile demand, disruptions, sanctioned vessels, new trade routes, or robust underlying consumption.

Answer

Svein Moxnes Harfjeld (President and CEO, DHT Holdings Inc) confirmed that end-users are actively seeking 1-3 year time charters at rates above previous terms, citing rumors of an $85,000/day 1-year charter and higher bids for 3-year contracts, driven by customer concerns over reliability and ship access due to consolidation. Regarding demand, Mr. Harfjeld clarified that while total liquids demand growth is around 1%, seaborne crude oil transportation demand is growing at approximately 2.5% (1 million barrels/day over 41 million barrels/day seaborne crude). He also noted the impact of varying transportation distances and expected production growth from the U.S., Guyana, and Brazil.

Jonathan Chappell of Evercore ISI highlighted the disappointing start to Q3 for the VLCC market, asking for reasons behind the weakness and potential negative catalysts. He also requested an update on the dry-docking schedule.

Answer

President & CEO Svein Moxnes Harfjeld attributed the temporary Q3 weakness to a combination of factors, including a halt in Chinese inventory building and the seasonal use of OPEC barrels for domestic power generation. He identified a downturn in the global economy's resilience as the main potential risk. He also stated that only one vessel is scheduled for dry-dock in the second half of the year.

Jonathan Chappell from Evercore ISI inquired about the unique 7-year time-charter for the DHT Appaloosa, asking if such long-term, profit-sharing deals are becoming more common. He also asked for an estimate on how much of OPEC's announced production increase will actually reach the market and its impact on VLCC demand.

Answer

President and CEO Svein Moxnes Harfjeld described the Appaloosa contract as a rare deal reflecting the customer's desire to secure quality, long-term tonnage from a top operator. He stated that while DHT is open to similar structures, they are not readily available. Regarding OPEC, he noted it was too early for a precise figure but expects the increased volumes to become more visible from June onwards, potentially creating a stronger-than-usual summer market.

Jonathan Chappell inquired about DHT's fleet development strategy, specifically asking whether monetizing older vessels is a better alternative than securing time-charters, and questioned the financing plan and chartering interest for the company's newbuilds.

Answer

President and CEO Svein Moxnes Harfjeld stated that DHT might divest one or two more of its 2007-built ships, noting that while they have attractive time-charters, finding suitable counterparties for sales can be a hurdle. For the newbuilds, he outlined a base case financing of $60 million per vessel, with a target to close the financing in Q2 2025. He also confirmed significant time-charter interest in the newbuilds from two key clients, though a deal is not yet finalized.

Jonathan Chappell asked about the noted rate differentiation for vessels under 15 years of age and whether this signals a plan to modernize the fleet, potentially using proceeds from older ships to finance newbuilds. He also questioned the current time charter market and DHT's interest in securing more fixed-rate contracts amid spot market volatility.

Answer

President and CEO Svein Moxnes Harfjeld acknowledged that older ships face rate pressure in softer markets but are still capable of securing strong charters in balanced conditions. He confirmed that divesting older vessels as newbuilds arrive in 2026 is part of the company's plan. Regarding time charters, Harfjeld noted a wider bid-ask spread but affirmed DHT's ambition to build more fixed income over the next one to two years as customers recognize the need to secure modern tonnage.

Jonathan Chappell from Evercore ISI questioned the potential year-over-year tonnage and operating ratio improvement if Q1's February and March trends align with normal seasonality and continue throughout the year.

Answer

CFO Adam Satterfield advised caution, noting that Q2 typically sees sequential revenue growth of 7% and OR improvement of 300-350 basis points. He suggested that if these trends materialize, Q2's operating ratio could be flat year-over-year, emphasizing the company's focus on cost management and leveraging existing capacity.

Jonathan Chappell asked about the potential full-year tonnage and operating ratio improvement if February and March volumes align with seasonality, based on the Q1 midpoint.

Answer

Adam Satterfield, CFO, refrained from specific full-year predictions due to market uncertainties. He outlined typical Q2 sequential trends: 7% revenue growth and 300-350 basis points of operating ratio improvement. He noted that if these trends materialize, the Q2 operating ratio could be flat year-over-year. He reiterated cautious optimism, highlighting the company's strong cost management and 10-year average net income growth of 15% despite recent challenges.

Jonathan Chappell inquired about the sequential decrease in salaries, wages, and benefits as a percentage of revenue, considering the annual wage increase in September, and asked about the impact of headcount changes and expected Q4 uplift on this line item.

Answer

Adam Satterfield, CFO, confirmed the September wage increase and noted that headcount continued to drift down through Q3, contributing to cost management. He expects normal attrition in Q4 and anticipates a combined 170 basis point increase in salaries, wages, and benefits and operating supplies and expenses sequentially.

Jonathan Chappell from Evercore ISI asked about the sequential decrease in salaries, wages, and benefits as a percentage of revenue, questioning if it was due to headcount reductions despite the annual September 1st wage increase, and how this would impact the operating ratio from Q3 to Q4.

Answer

Adam Satterfield, CFO, confirmed the September wage increase and noted a 6% year-over-year decrease in headcount, contributing to cost management. He explained that the combined salaries, wages, and benefits, along with operating supplies, typically increase the operating ratio by about 170 basis points sequentially from Q3 to Q4.

Jonathan Chappell of Evercore ISI questioned the forecast for pressure on operating supplies and expenses in Q3, given that this line item improved sequentially in Q2 despite similar expectations.

Answer

EVP & CFO Adam Satterfield clarified that Q2's improvement came from strong performance in repairs and maintenance due to retiring older equipment. For Q3, he anticipates pressure from higher fuel prices and potential losses on the sale of older equipment, which are recorded in miscellaneous expenses within overhead.

Jonathan Chappell of Evercore ISI questioned the expectation for pressure on operating supplies and expenses in Q3, given that this line item improved sequentially in Q2 despite similar forecasts.

Answer

EVP & CFO Adam Satterfield clarified that Q2's improvement was driven by strong performance in repairs and maintenance from retiring older equipment. For Q3, he anticipates pressure from higher fuel prices, the annual wage increase, and potential losses on the sale of older fleet assets, which are recorded in miscellaneous expenses.

Jonathan Chappell requested a breakdown of the April revenue-per-day metric into tonnage and yield, and asked if the pricing environment has changed due to sustained tonnage headwinds.

Answer

CFO Adam Satterfield declined to provide a detailed April breakdown due to holiday timing distortions but projected Q2 revenue per hundredweight (ex-fuel) to be in the 5.0% to 5.5% range. He affirmed that ODFL continues to successfully secure price increases, attributing this to their consistent, cost-based yield management strategy and rising operational costs.

Jonathan Chappell requested a breakdown of the April-to-date revenue per day into tonnage and yield (ex-fuel) and asked about any changes in the pricing environment.

Answer

CFO Adam Satterfield declined to provide a precise breakdown due to holiday timing but projected full-quarter revenue per hundredweight (ex-fuel) to be in the 5% to 5.5% range. He affirmed that ODFL continues to successfully secure price increases through its disciplined, cost-based yield management strategy.

Jonathan Chappell asked about the outlook for service center openings in 2025 and the company's ability to quickly add capacity if a demand inflection occurs.

Answer

CFO Adam Satterfield stated that openings are demand-driven and with over 30% excess capacity, they are not obligated to open any new centers but have several near completion that can be activated quickly. President & CEO Marty Freeman added that two facilities currently under construction are hub facilities, which will help lower future linehaul costs.

Jonathan Chappell asked management to frame the impact of pre-election uncertainty on shipper behavior versus the ongoing industrial macro headwinds the company has been facing.

Answer

CFO Adam Satterfield acknowledged that election years can create temporary uncertainty, causing some customers to be conservative. However, he believes that once the election is over, business fundamentals and consumer health will drive a return to growth, as companies must eventually focus on expansion and replenishment.

Jonathan Chappell asked Ghislain Houle for clarification on depreciation, specifically if the Q4 run rate, annualized with 4% inflation, would result in a $40 million year-over-year decrease. He also inquired about overall inflation, particularly the 'comp per employee' under that scenario.

Answer

Ghislain Houle, Chief Financial Officer, clarified that depreciation would be a smaller headwind of approximately $50 million in 2026 versus 2025, due to the full-year effect of the depreciation study. He stated that all-in rail inflation is expected to be slightly lower than 3%, and 'comp per employee' was about 7% in Q4 2025, projected to be in the mid-single-digit range for 2026.

Jonathan Chappell followed up on the depreciation discussion, asking Ghislain Houle to confirm the correct starting point for depreciation, noting that annualizing the Q4 run rate with 4% inflation would suggest a CAD 40 million year-over-year decrease. He also inquired about overall inflation, specifically the compensation per employee, given the CAD 100 million impact in comp and benefits.

Answer

Ghislain Houle, CFO, clarified that depreciation, historically a CAD 100 million year-over-year headwind, will be a smaller headwind of approximately CAD 50 million in 2026 versus 2025 due to the full-year effect of the depreciation study. He stated that the 'all-in rail inflation' is slightly lower than 3%, and compensation per employee, which was about 7% in Q4 2025, is expected to be in the mid-single-digit range for 2026.

Jonathan Chappell asked about the Falcon Premium service with Union Pacific, specifically regarding any out-clauses or agreement terms that could be a concern amid merger speculation.

Answer

Interim Chief Commercial Officer Janet Drysdale responded by emphasizing the service's focus on the Mexico-to-Canada corridor, stating that the North-South traffic is an important part of the service, implying its strategic value would continue. She did not comment on specific contractual terms.

Jonathan Chappell asked about the trajectory of revenue per RTM, questioning if it can remain positive on a year-over-year basis given the shift from currency tailwinds to headwinds and potential mix pressure from strong intermodal growth.

Answer

CEO Tracy Robinson expressed confidence that in most scenarios, revenue per RTM should remain positive for the full year. She indicated that their models, which account for growth in both international and domestic intermodal as well as bulk and merchandise traffic, support a positive outcome by year-end.

Jonathan Chappell asked how CN manages non-labor expense lines like purchased services and equipment rents to align with fluctuating volumes and ensure incremental margins on a potential second-half recovery.

Answer

Chief Network Operations Officer Pat Whitehead detailed the company's resource flexibility, including over 120 stored locomotives and a productive car fleet. President and CEO Tracy Robinson added that expenses are being managed very tightly to start the year, with a clear plan to flex resources up as volumes grow.

Jonathan Chappell of Evercore ISI asked how CN is managing resources amid soft demand while also preparing for a potential volume recovery at West Coast ports, balancing cost control with service reliability.

Answer

Chief Network Operations Officer Patrick Whitehead stated they are adjusting resources while maintaining surge capacity through a stored locomotive fleet and crew availability. Chief Field Operations Officer Derek Taylor added they are taking a patient, 'scaffold approach.' CEO Tracy Robinson concluded that service quality remains the primary focus.

Jonathan Chappell inquired about the significant sequential and year-over-year decline in Dedicated revenue per truck per week in Q4, and its contribution to the EPS shortfall. He also asked about the volume/revenue dependency of the targeted $40 million in cost savings for 2026.

Answer

Mark Rourke, President and CEO, attributed the Dedicated revenue per truck per week decline to unplanned automotive production shutdowns due to component issues, primarily in November, which impacted both dedicated and intermodal Mexico business. He also cited higher costs from three large dedicated startups. Darrell Campbell, EVP and CFO, added that heightened healthcare costs in Q4 predominantly affected the truckload segment, particularly dedicated. Darrell Campbell clarified that the $40 million in cost savings are largely productivity-based and structural, implying that costs will not increase at the same rate as volume, though inflationary pressures remain a factor.

Jonathan Chappell of Evercore ISI asked for clarification on the sequential and year-over-year decline in Dedicated revenue per truck per week in Q4, noting it appeared counter-seasonal and a significant contributor to the EPS shortfall. He also followed up on the volume/revenue dependency of the targeted $40 million in cost savings for 2026.

Answer

Mark Rourke, President and CEO, attributed the Dedicated revenue per truck per week decline primarily to unplanned automotive production shutdowns due to component issues, particularly in November, and higher startup costs for three large new Dedicated implementations. Darrell Campbell, EVP and CFO, added that heightened healthcare costs also impacted Truckload, mainly Dedicated. Darrell Campbell clarified that much of the $40 million in cost savings is productivity-based and structural, meaning costs won't return at the same pace as volume increases, though inflationary pressures remain.

Jonathan Chappell of Evercore ISI questioned the logistics segment's margin performance, noting that it remains low despite the growth of higher-margin Power Only services. He also asked about the higher-than-expected loss in the 'other' segment and its impact on guidance.

Answer

CEO Mark Rourke attributed the logistics margin pressure to a mix shift within traditional brokerage and noted that Power Only is performing well financially. EVP Jim Filter added that customers are currently favoring asset-based solutions. CFO Darrell Campbell clarified that the 'other' segment's performance was within the range contemplated in their guidance and advised modeling a similar run rate for the rest of the year.

Jonathan Chappell asked if Schneider is walking away from business to maintain price discipline and sought to clarify whether the revised guidance assumes tempered seasonality or a flatline from Q1 into the second half of the year.

Answer

CEO Mark Rourke confirmed that maintaining price discipline means they will forego volume with certain shippers, a strategy reinforced by the increasing frequency of 'mini allocation events' that present more attractive opportunities. Regarding guidance, he stated that their outlook recognizes the tempering at the end of Q1 and incorporates more moderate expectations for both price and volume going forward compared to their prior guidance.

Jon Chappell noted the meaningful sequential increase in intermodal revenue per load and asked what drove the improvement and if this represents a new baseline for 2025.

Answer

EVP and Group President Jim Filter attributed the strong Q4 revenue per load to high demand in headhaul markets and specific project work. He advised against viewing it as a new baseline, suggesting it should be considered part of normal seasonality for the Intermodal segment.

Jonathan Chappell questioned the conservative nature of the 2026 guidance, particularly regarding D&S margins, potential upside from Venezuelan oil flows, and the impact of share repurchases. He also asked about the expected return of rates from a 'price holiday' for major customers in 2025 and the potential for surging gas turbine demand.

Answer

CEO David Grzebinski and President and COO Christian O'Neil clarified that D&S margins are expected to be lower in H1 (backup power) and higher in H2 (behind-the-meter, engineered solutions), with future margin improvement from service and parts in 2027/2028. They confirmed that rates from the 2025 'price holiday' for long-term customers would revert in 2026. David Grzebinski noted that surging gas turbine demand is a 2027 revenue event, potentially significant in 2028/2029. Regarding Venezuela, Christian O'Neil explained that while international moves are for larger ships, Kirby benefits from increased heavy crude refining in the Gulf, leading to more barge movements of heavies and intermediates, though significant volumes are yet to be seen.

Jonathan Chappell questioned the conservative mid-to-high single-digit margin guidance for Distribution and Services, given power generation's high single-digit margins. He also asked about potential share buybacks, the upside from Venezuelan oil flows, the return of rates from 2025 'price holidays,' and the impact of surging gas turbine demand.

Answer

David Grzebinski, CEO, explained D&S margin variability, noting lower margins for standard backup power versus higher margins for highly engineered behind-the-meter systems, with the latter expected to ship more in H2 2026. He confirmed some share buyback is in guidance, alongside a focus on M&A. Christian O'Neil, President and COO, elaborated on the benefits of Venezuelan crude for barge movements (heavier crude, intermediates) and confirmed that 2025 'rate holiday' rates would return in 2026. David Grzebinski mentioned gas turbine packaging for 2027 revenue, with potential for significant growth in 2028-2029.

Jon Chappell inquired about the growth trajectory and potential lumpiness of the power generation business, given its significant Q3 performance. He also sought clarification on the factors contributing to the improved inland market conditions in Q4, including weather, crude slate, and chemical customer demand, and how these might impact utilization.

Answer

David Grzebinski (President and CEO) acknowledged some lumpiness in power generation due to OEM delivery schedules but noted a record backlog, expecting smoother, continued growth. Christian O’Neil (President and COO) explained that inland market conditions troughed in Q3 at 80% utilization and are now at 87.6%, with positive momentum from colder weather, heavier crude feedstocks, and signs of improvement in the chemical market.

Jon Chappell inquired about the growth trajectory and potential lumpiness of the power generation business, and sought clarification on the factors contributing to the improved inland market conditions observed in the fourth quarter, including weather, crude slate, and chemical customer demand.

Answer

David Grzebinski, Kirby's Chief Executive Officer, explained that power generation growth, while robust with a record backlog (up mid-teens year-over-year and sequentially), would still experience some lumpiness due to OEM engine delivery schedules. Christian O’Neil, Kirby's President and Chief Operating Officer, detailed that inland market conditions, which troughed at 80% utilization in Q3, had improved to 87.6% in Q4, driven by factors like colder weather, a shift to heavier crude feedstocks, and signs of strengthening in the chemical market.

Jonathan Chappell from Evercore ISI inquired about the current M&A environment for inland marine assets and whether Kirby is seeing more opportunities. He also asked about the sustainability of cost controls in the Distribution & Services (D&S) segment and when the significant D&S backlog might translate into accelerated revenue.

Answer

CEO David W. Grzebinski confirmed the M&A environment is more constructive than in recent years, stating that a consolidating marine acquisition is a top priority for capital. Regarding D&S, he noted that while lean processes are improving margins, a mix shift towards thinner-margin data center projects presents a challenge. He expects the backlog to begin converting to revenue in the second half of the year. President and COO Christian O'Neil added that D&S demand remains strong despite OEM supply delays.

Jonathan Chappell sought tangible evidence or explanation for why the current market cycle's margin squeeze for brokers would be shorter and less painful than historically, referencing recent implementations.

Answer

President of North American Surface Transportation Michael Castagnetto attributed this to improved data and technology empowering their people, leading to a better cost of hire advantage in Q4 2025 compared to previous periods. He explained that with a true demand signal, their ability to match freight to carriers and manage the squeeze would be quicker and more intelligent, allowing them to navigate to the other side of the squeeze more effectively.

Jonathan Chappell inquired about tangible evidence or examples to support the expectation that the current market cycle's margin squeeze for brokers will be shorter and less painful than historically experienced.

Answer

President of North American Surface Transportation Michael Castagnetto attributed the improved resilience to better data and technology in the hands of their people, which enhanced their cost of hire advantage in Q4. He noted that while the company won't be immune to a squeeze during a true market inflection with increased demand, their ability to manage it quicker, address it faster, and more intelligently will lead to a shorter and shallower impact compared to past cycles.

Jonathan Chappell asked for clarification on the 2026 operating income bridge, specifically if the global forwarding run rate assumption was reset lower due to recent challenges. He also inquired about the company's optionality for demonstrable outgrowth, asking about the inorganic opportunity set, potential risks of acquiring businesses outside the core, and how internal advancements would integrate.

Answer

CFO Damon Lee clarified that the updated 2026 operating income bridge's incremental pressure stems from slower-than-expected truckload rate recovery, not a lower global forwarding run rate, which is performing as anticipated despite Q3/Q4 challenges. On outgrowth optionality, he stated the 2026 plan is heavily focused on organic initiatives. While inorganic opportunities are considered, CEO Dave Bozeman and Damon Lee emphasized a 'disciplined and measured' approach with a 'very high bar' for M&A, ensuring high-quality decisions, clear value, and obvious synergies to mitigate risks.

Jonathan Chappell asked for clarification on the 2026 operating income bridge, specifically if the global forwarding run rate assumption was reset lower due to recent challenges. He also inquired about the company's optionality for demonstrable outgrowth, asking about the inorganic opportunity set, potential risks of acquiring businesses outside the core, and how internal advancements would integrate.

Answer

CFO Damon Lee clarified that the updated 2026 operating income bridge's incremental pressure stems from slower-than-expected truckload rate recovery, not a lower global forwarding run rate, which is performing as anticipated despite Q3/Q4 challenges. On outgrowth optionality, he stated the 2026 plan is heavily focused on organic initiatives. While inorganic opportunities are considered, CEO Dave Bozeman and Damon Lee emphasized a 'disciplined and measured' approach with a 'very high bar' for M&A, ensuring high-quality decisions, clear value, and obvious synergies to mitigate risks.

Jonathan Chappell inquired about C.H. Robinson's financial technology offerings for carriers and whether the company sees a competitive advantage in expanding these services.

Answer

Michael Castagnetto, President of North American Surface Transportation, discussed the 'Robinson Financial' offering, launched in partnership with Triumph. He explained that providing industry-leading payment programs and financial services creates a more complete ecosystem for carriers, adding another point of differentiation when combined with the company's freight volume and logistics expertise.

Jonathan Chappell posed a big-picture question on how C.H. Robinson will balance its goal of winning back market share with maintaining its newly established profitability thresholds once the freight market recovers.

Answer

CEO David Bozeman and President of North American Surface Transportation Michael Castagnetto addressed this. Bozeman cited the new operating model, technology, and people as the foundation enabling them to pursue both growth and profitability. Castagnetto added that the company's advanced pricing and costing engines provide an advantage in any market, allowing them to find the optimal combination of volume and margin.

Jonathan Chappell inquired if there is a point where achieving further productivity and margin expansion becomes significantly more difficult without the support of a broader market volume recovery, noting that expenses are already at the low end of guidance.

Answer

CEO Dave Bozeman acknowledged that improvement isn't always linear but emphasized a continuous improvement mentality regardless of market conditions. Arun Rajan, Chief Strategy and Innovation Officer, added that ongoing strategic initiatives and new technologies like Generative AI will continue to power productivity gains into 2025 and beyond.

Jonathan Chappell asked about the expected trajectory for CPKC's mid-single-digit RTMs and double-digit EPS growth, specifically whether Q1 would be a slower start with a ramp-up through the year.

Answer

EVP and CFO Nadeem Velani confirmed that Q1 is expected to be the toughest quarter due to challenging year-over-year comparisons, but anticipates easier comparisons in Q2 and Q3, leading to a natural increase in performance throughout the year rather than a "hockey stick" pattern. He clarified that the carbon tax impact is net neutral to earnings.

Jonathan Chappell, Senior Managing Director at Evercore ISI, sought insight into CPKC's expected Q1 2026 performance, considering headwinds like weather, carbon tax, and exchange rates. He asked if the company anticipates a slower start to the year with a ramp-up towards mid-single-digit RTMs and double-digit EPS, implying a back-half loaded trajectory.

Answer

Nadeem Velani, EVP and Chief Financial Officer, confirmed that Q1 would be the toughest quarter due to challenging comparisons, but anticipated a natural increase throughout the year, not a "hockey stick" recovery. He clarified that the carbon tax is net neutral to earnings, only impacting cents per RTM, and expressed confidence in year-over-year OR improvement despite the Q1 start.

Jonathan Chappell questioned the feasibility of CPKC's Q4 guidance for mid-single-digit volume growth and a sub-57 operating ratio, given current quarter-to-date volume trends, and asked for the line of sight to these targets.

Answer

EVP and CFO Nadeem Velani acknowledged tough year-over-year comparisons but pointed to easier comps in November and December due to prior labor disruptions. He expressed confidence in achieving mid-single-digit RTMs and a sub-57 operating ratio, citing strong historical year-end finishes and expecting at least 10% EPS growth for the year, despite a recent chip shortage in auto.

Jonathan Chappell questioned how CPKC plans to achieve its mid-single-digit volume growth and double-digit earnings growth targets, along with a sub-57 operating ratio, with only eight weeks remaining in the year, given recent volume trends.

Answer

EVP and CFO Nadeem Velani acknowledged tough year-over-year comparisons but highlighted easier comparisons in November due to prior-year labor disruptions. He expressed strong visibility to mid-single-digit RTMs, with bulk volumes offsetting auto chip shortages. Velani reiterated confidence in achieving a sub-57 operating ratio and at least 10% EPS growth for the year, citing strong historical Q4 finishes.

Jonathan Chappell from Evercore ISI asked for a quantification of the $0.03 to $0.04 EPS impact from the recent systems integration, whether the costs were fully contained in Q2, and the expected sequential impact moving into Q3.

Answer

EVP & CFO Nadeem Velani quantified the impact as approximately $30 to $40 million in revenue, with the remainder of the operating income impact tied to higher expenses and missed efficiencies from increased dwell and lower velocity. He stated that while there might be a small cost carryover into July, the impact is largely contained in Q2, and the company expects to start Q3 'pretty fresh'.

Jonathan Chappell of Evercore ISI asked for a quantification of the Gemini Alliance's potential contribution and whether the outlook has changed given recent market uncertainty.

Answer

EVP & CMO John Brooks stated his enthusiasm has not waned and that the partnership started faster than anticipated. He noted they are quickly moving towards two trains a day in Vancouver, primarily tied to Gemini. While they are watching the Lazaro Cardenas cross-border business closely, he does not feel potential changes will be a 'needle mover' and remains excited about the partnership's potential.

Jonathan Chappell asked about the momentum in core pricing and sought clarification on the revenue per RTM pressure observed in the Automotive and Intermodal segments.

Answer

EVP and CMO John Brooks confirmed that the pressure on revenue per RTM in Automotive and Intermodal was due to a significant increase in length of haul, which was up 17% and 20% respectively. He stated that overall core pricing remains strong, with contract renewals running north of 5%. Brooks acknowledged the competitive pressure from trucking in the intermodal space but noted a potential for catch-up as the market tightens.

Jonathan Chappell asked about Union Pacific's strategy to achieve operating ratio (OR) improvement in 2026, considering that pricing may not be a primary driver, accelerated inflation (specifically 4% for compensation per employee), and a lack of macro recovery. He inquired whether the improvement would primarily stem from headcount reductions or productivity gains, and asked for an indication of the expected magnitude.

Answer

Jennifer Hamann, Chief Financial Officer, explained that while price is not expected to be a tailwind in 2026 due to factors like natural gas prices, coal pricing, and a weak domestic intermodal market, OR improvement will be driven by continued productivity and efficiency from Eric Gehringer's team, along with a more favorable business mix. Jim Vena, CEO, added that the company is conserving cash by pausing share buybacks and prefers a conservative outlook to ensure over-delivery.

Jonathan Chappell asked about Union Pacific's strategy for achieving Operating Ratio (OR) improvement in 2026, considering the expectation that pricing won't be a primary driver, accelerated inflation, and a lack of macro recovery. He inquired if headcount productivity would be the main factor and the potential magnitude of improvement.

Answer

Jennifer Hamann, Chief Financial Officer, explained that while pricing won't be a tailwind due to natural gas prices, coal pricing, and a weak domestic intermodal market, productivity driven by Eric Gehringer's team and a more favorable business mix will support OR improvement. Jim Vena, Chief Executive Officer, added that the company is conserving cash by pausing share buybacks and maintains a conservative outlook.

Jonathan Chappell of Evercore ISI questioned the timing of potential merger discussions with Norfolk Southern, asking why Union Pacific would pursue a multi-year distraction given its strong organic momentum and excellent performance in a tough freight environment.

Answer

CEO Jim Vena responded by framing the decision as a forward-looking move to stay ahead of technological and fundamental industry changes. He emphasized that after years of building a highly efficient and customer-focused railroad, the company is now in a position to explore what's possible for the future to better serve customers and the nation, stating that standing still means getting left behind.

Jonathan Chappell of Evercore ISI asked how the company manages resources amid volatility within the Intermodal segment, specifically a potential decline in international volumes alongside growth in domestic.

Answer

EVP of Operations Eric Gehringer clarified that they always maintain a buffer of resources to ensure service levels. He explained their adjustment process involves first filling latent capacity on existing trains, then combining services, and only removing train symbols as a last resort, a process now accelerated by technology.

Jonathan Chappell of Evercore ISI inquired about the specific initiatives beyond labor that will drive workforce productivity in 2025, especially in the context of managing the guided 4% all-in cost per employee increase.

Answer

EVP of Operations Eric Gehringer detailed a multi-faceted approach to productivity, highlighting over 75 initiatives. Key areas include fundamental operational improvements like recrew rates, deploying technology in yards for more efficient car handling, automating terminal and maintenance tasks, and optimizing purchased services.

Jonathan Chappell of Evercore ISI asked if maintaining strong pricing momentum, as seen in the 5% ARC increase in Bulk and Industrial, requires a supportive macro volume environment.

Answer

EVP of Marketing and Sales Kenny Rocker responded that the company's ability to price is not dependent on the macro environment. Instead, it is linked to the value provided by their network performance, service levels, and capital investments. He stated that they are crystal clear with customers on this value proposition and see this pricing approach as sustainable.

Jonathan Chappell sought clarification on CSX's coal revenue per unit (RPU) calculation and expectations for its stabilization or improvement in Q1 and full-year 2026, given its importance to yield.

Answer

Maryclare Kenney, SVP and Chief Commercial Officer, CSX Corporation, explained that RPU is impacted by business mix, with stronger growth expected in lower RPU segments like intermodal, minerals, and fertilizers, and softness in higher RPU areas. Kevin Boone, EVP and CFO, CSX Corporation, added that coal RPU comps would largely stabilize after Q1 2026, potentially slightly down, influenced by mix and southern utility demand.

Jon Chappell sought clarification on the calculation of coal revenue per unit (RPU) and asked about expectations for coal RPU in Q1 and full-year 2026, specifically whether it is anticipated to stabilize or improve from the Q4 exit rate.

Answer

SVP and Chief Commercial Officer Maryclare Kenney explained that mix always plays a role, with stronger growth expected in lower RPU segments like intermodal, minerals, and fertilizers, impacting overall RPU. EVP and CFO Kevin Boone added that after lapping difficult comps, coal RPU should be more stable, possibly slightly down, by Q1 2026, with stronger southern utility demand being helpful.

Jonathan Chappell asked Sean Pelkey to detail the exit rate on key cost line items for Q4 and into 2026, given the completion of major projects and expected cost reductions.

Answer

Sean Pelkey, EVP and CFO, detailed sequential benefits from reduced severance, advisory, and network reroute costs, noting approximately $100 million in non-repeating costs for 2026. He highlighted strong underlying cost momentum in labor, PS&O efficiency, fuel efficiency, and improved car cycle times.

Jonathan Chappell from Evercore ISI asked for the sequential outlook on coal RPU and a quantification of the expected revenue headwinds from coal and diesel prices in the second half of the year compared to the first half.

Answer

EVP & CFO Sean Pelkey projected that Q3 total coal RPU would be similar to or modestly down from Q2. He quantified the commodity price revenue headwind at approximately $200 million in the first half, which is expected to moderate to about $100 million in the second half, setting up a potential return to year-over-year growth in Q4.

Jonathan Chappell sought clarification on the $45 million in Q1 disruption costs, asking if this amount was incremental to prior guidance and if it was fully contained to the first quarter, in order to set a clean baseline for Q2.

Answer

CFO Sean Pelkey detailed that the $45 million included about $20-25 million in expected reroute costs and another $20-25 million from weather and network congestion. He indicated that while the congestion-related portion represents an opportunity for improvement, not all of it will be eliminated in Q2.

Jonathan Chappell requested clarification on the quarterly cadence for labor costs, noting the tough comparison in Q1 and easy comparison in Q4 due to incentive compensation adjustments.

Answer

EVP and CFO Sean Pelkey provided a modeling framework. He advised starting with the Q4 cost per employee, adding back the incentive comp adjustment, and using that as a run rate for the first half of 2025. For the second half, he suggested adding the expected 4.4% wage inflation to the first-half run rate. He also noted potential favorability from lower overtime and health costs.

Jonathan Chappell requested clarification on the magnitude of the expected Q4 operating margin reduction, given the stated headwinds from fuel, coal, and hurricane impacts.

Answer

CFO Sean Pelkey quantified the headwinds, noting that lower fuel and coal prices represent about a $100 million year-over-year operating income headwind in Q4, compounded by an estimated $50 million impact from the hurricane. He concluded that the sequential margin decline from Q3 to Q4 would likely be worse than normal seasonality as a result.

Jonathan Chappell asked whether margin progression from Q1 would primarily be driven by cost efficiencies alone, or if a true market inflection with price increases is necessary for more significant margin improvement.

Answer

CEO Adam Miller stated the company aims for both cost and revenue improvements, acknowledging that normalized margins would require market lift beyond cost reductions. CFO Andrew Hess outlined a three-pronged approach for margin repair: capturing price, increasing volume, and reducing cost per mile, expecting each to contribute to margin improvement in 2026, with cost alone driving some expansion.

Jonathan Chappell inquired about the company's margin progression, asking whether cost and efficiency improvements alone could drive margin expansion, or if a true market inflection with price increases is necessary for achieving higher highs and lows.

Answer

CEO Adam Miller stated that the company aims for both cost reductions and revenue lift to improve margins, acknowledging that normalized margins would require market improvement beyond cost efforts. CFO Andrew Hess described a three-pronged approach for margin repair: capturing price, increasing volume, and reducing cost per mile, expecting each to contribute in 2026, with cost alone potentially driving some margin expansion.

Jonathan Chappell questioned Knight-Swift's support for the UMP-NSC merger, asking how it benefits the truckload business, particularly long-haul freight, given potential increased competition to their core one-way market.

Answer

CEO Adam Miller stated that Knight-Swift supports the UMP-NSC merger if it offers cost-effective solutions for customers, especially with their intermodal offering. He clarified that long-haul freight is not a significant part of their truckload business, as it's typically the cheapest and often handled by smaller, less safe carriers. Therefore, an improved intermodal solution for this segment would be additive, not detrimental, to their regional truckload operations.

Jonathan Chappell (Evercore ISI) questioned Knight-Swift's support for the UMP-NSC potential merger, asking for a detailed explanation of its benefits to the truckload business, particularly the long-haul segment, given potential increased competition to their core operations.

Answer

CEO Adam Miller stated that Knight-Swift supports the merger if it offers a cost-effective solution to customers, leveraging their intermodal offering. He clarified that the long-haul freight typically targeted by such mergers is not a significant part of Knight-Swift's truckload business, which focuses on regional, tougher freight with healthier revenue per truck per day. Miller believes that providing an intermodal solution for this cheaper, long-haul freight would be additive rather than detrimental to their truckload business.

Jonathan Chappell asked about the strategy for rightsizing the tractor and trailer fleet amid market uncertainty and how the company is managing different cost levers to prepare for various potential market paths.

Answer

Executive Adam Miller explained that the company is tightening its fleet by selling underutilized tractors and trailers to reduce depreciation and improve asset productivity. He noted they still have opportunities to reduce the trailer-to-tractor ratio and the number of unseated tractors. Miller emphasized this move cleans up excess capital without sacrificing the flexibility to respond to a market surge, as they can slow down sales or order new equipment if needed.

Jonathan Chappell asked if the same controlled initiatives and margin aspirations seen in Truckload and LTL could be applied to the Intermodal and Logistics businesses, or if they are fundamentally different.

Answer

Executive Adam Miller explained that Logistics is complementary to Truckload, with performance tied to the freight cycle, while Intermodal operates differently, relying on rail partnerships and scale. Executive Andrew Hess added that Intermodal is now structurally better positioned with a diversified customer base and improved network efficiency, putting it on a clear path to profitability in 2025.

Jonathan Chappell of Evercore ISI inquired about the current mix of spot versus contract business and the resulting operational flexibility for a market inflection.

Answer

Executive Adam Miller stated that spot exposure is in the low double-digits but can flex to 20-25% in stronger markets, noting that larger brands like Swift are seeing acute demand. Executive Brad Stewart added that existing slack in fleet utilization provides further capacity to capture spot opportunities without disrupting contract business.

Jonathan Chappell inquired about the breakdown of FedEx's B2B revenue growth in Q2, asking how much was new volume versus yield/surcharge initiatives, and if this growth magnitude is expected to continue in the second half.

Answer

EVP and Chief Customer Officer Brie Carere clarified that B2B contributed nearly half of the revenue growth, expecting this trend to remain consistent. She noted it was a combination of new B2B acquisition, increased share of wallet, and strong small business B2B performance, alongside their revenue quality strategy.

Jonathan Chappell inquired about the B2B segment's contribution to Q2 revenue growth, seeking a breakdown of new volume versus yield/surcharge impacts, and whether this growth magnitude is sustainable for the second half of the fiscal year.

Answer

Brie Carere, EVP and Chief Customer Officer, FedEx, clarified that B2B contributed 'nearly half' of Q2 revenue growth, expecting this consistency throughout the year. She noted the growth stemmed from a combination of new business acquisition, increased share of wallet, strong small business B2B performance, and the company's revenue quality strategy.

Jonathan Chappell asked how FedEx plans to achieve revenue acceleration to the 5% midpoint of its full-year guidance, given intensifying global trade headwinds and challenging year-over-year comparisons, inquiring if it's driven by price/yield or significant volume pickup.

Answer

EVP & Chief Customer Officer Brie Carere explained that the revenue acceleration is driven by several factors: the disappearance of the $280 million USPS top-line headwind, continued onboarding of new business (e.g., Amazon), modest yield improvement at FedEx Freight in the back half of the year, and sustained domestic momentum. She emphasized that the midpoint is realistic.

Jonathan Chappell sought to clarify the $170 million Q1 tariff impact, asking how much is a direct revenue loss versus costs that can be mitigated by flexing the network, such as the significant capacity cuts on the Asia-to-U.S. lane in May.

Answer

President & CEO Raj Subramaniam credited the Tricolor strategy for enabling the network flexibility to make such capacity adjustments. EVP & CFO John Dietrich added that it's a fluid situation where capacity is redirected, not just eliminated, and declined to parse the $170 million headwind into revenue and cost components.

Jonathan Chappell sought to clarify the $170 million Q1 tariff impact, asking how much is purely a revenue loss versus costs that could be mitigated through network flexibility, such as the recent capacity cuts on the Asia-to-U.S. lane.

Answer

President & CEO Raj Subramaniam credited the Tricolor strategy for enabling recent network flexibility. EVP & CFO John Dietrich explained that it's a fluid situation where capacity is redirected, not just eliminated, so it's not a simple cost takeout. He declined to parse the $170 million but affirmed it was an appropriate estimate of the net impact.

Jonathan Chappell of Evercore ISI asked for quantification of the impact of higher-than-expected inflation on the revised guidance and its potential stickiness for future margins.

Answer

EVP and CFO John Dietrich explained that inflationary pressures have been a consistent factor, particularly with increased volumes during peak and wage considerations. He noted it's an ongoing element they are managing and was one of several factors contributing to the updated guidance.

Jonathan Chappell of Evercore ISI asked about the potential impact of new tariffs, whether FedEx is seeing any customer pull-forward of shipments, and how the network would manage a potential short-term demand surge.

Answer

EVP and Chief Customer Officer Brie Carere noted there might be a slight pull-forward reflected in December volumes from the ports, but it's difficult to distinguish from peak consumer demand. President and CEO Raj Subramaniam added that FedEx's global scale and agility allow it to move capacity much faster than manufacturing can shift. He highlighted that the company's end-to-end international service, including customs clearance, provides a competitive advantage in navigating such changes.

Jonathan Chappell inquired why the Q1 DRIVE savings of $390 million were below internal expectations and asked what provides confidence that the full-year $2.2 billion target is still achievable after missing the first quarter's target.

Answer

EVP and CFO John Dietrich acknowledged the Q1 savings were below what they had hoped for but emphasized the robustness of the DRIVE process. He expressed strong confidence in reaching the $2.2 billion full-year goal, citing the successful delivery of the $1.8 billion target in the prior fiscal year and the senior leadership team's direct, weekly involvement in overseeing the strong pipeline of initiatives.

Jonathan Chappell inquired about Frontline's capital allocation strategy, specifically if the recent deleveraging indicates a new focus on strengthening the balance sheet akin to peers, while maintaining its robust dividend policy. He also challenged the premise of scrapping ships at 20-22 years given strong market rates, asking how these vessels exit the effective fleet without actual scrapping.

Answer

CEO Lars Barstad clarified that the current low loan-to-value (LTV) is a result of conservative financial analysis and hesitation to invest in a market where resale values outpaced freight rates, rather than an active deleveraging strategy. Regarding older vessels, Mr. Barstad explained that while direct scrapping is low, ships over 20 years effectively exit the compliant market due to high insurance costs, limited terminal access, and their alternative use in the sanctioned oil trade, leading to significant efficiency loss from 18 years of age.

Jonathan Chappell inquired about Frontline's capital allocation strategy, specifically whether the recent deleveraging indicates a new focus on strengthening the balance sheet alongside its robust dividend policy. He also challenged the assumption of scrapping ships at 20-22 years, asking how older vessels contribute to fleet utilization without actual scrapping, given strong market rates.

Answer

CEO Lars Barstad clarified that the current low loan-to-value (LTV) is a result of conservative financial analysis and hesitation to invest in a market where resale values outpaced term charter rates, rather than an active deleveraging strategy. Regarding older vessels, Mr. Barstad explained that while not always scrapped, ships over 18-20 years face significant efficiency loss in the compliant market due to high insurance costs and terminal bans, often shifting to the sanctioned oil trade, which effectively removes them from the compliant fleet.

Jonathan Chappell asked why Frontline's stock is trading at a discount to NAV despite a strong outlook and whether a strategic change, such as monetizing older vessels, is being considered.

Answer

Executive Lars Barstad acknowledged the discount, attributing it to a general investor outflow from tanker stocks and a desire to 'see the proof in the pudding' before investing. He defended the spot exposure strategy to retain upside. Regarding asset sales, he expressed caution about selling older vessels to counterparties involved in sanctioned trades and affirmed the strategy is to maintain the current fleet size.

Jonathan Chappell of Evercore ISI asked for an update on the tangible market impact of recent geopolitical events and sanctions, questioning if they have 'real teeth'. He also sought clarification on the number of scheduled dry docks for 2025 and the reason for the significantly low Q4 administrative expenses.

Answer

Executive Lars Barstad confirmed that recent sanctions have had a material impact, citing the self-sanctioning by China's Shandong province as a 'game changer' that caused a rate spike for certain vessels and led to a backup of Iranian crude. Executive Inger Klemp clarified that only three ships (two VLCCs, one Suezmax) are scheduled for dry dock in 2025. She explained that Q4 administrative expenses were low due to a one-time revaluation gain on a synthetic option program and that a normalized quarterly run-rate would be approximately $9 million to $10 million.

Jonathan Chappell of Evercore ISI asked about the potential for proactive balance sheet deleveraging amid market volatility and inquired about the market impact of a simultaneous resolution in Ukraine and increased sanctions on Iran.

Answer

Executive Inger Klemp stated that Frontline is comfortable with its current debt level, noting a loan-to-value ratio just below 50% and confidence in fleet asset values. Executive Lars Barstad addressed the geopolitical scenario, explaining that a Ukraine resolution could quickly reverse sanctions, shifting trade flows and pushing Atlantic barrels to Asia. Conversely, stricter Iran sanctions would force its oil onto compliant tonnage, creating an exponential positive effect for the compliant tanker market.

Jonathan Chappell from Evercore ISI inquired about the completion status of Frontline's refinancing and vessel divestiture programs. He also sought the strategic reasoning for using a sale and leaseback structure in the current market and asked for an analysis of China's oil inventory levels and potential import aggression in the latter half of the year.

Answer

Executive Inger Klemp confirmed that major refinancing and divestiture activities are complete, clarifying the recent sale-leaseback was a refinancing of a prior agreement with bank-like terms. Executive Lars Barstad noted that while China's import activity is currently soft and hard to track due to sanctioned sources, he expects seasonal demand from other regions like India to support the market, even if China's growth remains muted.

Jonathan Chappell asked about the current MR spot rates, noting they are decent but not exceptional despite record output and strong refinery runs, and questioned if a stronger winter is anticipated or if limiting factors exist. He also inquired about Ardmore Shipping's strategy behind fixing a 2-year charter at rates below current spot levels and their appetite for similar long-term deals.

Answer

CEO Gernot Ruppelt acknowledged the point about MR rates lagging VLCCs but highlighted the significant ramp-up in earnings throughout the year and positive long-term demand drivers, including an aging fleet and geopolitical shifts creating volatility and increased trading. He also explained that the 2-year charter was a small portion of the fleet, an opportunity to lock in strong returns with a high-quality counterparty, augmenting and solidifying earnings quality, and reflecting the oil major's confidence in long-term product movement.

Jonathan Chappelle with Evercore inquired about the current MR spot rates, noting they are decent but not phenomenal despite record refined product volumes and strong refinery runs. He asked if this indicates a build-up to a stronger winter period or if there are limiting factors preventing rates from reaching $35,000-$40,000 per day, especially given the strength in the VLCC market. He also asked about the rationale behind the recent two-year time charter at a rate lower than current spot market performance and the company's appetite for similar deals.

Answer

CEO Gernot Ruppelt and President Bart Kelleher explained that while there's a strong correlation between MRs and crude tankers over time, the product tanker sector has seen a significant ramp-up in earnings. They highlighted long-term demand drivers, the evolving product tanker market, and the oldest fleet on record. Geopolitical factors are creating volatility, increasing trading activity, and driving longer voyage distances (e.g., California imports, Atlantic Basin triangulations, Russian CPP imports). Regarding the time charter, Mr. Ruppelt stated it represents a small portion of the fleet, part of a broader portfolio strategy to lock in strong returns with a high-quality counterparty, and reflects the oil major's confidence in long-term physical needs.

Jonathan Chappell inquired about the specifics of the $2 million spread time charter in/out deal, asking if it involved the Matterhorn and if similar opportunities exist for the other three time-chartered vessels expiring soon. He also asked if the uncertain macroeconomic and geopolitical environment is creating more opportunities for fleet expansion or modernization through acquisitions or charters.

Answer

Gernot Ruppelt, an executive at Ardmore, confirmed they are constantly seeking creative spread opportunities but could not share commercially sensitive details. He noted there are no options on the other chartered-in ships but that Ardmore maintains a strong relationship with the owner. Regarding fleet expansion, Ruppelt stated that while they are closely tracking a correction in asset values, they have deemed it prudent to hold off on transactions, maintaining rigorous evaluation discipline.

Jonathan Chappell of Evercore ISI inquired about Ardmore's strategy regarding time charter coverage versus spot market exposure in the current strong market. He also asked how the capital allocation strategy might evolve as the company approaches a net cash position by year-end.

Answer

Incoming CEO Gernot Ruppelt stated that while the company constantly evaluates time charter opportunities, they currently feel very strongly about the spot market's potential and will remain predominantly spot-exposed. Executive Vice Chairman Bart Kelleher added that the capital allocation policy remains consistent, prioritizing further deleveraging to lower breakevens, investing in the existing fleet, and opportunistically pursuing fleet modernization, all while continuing the dividend.

Jonathan Chappell from Evercore ISI Institutional Equities asked for clarification on Landstar's observations regarding declining revenue from other transportation companies and flat October revenue per load, contrasting with market reports of spiking spot rates.

Answer

Jim Todd, CFO and VP, explained that Landstar experienced sub-seasonal pricing, a widening net revenue margin on brokerage business, and dropping tender rejections in Q3. He noted October pricing was flat to September, lagging typical seasonal upticks, and suggested a potential 'Landstar lag' in rate adjustments.

Jonathan Chappell inquired about Landstar's October pricing and volume trends, specifically how they align with market reports of spiking spot rates, given Landstar's reported decline in revenue hauled for other transportation companies.

Answer

CFO Jim Todd explained that Landstar's Q3 saw sub-seasonal pricing and a widening net revenue margin on brokerage business. He noted that October pricing was flat to September, lagging typical historical upticks, and Landstar was not observing the spot rate spikes reported elsewhere. He also asked about Q4 expense expectations and the bridge for incentive compensation in 2026.

Jonathan Chappell of Evercore ISI asked for clarification on the Q3 2025 SG&A expense outlook, specifically how to adjust for a Q2 cost reclassification, and questioned the drivers behind the strong sequential increase in unsided platform revenue per load.

Answer

CFO Jim Todd clarified that for the SG&A forecast, the $4.8 million reclassification should be added back to the Q2 reported figure before applying the seasonal adjustments. He also explained that the unsided platform revenue strength was broad-based across each month of the quarter for both BCO and overall metrics, not just a single month's performance.

Jonathan Chappell questioned the drivers behind the improving BCO count trend and the large increase in truck brokerage carriers, and also asked for an estimate on market overcapacity.

Answer

Executive Matthew Miller explained the jump in brokerage carriers was due to a new vendor partnership providing access to a larger pool of vetted carriers, which will normalize as they become more selective. He noted BCO retention has improved for five straight quarters. CEO Frank Lonegro addressed overcapacity, stating that while the market is not yet balanced, he believes enforcement of new English proficiency rules could tighten capacity first in border-adjacent regions.

Jonathan Chappell of Evercore ISI asked if Landstar's model retains the same operating leverage for the next cycle, given higher structural costs. He also questioned why the Q4 outlook was less optimistic than some peers, probing whether it was conservatism or a reflection of customer demand.

Answer

CFO James Todd affirmed belief in the model's ability to convert 70% of incremental variable contribution to operating income but highlighted a ~$13 million headwind from incentive compensation in 2025 and ongoing insurance cost pressures. CEO Frank Lonegro and executive Matt Dannegger explained the Q4 outlook is based on feedback from their agent network, which does not indicate a robust peak season. They noted that while they are holding their share, customers are not signaling a broad surge in holiday-related volume.

Jonathan Chappell asked for clarification on the Amazon glide-down, specifically why the Q3 decline was 21% versus an anticipated 30%, and inquired about the cost alignment for the non-Amazon business, considering factors like de minimis and lighter SMB volumes, to determine if further cost adjustments are needed.

Answer

Carol Tomé, CEO, explained that the Amazon glide-down is on plan, with the company successfully exiting unwanted volume while growing desired segments like returns, which resulted in a lower overall decline than initially projected. Nando Cesarone, EVP and President U.S., highlighted broader cost-cutting efforts beyond Amazon, including building closures, 34,000 position eliminations, and significant productivity gains from automation and Network of the Future projects, leading to improved operating margins despite volume declines.

Jonathan Chappell asked for clarification on the Amazon glide down, specifically why the Q3 volume decline was 21% versus an anticipated 30%, and whether cost alignment efforts for the non-Amazon business are on track given other market changes.

Answer

Carol Tomé, CEO, clarified that the Amazon glide down is on target for exiting unwanted volume while successfully growing desired Amazon volume, such as returns, which explains the 21% decline. Nando Cesarone, EVP and President U.S., highlighted significant productivity gains across the network, including 34,000 position eliminations and the best production rates in 12-20 years for inside and hub operations, driven by Network of the Future (NOF) automation projects. Brian Dykes, CFO, underscored the achievement of operating margin expansion despite a 12.3% volume decline, demonstrating effective cost management.

Jonathan Chappell of Evercore ISI asked if UPS is seeing pricing pressure on its core organic business, considering the challenging market, despite the strong overall revenue-per-piece growth guidance which benefits from mix changes.

Answer

CEO Carol Tomé pointed to strong Q4 keep rates on the 5.9% GRI as proof of pricing strength. CFO Brian Dykes broke down the 6% RPP growth into thirds: strong base rates, improved customer mix (SMB focus), and improved product mix (premium products). Chief Commercial and Strategy Officer Matthew Guffey added that pricing discipline is supported by technology like 'Architecture of Tomorrow' and 'Deal Manager,' which now handles 96% of deals up to $10 million, allowing for speed and customization.

Jonathan Chappell questioned the persistence of coal RPU headwinds, asking for clarification on sequential versus year-over-year deterioration and when stabilization might occur, given recent export benchmarks.

Answer

Chief Commercial Officer Ed Elkins clarified that while sequential RPU might stabilize, year-over-year deterioration is expected to persist through Q4 and early next year due to sustained weakness in export coal prices. He noted that Q3 saw volume degradation due to the poor pricing environment.

Jonathan Chappelle of Evercore ISI sought clarification on the persistence of coal RPU headwinds, specifically if the pressure would stabilize sequentially or persist year-over-year, and when a stabilization in export coal markets is anticipated.

Answer

Chief Commercial Officer Ed Elkins clarified that while sequential RPU degradation for export coal is not anticipated, year-over-year RPU deterioration will persist, likely through Q4 and early next year, due to sustained weakness in seaborne coal prices. He noted that Q3 saw volume degradation as a result of the poor pricing environment.

Jonathan Chappell noted that the Q1 productivity savings were concentrated in compensation and benefits and asked if future savings toward the $150 million-plus target would come from other areas like purchased services, rents, or materials.

Answer

CFO Jason Zampi confirmed that while labor and fuel efficiency were the most significant drivers this quarter, productivity gains are being realized throughout the income statement, including in purchased services and equipment rents due to a more fluid network. COO John Orr elaborated on numerous initiatives, from fleet management and freight car maintenance to reducing taxi usage, that are contributing to broad-based cost reductions.

Jonathan Chappell of Evercore ISI asked if productivity savings beyond the $55 million in Q1 labor would come from other areas like purchased services and materials to reach the full-year target.

Answer

CFO Jason Zampi confirmed savings are being realized across the P&L, not just in labor. COO John Orr provided detailed examples, including improved fleet management, lower maintenance, reduced loss and damage, and a $15 million drop in taxi usage, all contributing to the $150 million annual goal.

Jonathan Chappell requested more quantitative detail on spot market wins and the potential for realistic volume growth given a mixed macroeconomic outlook.

Answer

CMO Ed Elkins identified the agriculture markets (grain, soybeans) as a key area for spot wins, which were enabled by newfound operational agility and capacity. He contrasted this with weakness in auto. An executive, likely COO John Orr, added that the new intermodal reservation system is key to this agility and will unlock further low-cost growth.

Jonathan Chappell of Evercore ISI asked about any potential volume impact from the recent proxy contest and whether improved service is making a long list of customers more open to returning to rail.

Answer

Ed Elkins, CMO, asserted that customers were highly supportive during the contest and that the focus now is on earning back merchandise share lost over an extended period by delivering consistent service. Alan Shaw, CEO, emphasized that the superior service product is already driving 7-8% growth in the most service-sensitive markets, Automotive and Intermodal.

Jonathan Chappell questioned the sequential improvement in revenue per load for both intermodal and ICS in Q3, despite persistent demand challenges and flat spot market pricing. He sought to understand if this improvement was due to a volume-versus-pricing decision, a mix shift, surcharges, or if it established a new baseline for future pricing, and whether there was a risk of rates reverting to Q2 levels.

Answer

President of Intermodal Darren Field explained that the Q3 results reflected a fully implemented bid season, with positive pricing in headhauls and negative in backhauls, resulting in a muted overall price per load. He noted that sequential transcon volume increases and mix shifts could also play a role. COO Nick Hobbs attributed ICS's improvement to a mix shift towards more complex, higher-rate business.

Jonathan Chappell asked about the sequential improvement in revenue per load for intermodal and ICS despite soft demand and spot rates. He sought to understand if this was due to volume versus pricing decisions, mixed shifts, surcharges, or a new starting point for future pricing, and if there was a risk of rates reverting to Q2 levels.

Answer

President of Intermodal Darren Field explained that Q3 results reflected a fully implemented bid season with good headhaul pricing offsetting negative backhaul pricing, resulting in a muted overall price per load. He noted sequential transcontinental volume increases could also play a role. COO and President of Highway and Final Mile Services Nick Hobbs attributed ICS improvement to a mix shift towards more difficult, multi-stop business with higher rates.

Jonathan Chappell of Evercore ISI inquired about the Intermodal segment's revenue per load outlook for the next four quarters, considering the recent bid season results, Eastern network market share gains, and overall freight mix shifts.

Answer

Darren Field, President of Intermodal, explained that freight mix is a significant variable and the recent mix was not seasonally normal. He noted that while core pricing was slightly positive, intermodal pricing traditionally lags the truck market. Brad Delco, SVP of Finance, added that despite a lower revenue per load, Intermodal's margin improved sequentially due to cost initiatives, demonstrating that margin performance is not solely dependent on price.

Jonathan Chappell of Evercore ISI asked how J.B. Hunt would manage its assets and pricing strategy if a steep decline in imports, such as the one forecasted by the NRF, were to occur.

Answer

Darren Field, President of Intermodal, asserted that the company would not chase business with lower prices based on fear of an unknown decline, noting that consumer spending could shift to products from other regions. CFO John Kuhlow added that many customers have already been diversifying their sourcing, which could mitigate the impact of a decline from a single country.

Jonathan Chappell asked what specific, controllable actions J.B. Hunt can take to improve margins and returns on capital without relying on a broader market recovery, especially given ongoing inflationary pressures.

Answer

President and CEO Shelley Simpson outlined a three-part strategy: 1) improving network balance in Intermodal to reduce costly empty miles, 2) continuing disciplined cost control efforts, and 3) leveraging strong service performance to have constructive pricing conversations with customers to ensure they are paid appropriately for the value delivered.

Jonathan Chappell asked for an explanation of the sequential increase in Intermodal revenue per load, which seemed counterintuitive given mix shifts and prior commentary on bid season pricing.

Answer

Darren Field, President of Intermodal, explained that a longer length of haul in Q3 compared to Q2 helped offset sequential pricing pressure. He reiterated that returns are unsatisfactory and the focus remains on delivering value to be positioned for future pricing improvements.

John Chappell of Evercore ISI asked about the key drivers behind the remarkable stability in TCE rates over the last three quarters and whether this consistency restricts TORM's operational or strategic flexibility. He also inquired if the recent major refinancing would lead to a higher dividend payout ratio in the future.

Answer

CEO Jacob Milkgaard explained that the stable rate environment provides a solid foundation for potential upside from factors like increased OPEC production and stretched trade routes, and it does not restrict the company's agility. CFO Kim Balle confirmed that the new financing is expected to lower the cash flow breakeven in 2026, which should support a higher dividend payout ratio, suggesting a level around 75-80% would be reasonable.

Jonathan Chappell of Evercore ISI asked if TORM's capital allocation or operational strategies have shifted given the significant geopolitical and macro uncertainties, and followed up on the dividend payout ratio and second-hand vessel market liquidity.

Answer

CEO Jacob Meldgaard stated that TORM's financial strategy remains highly stable and disciplined, though they are re-evaluating fleet composition in a normalizing rate environment. He noted TORM's high-quality vessels sell well even in illiquid markets. CFO Kim Balle clarified that the dividend payout ratio calculation is consistent, with fluctuations stemming from working capital and cash retained from vessel sales.

Jonathan Chappell of Evercore ISI questioned whether the recent market softness was purely seasonal or indicative of broader cyclical headwinds, citing concerns over Chinese economic data and consumer sentiment. He also inquired if TORM's expanded fleet size might prompt a shift towards more time charter contracts for stability.

Answer

Executive Jacob Meldgaard acknowledged the risk but noted the current market pattern mirrors the seasonality of 2023. He expressed a belief that the weakness is temporary and not a fundamental shift, stating TORM will remain opportunistic with its fleet strategy rather than locking in long-term charters in the current environment.

Jonathan Chappell of Evercore ISI inquired about TORM's fleet strategy regarding vessel acquisitions versus divestments amid rising asset values, and its appetite for increasing long-term charter coverage following a recent 3-year contract.

Answer

CEO Jacob Meldgaard stated that while TORM is currently in a 'pause moment' on acquisitions due to high asset values, the company is actively scouting for compelling opportunities. He also confirmed increasing client interest in longer-term charters, noting TORM is in more dialogue on such contracts compared to previous quarters.

Jonathan Chappell of Evercore ISI asked for the rationale behind lowering the guidance midpoint despite positive developments like increased cost savings, the accretive Martin acquisition, and an early West Coast peak. He also requested an update on bid season and pricing volatility.

Answer

CFO Kevin Beth explained that the guidance midpoint was lowered primarily because brokerage margins have not recovered as anticipated and overall customer demand has been slightly weaker than previously expected. President & CEO Phillip Yeager added that the company took a conservative stance on peak season surcharges and the ramp-up timing for new Final Mile awards. Regarding bid season, Mr. Yeager noted it was largely complete with rational competition, and the company successfully maintained its share gains from the prior year.

Jonathan Chappell sought to clarify how the current outlook translates to full-year Intermodal volume and pricing growth figures. He also asked for an update on the expected headwind from incentive compensation normalization mentioned previously.

Answer

CFO Kevin Beth stated that due to market uncertainty, the company is not providing a full-year Intermodal volume forecast at this time. He projected that pricing would be 'pretty close to flat' year-over-year for the full year. On incentive compensation, Beth confirmed a headwind is still expected, but it is being 'muted a little bit' by the overall reduction in headcount.

Jonathan Chappell of Evercore ISI sought confirmation on the expected cadence for Intermodal volume growth throughout 2025. He also asked about the timing of the bid season, specifically the split between Q1 and Q2 for the 70% of contracts being repriced, and the potential to capture price increases before rates are locked in for the year.

Answer

Executive Phillip Yeager and CFO Kevin Beth confirmed the Intermodal volume growth expectation, with higher growth in the first half due to easier comps, moderating in the second half to achieve a high single-digit full-year target. Regarding bids, Yeager explained that the majority occur in Q1 with effective dates late in the quarter, while Q2 bids are implemented around May/June. He emphasized that the company constantly assesses its book of business and will have discussions with customers to adjust for market changes, regardless of contract timing.

Jonathan Chappell of Evercore ISI asked about the 5.1% contractual renewal rate, noting it was lower than recent figures and questioning if this signaled tougher comparisons or a more competitive pricing environment.

Answer

EVP & CFO Matthew Batteh clarified that 60-70% of business is contractual and the renewal number reflects the specific book of business up for renewal in that quarter. He stated the pricing environment remains rational and the company is focused on getting compensated fairly. President & CEO Frederick Holzgrefe added that the figure can change quarter-to-quarter based on which customers are renewing.

Jonathan Chappell of Evercore ISI asked for clarification on the operating ratio (OR) impact from sub-seasonal trends versus weather and questioned if the Q1 OR is the new baseline. He followed up by asking when cost-cutting actions would commence given the weak macro outlook.

Answer

Executive Matthew Batteh explained that the lack of a seasonal step-up in legacy markets in March made it difficult to cut costs quickly and that sub-seasonal trends continued into April. President and CEO Fritz Holzgrefe clarified the weather impact was incremental and stated the company operated around an 89% OR in March, which is the level they are managing towards for Q2. He confirmed cost actions, like matching labor to freight volumes and network optimization, are already underway.

Jonathan Chappell of Evercore ISI inquired about Saia's December and January shipment and tonnage trends, the typical Q4 to Q1 seasonal operating ratio (OR) change, and the company's outlook considering the maturation of new terminals.

Answer

Executive Matthew Batteh provided the monthly and January-to-date volume metrics, noting January shipment growth was up 6.5% and tonnage up 13.5%. He explained that challenging weather and the drag from new terminals, which contributed three-quarters of the shipment growth, would likely lead to a 30-50 basis point OR deterioration from Q4. However, he reaffirmed the full-year OR improvement target of 80-100 basis points, anchored by expected improvements throughout the year.

Jonathan Chappell from Evercore ISI asked for a comparison of the utilization ramp between terminals opened in the first half of the year versus the third quarter. He also questioned why Saia's fuel surcharge revenue was nearly flat sequentially despite falling diesel prices.

Answer

CEO Fritz Holzgrefe explained that comparing utilization is difficult as terminals have different roles and scales, but noted that the large Q2 openings were already profitable, which is a significant achievement. Executive Matthew Batteh added that entering a brand-new geography, like in Q3, is a different challenge. On fuel, Batteh stated that fuel is not a simple pass-through and that higher base rates and increased volumes also contribute to the total fuel surcharge revenue.

Jonathan Chappell questioned the strategy of waiting for lower asset prices for fleet renewal while maintaining a positive market outlook, asking why Teekay doesn't view its own discounted stock as the most attractive investment.

Answer

Executive Kenneth Hvid acknowledged the challenge, explaining that history suggests market downturns create sudden buying opportunities. He noted that while Teekay Tankers' (TNK) stock is attractive, the company is fundamentally an operator that must eventually acquire steel assets to generate future cash flows and is waiting for shipyard prices to soften.

Jonathan Chappell questioned the strategy of maintaining a positive market outlook while simultaneously waiting for asset prices to fall for fleet renewal. He also asked why Teekay, with its significant liquidity, wouldn't prioritize buying back its own discounted stock (TNK) over waiting to purchase new vessels.

Answer

Executive Kenneth Hvid acknowledged the challenge, explaining that historical cycles suggest a market downturn will eventually create buying opportunities for vessels. He noted that as vessel ordering slows in other sectors, shipyard prices should decrease. Regarding share buybacks, Hvid conceded that TNK stock appears attractive but stressed that as an operating company, Teekay must eventually invest in 'steel' to secure future cash flows, though buybacks remain under continuous assessment.

Jonathan Chappell of Evercore ISI inquired about the surprising stability of high tanker rates despite market volatility and asked for the company's capital allocation priorities given its new debt-free, net cash position.

Answer

Director of Research Christian Waldegrave explained that rate stability was supported by Red Sea disruptions and altered Russian export patterns, which offset normal seasonality. President and CEO Kevin Mackay outlined a balanced capital allocation plan focused on fleet renewal, preserving capital for future large-scale rejuvenation, and providing shareholder returns through dividends.

Jonathan Chappell of Evercore ISI inquired about the strategic rationale for the passive investment in Ardmore Shipping, questioning why Teekay invested in a less liquid peer instead of its own stock. He also asked about the pace of fleet renewal and how it aligns with capital allocation, particularly concerning the possibility of a special dividend given the company's strong cash position.

Answer

CEO Kenneth Hvid explained that the Ardmore investment was a small, opportunistic financial play on good value in an adjacent sector and not a strategic shift away from their core business. He emphasized that fleet renewal is the top priority. Regarding capital allocation, Hvid confirmed the company's strong financial position and stated that the Board would discuss a potential special dividend at its upcoming meeting, maintaining their policy of not paying out all earnings.

Jonathan Chappell of Evercore ISI inquired about the future of the Teekay corporate structure, asking if further consolidations into Teekay Tankers (TNK) are expected and whether there are plans to simplify the dual-class share structure. He also requested modeling details for the Teekay Australia acquisition, including its closing timeline and cost breakdown.

Answer

President and CEO Kenneth Hvid clarified that the recent transactions complete the group's simplification, with no further assets to be dropped down from Teekay Corp. to TNK. He defended the current dual-entity structure as a legacy arrangement that provides strength and flexibility. CFO Brody Speers added that the Teekay Australia acquisition is expected to close by December 31, 2024, and will be reflected as approximately $100 million in revenue and $90 million in operating expenses.

Jonathan Chappell inquired about the unusual stability of high tanker rates despite market volatility and questioned Teekay Tankers' capital allocation priorities following its move to a net cash position.

Answer

Director of Research Christian Waldegrave attributed rate stability to strong tonne-mile demand from Red Sea diversions and issues with Russian refineries. President and CEO Kevin Mackay outlined a balanced capital allocation strategy, prioritizing fleet renewal via secondhand vessel purchases, building cash reserves for future large-scale rejuvenation, and maintaining shareholder returns.

Jonathan Chappell from Evercore ISI asked for specifics on how Scorpio Tankers intends to further reduce its cash breakeven levels and questioned whether the recent peak in ton-mile demand represents a new, higher floor.

Answer

Chief Financial Officer Chris Avella explained that breakevens can be lowered by using liquidity to pay down drawn revolving credit facilities, reducing debt service costs. President Robert Bugbee addressed ton-mile demand, stating that while they don't forecast super-high rates, the company's lower breakeven means it can generate significant cash flow even at more moderate rates.

Jonathan Chappell asked about the recent trend of larger crude tankers entering the clean product trade, questioning how established ships could switch so quickly and whether this poses a recurring seasonal risk. He also inquired if this, combined with the order book, would create more rate volatility for LR2s.

Answer

Chief Commercial Officer Lars Nielsen clarified that the encroachment was driven by a significant, but temporary, rate spread between clean and dirty markets, which incentivized expensive clean-ups. He noted this trend is already reversing as the crude market strengthens, which will benefit product tankers. Mr. Nielsen stated that the company embraces volatility as a sign of underlying market strength and does not see the encroachment or the order book as long-term threats, given the constructive outlook for the crude market.

Jonathan Chappell asked if Scorpio Tankers has considered increasing its time charter coverage given the strong market, and inquired about the potential impact of another Russian diesel export ban.

Answer

Chief Financial Officer Chris Avella stated that the spot market has historically provided better returns and that selling older assets has been more accretive than time charters. President Robert Bugbee added that a Russian ban would tighten the market by removing about 1 million barrels per day of distillate that would need to be sourced from elsewhere.