Tom Wadewitz

Tom Wadewitz asked how Saia would perform in a flat freight market, specifically regarding shipment growth and share gains. He also inquired about the revenue growth backdrop needed to achieve the low end of the 100-200 basis point operating ratio improvement.

Answer

President and CEO Fritz Holzgrefe stated that in a flat market, Saia would follow its 2025 playbook, focusing on growth from new markets, gaining share through its national network's quality, and pricing for returns. He indicated that the low end of the OR improvement range assumes some market growth (1-2%) and a focus on evolving revenue per shipment, with stronger market conditions accelerating performance towards the upper end.

Tom Wadewitz asked how Saia would perform in a flat freight market, specifically regarding shipment growth and the drivers for the low end of the 100-200 basis point OR improvement range, including necessary revenue growth.

Answer

Fritz Holzgrefe, President and CEO, explained that in a flat market, Saia would continue to gain market share through its new and ramping markets, focusing on core execution and generating returns rather than leading in shipment growth. He stated that the low end of the 100-200 basis point OR improvement range assumes some market growth, but improvements are achievable even in a soft macro. Fritz emphasized that the revenue component, driven by pricing and new market growth, will be key to incremental performance.

Tom Wadewitz of UBS asked for guidance on how to model revenue per hundredweight or revenue per shipment sequentially into Q3. He also questioned if Saia could achieve meaningful OR improvement without a broader freight market recovery.

Answer

EVP & CFO Matthew Batteh declined to give specific guidance on yield metrics, citing the significant impact of freight mix, but reiterated the company's intense focus on rational pricing. President & CEO Frederick Holzgrefe stated that while a freight recovery is the biggest lever, Saia has methodical, idiosyncratic opportunities to improve costs by building density in its new network. He believes this allows them to do a little better than normal seasonality even in a muted environment.

Tom Wadewitz sought insight into RXO's visibility for Q2, specifically regarding gross margin trends (considering seasonal pressure versus potential contract price catch-up) and expected load improvements. He also questioned the reliability of the late-stage pipeline as an indicator for brokerage business, and asked about translating tech initiatives into operating cost reductions for 2026 and beyond.

Answer

Drew Wilkerson, Chairman and CEO, RXO, stated that Q2 gross margin depends on market conditions and tender rejections, with strong opportunity from contractual price increases and robust spot loads. He expressed high confidence in improving loads from Q1 to Q2. He clarified that the late-stage pipeline is a highly reliable indicator, representing targeted, lane-by-lane discussions focused on value-add and capacity solutions. Jamie Harris, CFO, RXO, and Drew Wilkerson, Chairman and CEO, RXO, explained that tech initiatives contribute to cost reduction through automation and sunsetting old systems, but also drive structural efficiency to decouple volume growth from headcount, leading to high incremental margins (up to 80% flow-through to EBITDA) rather than just direct cost-outs.

Tom Wadewitz asked about RXO's visibility on Q2 gross margin and load improvement, considering seasonal pressures versus potential contract price catch-up. He also questioned the reliability of the pipeline as an indicator for actual business flow-through and inquired about the operating cost reduction impact of tech initiatives in 2026 or over multiple years.

Answer

Drew Wilkerson, Chairman and CEO, RXO, stated that Q2 gross margin depends on market conditions and tender rejections, with strong opportunity from contractual price increases and spot loads. He expressed high confidence in improving loads from Q1 to Q2. He clarified that the late-stage pipeline is a highly targeted indicator, focusing on lane-by-lane value-add and capacity. Jamie Harris, CFO, RXO, noted pure cost-outs from completing integration and automation. Drew Wilkerson added that over $155 million in costs have been removed post-spin, and technology drives structural efficiency, decoupling volume growth from headcount, with incremental brokerage margins potentially flowing through at 80% to EBITDA. Cost benefits are expected in 2026 versus 2025, with continued productivity gains.

Tom Wadewitz asked for insights into the Q4 run rate's implications for 2026 EBITDA, considering the $30 million in cost savings and other initiatives. He also questioned the effectiveness of supply-side enforcement, specifically whether questionable capacity might avoid enforcement areas rather than fully exiting the market.

Answer

Jamie Harris, CFO of RXO, stated that projecting 2026 EBITDA is challenging due to unknowns in demand and purchase transportation costs, but highlighted significant cost reductions and the purchase transportation opportunity. Drew Wilkerson, Chairman and CEO of RXO, added that the industry turns quickly, and a market recovery could lead to significant margin expansion. Jamie Harris also emphasized that federal enforcement is widespread, making it difficult for carriers to avoid being caught, and that RXO supports these actions for a safer industry.

Tom Wadewitz inquired about the weakness in truckload volumes, specifically asking for details on the strategy of "optimizing price, volume, and service" and whether this was related to improving the Coyote book of business.

Answer

Chairman and CEO Drew Wilkerson explained that the volume decline was partly due to automotive weakness and a deliberate, customer-by-customer effort to align on strategic lanes, which improved gross profit per load by 7% sequentially. He stated this process, tied to the recent bid season, is now largely complete and emphasized that the focus on improvement is company-wide, not exclusive to Coyote, while noting high retention among top customers.

Tom Wadewitz inquired about the profitability impact of the FirstFleet acquisition, the ramp-up of synergies, and how it might affect Werner's TTS margin throughout 2026.

Answer

Chairman and CEO Derek Leathers explained that FirstFleet's standalone margins are lower but $18 million in identified cost synergies (1/3 realized in 2026, 2/3 run rate by year-end) represent about 300 basis points of margin improvement. He expects FirstFleet's margins to converge with Werner's Dedicated margins within 18-24 months, noting it's a positive asset from the start and improves blended TTS margins. EVP, Treasurer, and CFO Chris Wikoff clarified that the $18 million synergies are largely cost-based and not market-dependent, similar to Werner's past cost-saving initiatives.

Tom Wadewitz questioned the profitability impact of the FirstFleet acquisition, the ramp-up of synergies, and how this might affect margins through 2026, as well as the key levers for TTS margin improvement.

Answer

Derek Leathers, Chairman and CEO, explained that FirstFleet's standalone margins are lower but the acquisition is immediately accretive. He detailed $18 million in identified cost synergies, with about one-third realized in 2026 and a two-thirds run rate by year-end, expecting FirstFleet's margins to converge with Werner's dedicated margins in 18-24 months. Chris Wikoff, Executive Vice President, Treasurer, and CFO, emphasized that these synergies are largely cost-based and not market-dependent, similar to Werner's past cost-saving initiatives.

Tom Wadewitz from UBS Group inquired about the level of rate increase needed to meaningfully improve margins amid cost inflation and asked if the current operating income level in the Logistics segment is a sustainable run rate.

Answer

CFO Chris Wikoff stated that a mid-single-digit rate improvement is needed, but emphasized that the path to double-digit TTS margins also depends on Dedicated growth, cost discipline, and technology leverage. Chairman & CEO Derek Leathers confirmed the improvement in Logistics is structural, driven by technology and the successful integration of Reed TMS, and expressed optimism for continued momentum, suggesting the performance is sustainable.

Tom Wadewitz asked about XPO's outlook on underlying inflation for 2026, including core wage and benefit costs, and how productivity initiatives, particularly from tech and AI, would offset these costs to impact margins.

Answer

Kyle Wismans, CFO, XPO, projected that cost per shipment would be up in the low single-digit range for 2026. He specified core wage inflation at 3%-4% and higher benefit costs of 1-2 points. Wismans emphasized that these increases are expected to be offset by productivity initiatives, including AI-driven improvements in line haul, pickup and delivery, and dock operations, as well as broader labor productivity (which was two points in Q4 2025 and is expected to continue). On a net basis, he anticipates cost per shipment to be similar to last year, remaining in the low single-digit range.

Tom Wadewitz asked about XPO's outlook on underlying inflation for 2026, comparing it to 2025, and how productivity gains from tech and AI initiatives would offset these cost pressures to impact margins.

Answer

Kyle Wismans, CFO of XPO, projected cost per shipment to be up in the low single-digit range for 2026, with core wage inflation at 3-4% and higher benefit costs. He emphasized that productivity initiatives, including AI for line haul, P&D, and dock, along with labor productivity (2 points in Q4 2025), are expected to offset these increases, resulting in a similar net cost per shipment trend as 2025.

Tom Wadewitz asked about the importance of volume growth and market share gains for XPO in the next freight upturn, and which productivity metrics are key to track.

Answer

CEO Mario Harik explained that in an upturn, XPO expects 'off the charts' incremental margins and rapid earnings growth driven by pricing, volume, and cost dynamics. He highlighted that 10-15% of LTL tonnage is waiting to return as the industrial economy recovers, and XPO's 30% excess capacity positions it to support customers. While aiming to increase market share, the focus is on profitable mix and being the top performer in yield improvement. Key productivity metrics include labor hours per shipment (improved 2.5 points in Q3), pallets per person per hour on docks, stops per hour in P&D, and load average/factor in linehaul.

Tom Wadewitz asked about the importance of volume growth and market share gains for XPO in the next freight upturn, given industry-wide excess capacity, and inquired about key productivity metrics.

Answer

Mario Harik (CEO, XPO) stated that incremental margins would be 'off the charts' in an upturn, leading to rapid earnings growth. He expects mid-teens tonnage to return to LTL as the industrial economy recovers, with XPO's 30%+ excess capacity enabling it to support customers. XPO aims to increase market share while prioritizing yield improvement. He highlighted that post-Yellow, productivity improved 7% and 5% in subsequent quarters, expecting even faster gains with new AI tools. The key productivity metric is labor hours per shipment, which improved 2.5 points in Q3.

Tom Wadewitz of UBS asked for more detail on the competitive landscape of the grocery consolidation market and inquired about how many other similar new service opportunities exist in XPO's pipeline for the coming years.

Answer

CEO Mario Harik described the grocery business as a consolidated LTL segment where excellent service is a prerequisite, a strength XPO now possesses. He mentioned that after launching about a half-dozen premium services last year, the company is now focused on building the sales pipeline for each. Harik noted they are about one-third of the way to their goal for accessorial revenue and are contemplating another three to four new premium services, such as expedited offerings and security dividers, over the next couple of years.

Tom Wadewitz asked about the level of positive customer feedback and enthusiasm for activity improvement, comparing it to the significant step-up seen in the recent ISM print, which historically correlates well with LTL.

Answer

Adam Satterfield, CFO, confirmed hearing positive input from customers, including lower inventories and anticipated replenishment, but cautioned against over-reliance on a single ISM print. He emphasized the company's long-term strategy of superior service and fair pricing, which drives a 'flywheel effect.' He expressed confidence that history would repeat, with Old Dominion outperforming other carriers in the early stages of a recovery, but reiterated cautious optimism.

Tom Wadewitz from UBS questioned the extent of positive customer feedback regarding activity improvement, comparing it to the significant increase seen in the recent ISM print, and how Old Dominion views this sentiment.

Answer

CFO Adam Satterfield noted that while customer conversations in Q4 showed some optimism, the ISM print represents only one month of data, and Q1 volumes and revenue are still projected to be down year-over-year. He emphasized that Old Dominion's business model is poised to outperform in the early stages of recovery, but cautioned against over-optimism.

Tom Wadewitz asked about Old Dominion Freight Line's current terminal capacity position, specifically if it exceeds the target 20%-25% excess, and whether the company plans to reduce CapEx spending on terminals given the high capacity.

Answer

Adam Satterfield, CFO, stated that the company is well north of 30%, possibly above 35%, in excess terminal capacity. He confirmed that CapEx for real estate is likely to be lower next year, noting that completed but unused service centers are already depreciating, reflecting the cost of maintaining capacity for future growth.

Tom Wadewitz from UBS asked about Old Dominion Freight Line's current terminal capacity, specifically if it exceeds the target 20-25% excess, and whether the company plans to reduce capital expenditures on terminals given the significant excess capacity.

Answer

Adam Satterfield, CFO, confirmed that Old Dominion Freight Line's excess terminal capacity is well over 30%, potentially above 35%, significantly exceeding their 20-25% target. He indicated that real estate capital expenditures are likely to be lower next year, with several completed service centers held in reserve and already depreciated, ensuring readiness for future growth.

Tom Wadewitz of UBS Group inquired about the pricing environment, specifically the outlook for revenue per hundredweight excluding fuel in Q3 and whether competitive discipline is changing.

Answer

EVP & CFO Adam Satterfield projected that yield excluding fuel would increase by 4.0% to 4.5% in Q3, consistent with July trends. He emphasized that their disciplined, cost-based pricing strategy remains unchanged and that they continue to secure rate increases on renewals, seeing no degradation in the competitive environment.

Tom Wadewitz of UBS Group AG inquired about the pricing outlook, specifically for revenue per hundredweight excluding fuel in Q3, and whether competitive discipline in the market is changing.

Answer

EVP & CFO Adam Satterfield stated he expects revenue per hundredweight ex-fuel to increase 4.0% to 4.5% in Q3, consistent with July trends. He emphasized this is not due to a change in pricing strategy but is a function of prior-year comparisons, and that ODFL continues to secure cost-based increases on renewals.

Representing Tom Wadewitz, Mike Triano asked for a rule of thumb on how an increase in weight per shipment translates into higher revenue per shipment.

Answer

CFO Adam Satterfield explained that while there isn't a precise one-for-one rule, higher weight per shipment generally leads to increased revenue per shipment and significant operational efficiencies, particularly in linehaul. He noted that current weight per shipment is below levels seen in prior expansionary periods, indicating room for improvement.

Tom Wadewitz asked about the competitive pricing dynamic in the LTL market, specifically if it remains stable or is becoming tougher. He also asked Mac Pinkerton for his high-level thoughts on how the Asset-Light segment competes, fits in the market, and leverages for growth.

Answer

Eddie Sorg, Chief Commercial Officer of ArcBest, characterized pricing discipline in the LTL market as rational and similar to the past year, noting a positive sign in less bid activity from customers. Mac Pinkerton, COO of Asset-Light Logistics, shared his perspective, highlighting that the Managed Solutions business is outpacing the market due to a strong foundation. He noted that while services like LTL brokerage, Truckload brokerage, Intermodal, and Global Forwarding are at different stages, the company is well-positioned. Mac also emphasized significant investments in the SMB space, which are exceeding expectations and contributed to the Asset-Light segment achieving break-even in 2025.

Tom Wadewitz of UBS asked about customer demand sentiment, specifically whether there are signs of optimism related to recent trade deals, tariff stability, or the newly passed tax bill.

Answer

Chief Commercial Officer Eddie Sorg described customer feedback as a 'mixed bag,' with continued softness and uncertainty around tariffs and investment. He noted the perspective on the tax bill is 'still a wait and see.' However, CFO Matt Beasley added that ArcBest itself sees potential for about $25 million in cash tax savings in the first half of the year from the bill and is encouraged by its potential to stimulate freight-generating activity.

Tom Wadewitz of UBS asked about the potential for mid-single-digit truckload contract rate increases driven solely by supply-side reduction, even without demand improvement. He also inquired about the strongest opportunities for margin improvement in 2026 across brokerage, intermodal volume, and Dedicated responsiveness.

Answer

Jim Filter, EVP and Group President of Transportation and Logistics, detailed the structural changes in capacity due to regulatory enforcement, leading to the exit of irrational capacity and constriction of new entrants. He emphasized that this is a multi-quarter process, potentially leading to several years of upside, and shippers are increasingly recognizing supply risk. He expects Network to see the first improvement due to spot market exposure, followed by Intermodal and Logistics. Mark Rourke, President and CEO, highlighted Dedicated's potential for self-help margin improvement through backhaul efficiencies, leveraging the multimodal platform and agentic AI, and improved account structures as demand recovers.

Tom Wadewitz asked how much rate improvement, specifically mid-single-digit truckload contract rates, could be achieved solely from supply-side reductions without demand improvement. He followed up by asking where Schneider is most optimistic for margin improvement in 2026, considering brokerage, intermodal, and truckload rates.

Answer

Jim Filter, EVP and Group President of Transportation and Logistics, detailed issues contributing to 'shadow capacity' and increased enforcement driving irrational capacity out, which is constricting the new driver funnel. He noted moderation in driver recruiting, cancellations of tractor purchases, and a sharp contraction in brokerage carrier accounts. He believes market adjustment will take quarters and several bid cycles, potentially leading to several years of upside. He expects the network business to see the first improvement due to its spot market exposure, with intermodal capturing upside as the truckload market improves, and logistics providing nimble problem-solving. Mark Rourke, President and CEO, highlighted dedicated backhaul efficiencies, leveraging agentic AI and the multimodal platform for high incremental margin gains, and the potential for demand improvement to boost existing account structures.

Tom Wadewitz of UBS Group asked for specific financial figures, including the gain on sale impact in truckload and a forecast for the 'other operating' line loss. He also posed a strategic question about potential disadvantages in the East-West intermodal network from rail consolidation.

Answer

CFO Darrell Campbell quantified the first-half gain on sale improvement at approximately $3 million year-over-year and advised modeling the 'other' segment loss for Q3 and Q4 to be consistent with Q2. Regarding the strategic question, EVP Jim Filter and CEO Mark Rourke reiterated that 'details matter' and they use a deliberate evaluation process for all rail services, declining to break out specific network exposures.

Tom Wadewitz asked about the expected adjusted gross profit (AGP) growth progression from Q4 to Q1, particularly given the pressure in December, and the potential for NAST operating margin to exceed the mid-forties target in a strong 2027 market, balancing margin expansion with volume growth.

Answer

CFO Damon Lee explained that December's AGP pressure was heavily influenced by Global Forwarding and ocean rate normalization, which is expected to continue into Q1. He noted that spot rate cost pressure from December carried into January but expressed confidence in continued outperformance through revenue management. Regarding 2027 margins, Lee emphasized optionality, stating that beyond the 40% NAST mid-cycle target, the company would decide whether to continue expanding margins or reinvest for demonstrable market share growth. CEO Dave Bozeman added that the company remains disciplined and measured with the right economics.

Tom Wadewitz asked about the expected adjusted gross profit (AGP) growth progression from Q4 to Q1, particularly given December's pressure, and inquired about the long-term operating margin potential for NAST in 2027, specifically if a mid-forties number is achievable or if the company would prioritize volume growth.

Answer

CFO Damon Lee explained that December's AGP decline was heavily influenced by Global Forwarding and ocean rate normalization, which is expected to continue into Q1. He noted that spot rate cost pressure from December carried into January but affirmed the company's commitment to outperformance and strategic execution. Regarding 2027, Mr. Lee emphasized optionality, stating that while the 40% NAST mid-cycle margin target is on track, beyond that, decisions would balance margin expansion with reinvesting for demonstrable market share growth.

Tom Wadewitz congratulated the company on strong results despite a tough rate environment and asked about the drivers of truckload volume growth, specifically whether it's price-driven, aggressive bidding with enterprise customers, or if further acceleration is expected. He also clarified if growth was primarily from SMB or enterprise segments.

Answer

President of North American Surface Transportation Michael Castagnetto explained that truckload volume growth is driven by strong performance in key verticals (retail, energy, automotive, healthcare), drop trailer, cross-border, and small/medium business segments. He highlighted the combination of expert personnel and advanced AI-driven pricing models, which enable the company to strategically win the 'right volume' across both enterprise and SMB customers, rather than just chasing volume.

Tom Wadewitz congratulated the company on strong results despite a tough rate environment and asked about the drivers of truckload volume growth, specifically whether it's price-driven, aggressive bidding with enterprise customers, or if further acceleration is expected. He also clarified if growth was primarily from SMB or enterprise segments.

Answer

President of North American Surface Transportation Michael Castagnetto explained that truckload volume growth is driven by strong performance in key verticals (retail, energy, automotive, healthcare), drop trailer, cross-border, and small/medium business segments. He highlighted the combination of expert personnel and advanced AI-driven pricing models, which enable the company to strategically win the 'right volume' across both enterprise and SMB customers, rather than just chasing volume.

Tom Wadewitz inquired about the timeline for achieving the 40% NAST operating margin target and whether there is a ceiling on NAST gross margin, given the strong recent performance.

Answer

Michael Castagnetto, President of NAST, stated he doesn't see a 'limit' on gross margin potential as the company improves its freight selection. CFO Damon Lee reiterated confidence in the 40% mid-cycle target from the Investor Day commitments but clarified it is not a cap, emphasizing the company will maintain its strategic optionality between market share and profitability.

Tom Wadewitz asked for Keith Creel's high-level perspective on USMCA, including the risks associated with potential renegotiation, the timing of such events, and whether CPKC has already absorbed significant headwinds from past tariff-related issues like Liberation Day.

Answer

President and CEO Keith Creel confirmed that CPKC has already absorbed a significant revenue impact (over CAD 200 million) from past uncertainties. He believes President Trump will adjust the trade balance but that a positive USMCA renewal is possible, as trade between the three nations is critical. He speculated that active renegotiation might occur in the summer, potentially before the midterms.

Tom Wadewitz, Senior Equity Research Analyst at UBS, asked Keith Creel about his high-level thoughts on the USMCA, the risks associated with potential renegotiation, and the timing of any changes, particularly in the context of CPKC having already absorbed significant tariff-related headwinds.

Answer

Keith Creel, President and CEO, acknowledged that CPKC has already absorbed a significant hit (around $200 million in revenue impact) from trade uncertainty. He believes President Trump will rebalance trade to benefit the U.S. but affirmed the critical importance of trade between the three nations. He speculated that renegotiation activity might intensify in the summer, potentially concluding before the midterms, and emphasized CPKC's unique position as "North America's railroad" to enable trilateral trade.

Tom Wadewitz asked Keith Creel to elaborate on CPKC's differing views on the UPNS merger compared to Jim Vena's characterization of limited overlap, and to explain the paradox of minimal direct risk to CPKC's north-south flows versus concerns about the market power of a large UPNS entity.

Answer

President and CEO Keith Creel clarified that market power concerns stem from the sheer size and scale, and the potential for leveraging it on captive traffic, not just gateway traffic. He argued that minimizing overlap to a few plants is an 'ill-fated definition' of competition, emphasizing that reducing options does not enhance competition. Creel stressed the need for conditions with 'teeth' to prevent anti-competitive behavior, citing UP's past actions regarding South End rights post-CPKC merger as an example of concerns.

Tom Wadewitz asked about CPKC's differing views on the UPNS deal compared to Jim Vena's, the paradox of no direct risk to CPKC but concern over market power, and how market power could lead to anti-competitive behavior like bundling or taking captive traffic.

Answer

President and CEO Keith E. Creel emphasized concerns about 'sheer size and scale market power' potentially leading to price increases on captive traffic if gateways are not rewarded. He argued against a minimalistic definition of competition reduction and stressed the need for conditions with 'teeth' to prevent anti-competitive behavior, citing UP's past actions regarding South End rights traffic after CPKC's merger.

Tom Wadewitz of UBS Group questioned CPKC's strong opposition to the UP-NS merger, given the company's own favorable view on the benefits of single-line service, and asked why the proposed merger's single-line offerings are viewed as a threat.

Answer

CEO Keith Creel agreed that single-line service is the 'gold standard' but argued that the merger review is not an isolated analysis of that benefit. He stated that the UP-NS proposal does not threaten CPKC's own single-line intermodal services, which are strong in the Canada-U.S.-Mexico corridor. Creel emphasized the review must consider the broader, complex impacts of creating a potential duopoly in the North American rail network, which goes far beyond the benefits of one new service.

Tom Wadewitz asked about Union Pacific's volume strategy during the merger approval phase: whether to aggressively pursue volume or conserve efforts until the combined railroad is operational, especially considering Norfolk Southern's past volume shifts.

Answer

Jim Vena, Chief Executive Officer, stated that Union Pacific's strategy for 2026 is to actively grow its business, seeking every opportunity to increase carloads from existing customers and expand into new markets. He highlighted successful growth in and out of Mexico despite competition from CPKC. He emphasized his expectation for Kenny Rocker, Executive Vice President of Marketing, to grow the business and Eric Gehringer, Executive Vice President of Operations, to deliver productivity.

Tom Wadewitz asked about Union Pacific's volume strategy during the merger approval phase, specifically whether the company intends to aggressively pursue volume growth or adopt a more conservative approach until the combined railroad is fully operational. He also referenced Norfolk Southern's volume shift to CSX on J.B. Hunt.

Answer

Jim Vena, CEO, affirmed that Union Pacific is actively pursuing business growth in 2026, seeking every opportunity to increase carloads from existing customers and expand market share. He highlighted the company's success in growing business in and out of Mexico despite the Canadian Pacific-Kansas City merger. He emphasized that the merger approval process is distinct from the fundamental need to operate and grow the railroad, and that Kenny Rocker, EVP of Marketing, is expected to deliver on business growth.

Tom Wadewitz of UBS Group AG asked about the nature of feedback Union Pacific has received from shippers regarding potential industry consolidation since the topic became more prominent in public discussion.

Answer

CEO Jim Vena declined to provide specifics on shipper feedback, stating that the company does not negotiate or discuss details of ongoing discussions publicly. He reiterated that the company has been very specific in its official announcement and would not elaborate further while in advanced negotiations.

An associate for Tom Wadewitz of UBS asked if the mid-single-digit improvements in workforce and locomotive productivity are sustainable into next year, especially in a flat to slightly up volume environment.

Answer

Executive Vincenzo Vena expressed confidence in delivering on the company's 2025 guidance, stating there's no reason productivity improvements can't continue. CFO Jennifer Hamann reiterated this, noting that the company has clear action plans for productivity gains across all expense areas and capital, which gives them confidence in the runway ahead.

Tom Wadewitz inquired about the post-Amazon glide-down algorithm for domestic package, including expected low-single-digit revenue growth and the pace of margin improvement. He also asked about the $400-$500 million EBIT headwind from SurePost insourcing in 2025 and its recovery with the USPS outsourcing.

Answer

Brian Dykes (EVP and CFO, UPS) outlined expectations for mid-single-digit enterprise and SMB volume growth in 2H 2026, normalized revenue per piece (around 2% base rate), and cost per piece normalizing below revenue per piece. He confirmed the USPS transition would lead to savings in 2H 2026, with the full $400-$500 million EBIT benefit expected by 2027. Carol Tomé (CEO, UPS) concurred on the 2027 timeline for full benefit realization.

Tom Wadewitz inquired about the post-Amazon glide down algorithm for domestic package, including expected revenue growth, margin improvement pace, and the recovery of EBIT headwind from insourcing SurePost (GroundSaver) in 2025.

Answer

Brian Dykes (EVP and CFO, UPS) stated expectations for mid-single-digit enterprise and SMB volume growth in the second half of 2026, with base rate increases around 2%. He anticipates cost per piece to normalize below revenue per piece, driving long-term margin improvement. Carol B. Tomé (CEO, UPS) and Brian Dykes clarified that the full benefit of GroundSaver outsourcing, estimated at $400-$500 million, is expected by 2027.

Tom Wadewitz asked for an update on SMB performance, particularly regarding concerns from Q2 and the impact of the global de minimis exemption elimination on the international business, and whether SMB stability has been achieved.

Answer

Carol Tomé, CEO, reported that SMB volume was down slightly year-over-year but UPS gained market share. She highlighted extensive efforts to support SMBs through trade webinars and direct conversations, acknowledging the complexity of trade policy changes. The elimination of de minimis led to a tenfold surge in daily customs entries, managed efficiently by AI. Brian Dykes, CFO, quantified the direct impact of de minimis at $60 million in Q3 and an estimated $75-100 million in Q4, primarily due to demand shifts and changes in profitable trade lanes, particularly a 20% decline in China-U.S. volume. Carol Tomé noted that while enterprise customers expect a strong peak, SMB forecasts are slightly lower, advising caution for next year as tariffs fully impact SMBs.

Tom Wadewitz asked for an update on Small and Medium Business (SMB) performance, particularly how it compared to Q2 concerns following the global elimination of the de minimis exemption, and its specific impact on the international business. He also inquired about the stability of SMB trends moving forward.

Answer

Carol Tomé, CEO, reported that SMB volume was slightly down year-over-year but gained market share, noting that some SMBs face challenges from trade policy shifts. She highlighted a tenfold surge in daily dutiable customs entries post-de minimis elimination, largely managed by technology. Kate Gutmann, EVP and President International, explained efforts to assist consumer-to-consumer shippers. Brian Dykes, CFO, quantified the de minimis impact as $60 million in Q3, primarily due to shifts in profitable trade lanes like China-U.S. Carol Tomé added that while enterprise customers forecast a strong peak, SMBs are slightly behind last year, advising caution for next year due to anticipated tariff impacts.

Tom Wadewitz asked about CSX's base operating ratio (OR) for 2025 and the company's strategy for pricing and productivity, specifically inquiring about the opportunity to achieve pricing above cost inflation in 2026.

Answer

Steve Angel, President and CEO, CSX Corporation, clarified that the 2025 base OR excludes the Goodwill charge. He noted that Maryclare Kenney, SVP and Chief Commercial Officer, CSX Corporation, has implemented new pricing structures, and the company expects a higher price yield in 2026 compared to 2025, with full contract review taking about a year.

Tom Wadewitz inquired about the base operating ratio (OR) for 2025, excluding the goodwill charge, and sought insight into CSX's pricing strategy and the expected price-cost spread for 2026, particularly regarding the opportunity for pricing initiatives to exceed cost inflation.

Answer

President and CEO Steve Angel clarified that the 2025 OR base excludes the goodwill charge. He noted that SVP and Chief Commercial Officer Maryclare Kenney has implemented new pricing structures, and the company anticipates a higher price yield in 2026 compared to 2025. He also mentioned that it would take about a year to review and adjust all contracts.

Tom Wadewitz asked Kevin Boone for his outlook on market conditions, particularly weakness in chemicals, metals, and forest products, and whether carload can rebound in 2026 or if intermodal will be the primary growth driver.

Answer

Kevin Boone, EVP and Chief Commercial Officer, described mixed market conditions, strong momentum in aggregates/cement, and challenges from temporary closures in forest products and chemicals. He noted optimism for domestic coal due to regulatory shifts and data center demand, and continued focus on intermodal growth through partnerships and service.

Tom Wadewitz of UBS Group AG asked for Joe Hinrichs' view on the 'ease of doing business,' specifically questioning if a single-line rail service is inherently easier for shippers compared to an interline service, in the context of merger discussions.

Answer

President & CEO Joseph Hinrichs reiterated his focus on improving the customer experience to drive growth, without commenting directly on a transcontinental merger. He stated that CSX is open to all possibilities and partnerships that create shareholder value and make the industry more competitive.

Tom Wadewitz questioned if the incentive compensation headwind is a short-term impact clearing for FY27 or if it might carry over, and how to think about broader FEC margin improvement given a potential pause.

Answer

President and CEO Raj Subramaniam clarified that FY26 is a catch-up year for incentive compensation and it is not expected to be a headwind in FY27. He expressed satisfaction with the underlying momentum from network, organizational, and digital transformations, noting that current headwinds are peculiar to the next three to six months.

Tom Wadewitz asked about the incentive compensation headwind, questioning if it's a short-term catch-up for FY26 or if it might extend into FY27, and how it impacts the broader FEC margin improvement trajectory given recent strong performance.

Answer

Raj Subramaniam, President and CEO, FedEx, clarified that the incentive compensation headwind is specific to FY26 to align with performance and is not expected to carry into FY27. He expressed strong satisfaction with the underlying momentum from network, organizational, and digital transformations, acknowledging current short-term headwinds but maintaining confidence in ongoing progress and flow-through.

Tom Wadewitz sought clarification on the nature of the $150 million global trade headwind in Q1, specifically whether it was a revenue or cost impact, and why it is projected to worsen significantly to $1 billion for the full fiscal year.

Answer

EVP & Chief Customer Officer Brie Carere clarified that the majority of the $150 million Q1 headwind was a top-line revenue reduction, primarily due to de minimis impacts on the China lane. EVP & CFO John Dietrich added that the full-year $1 billion headwind includes $300 million in direct trade-related expenses, such as customs clearance and staffing, in addition to continued top-line pressure.

Tom Wadewitz asked for a better way to measure Network 2.0 progress, suggesting terminal closures as a key metric, and inquired about the program's status versus its original plan and the number of stations shut down to date.

Answer

EVP & CFO John Dietrich stated the program is 'on track,' with a primary focus on maintaining service levels. President & CEO Raj Subramaniam provided specifics, reporting that as of the end of fiscal 2025, 100 stations have been closed and 290 have been integrated, with a long-term goal to remove roughly 30% of surface facilities.

Tom Wadewitz asked for more tangible metrics to track the progress of Network 2.0, suggesting terminal closures as a key indicator. He inquired if the program was ahead of schedule and requested the number of stations shut down to date.

Answer

EVP & CFO John Dietrich stated the program is 'on track,' with a primary focus on maintaining service levels. President & CEO Raj Subramaniam provided specifics, stating that as of the end of fiscal 2025, 100 stations have been closed and 290 have been integrated, with a goal to remove roughly 30% of surface facilities by the program's end.

Tom Wadewitz asked about competitive responses in intermodal, specifically from J.B. Hunt and BNSF potentially shifting business to CSX, and the stickiness of Norfolk Southern's intermodal business due to its network (e.g., Crescent Corridor). He also inquired about the competitive impact of CSX's Howard Street tunnel project.

Answer

President and CEO Mark George emphasized that over half of J.B. Hunt's business originates/terminates in the East, which Norfolk Southern is confident in retaining due to its unrivaled intermodal franchise, built over two decades with significant investments in corridors and terminals. Chief Commercial Officer Ed Elkins added that Norfolk Southern offers exceptional value in key lanes that cannot be replicated, and cargo owners will eventually return to the most sensible network. Mark George declined to comment on CSX's project.

Tom Wadewitz from UBS questioned the competitive responses in intermodal, particularly regarding J.B. Hunt and BNSF potentially shifting business to CSX, and the factors that make Norfolk Southern's intermodal business sticky, such as its network and corridor initiatives. He also asked about the competitive impact of CSX's Howard Street tunnel project.

Answer

President and CEO Mark George highlighted that over half of their J.B. Hunt business originates and terminates in the East, which they are confident in retaining due to excellent service. He emphasized Norfolk Southern's unrivaled intermodal franchise, built over two decades with significant investments in corridors and terminals, providing the fastest routes and optimal terminal footprint. Chief Commercial Officer Ed Elkins added that Norfolk Southern offers exceptional value in key lanes that cannot be replicated, attributing their position as the second-largest intermodal franchise to superior route and terminal networks.

Tom Wadewitz asked about Delta's 2026 outlook, specifically whether the projected 10% earnings growth assumes low single-digit revenue growth in the main cabin or if it's primarily driven by premium products and card spend. He also asked if the main cabin improvement is due to consumer segment strength or Delta's market share gains and industry capacity rationalization.

Answer

President Glen Hauenstein confirmed an inflection in main cabin demand, expecting current trends to carry into early 2026, with main cabin improvement as part of base revenue assumptions, alongside continued growth in premium products and card spend. He attributed the main cabin improvement to significant seat removals at the low end of the industry, which has forced competitors to raise fares, thereby helping Delta's main cabin pricing.

Tom Wadewitz asked about Delta's 2026 outlook, specifically if the anticipated 10% earnings growth assumes low single-digit revenue growth in main cabin, or if it's primarily driven by premium and card. He also sought to understand the main drivers of main cabin improvement seen in Q4 and carrying into 2026, whether it's consumer segment strength or Delta's share gains and industry capacity rationalization.

Answer

President Glen Hauenstein confirmed that main cabin has inflected, and its improvement is part of Delta's base revenue assumptions for 2026, alongside continued growth in premium products and card spend. He attributed the main cabin improvement primarily to the rationalization of capacity at the low end of the industry, where competitors have removed seats and need to achieve higher fares to survive, which helps Delta's main cabin pricing.

Tom Wadewitz of UBS inquired about the extent of cross-selling across Hub Group's service lines and asked if the creation of new 'watershed markets' from the potential rail merger represents a tangible opportunity for intermodal growth.

Answer

President & CEO Phillip Yeager confirmed that cross-selling is a key part of their strategy, stating that over 80% of customers use two services and over 60% use three, with recent success in Final Mile. He affirmed that the concept of new watershed markets is a significant opportunity, as eliminating interchange touchpoints could make previously unviable intermodal lanes both time-competitive and cost-effective, unlocking a large over-the-road conversion opportunity.

Tom Wadewitz from UBS asked about the remaining operational improvements in U.S. LTL, such as insourcing line haul from rail, and questioned why pricing, measured by revenue per hundredweight, remains under pressure despite service enhancements.

Answer

Alain Bedard, President, CEO & Chairman, explained that while next-day service is now comparable to peers, two-to-four-day service still needs improvement, which limits pricing power. He stated that until service is consistently on par with peers, rates cannot match them. He also noted line haul on rail is down to ~20% of miles, a significant reduction that has improved service on longer routes.

Tom Wadewitz from UBS Group asked about the significant year-over-year decline in load factor, its gap relative to peers, and whether this is a temporary trade-off for other initiatives or a metric that will influence future capacity decisions.

Answer

President & CEO Bob Jordan and COO Andrew Watterson acknowledged the load factor gap and stated that closing it is a key objective for the second half of the year. They explained the focus in H1 was on yield, but now shifts to volume. This will be driven by network changes adding 40% more intentional connection opportunities, the introduction of Basic Economy, and new distribution channels. Watterson noted that August load factor is already showing improvement, down only 0.5 points year-over-year.

Tom Wadewitz asked if the recent executive change was related to strategy execution and whether the softening in intermodal was due to tariffs or broader macro demand.

Answer

CEO Tracy Robinson asserted that current headwinds are tariff and macro-related, not an issue with the company's strategy. She and Interim CCO Janet Drysdale confirmed the intermodal softness is tariff-related, driven by inventory front-loading ahead of deadlines and the impact of tariffs on goods from multiple Asian countries, not just China.

Tom Wadewitz from UBS Group AG inquired about United's strong Q2 cost performance, specifically the drivers behind the low CASM-ex and reduced distribution expenses, and asked for an update on the demand environment, questioning if it has returned to early-year levels.

Answer

EVP & CFO Mike Leskinen attributed the strong cost performance to operational reliability and expects similar results in H2 2025. He noted that while distribution costs are on a long-term downtrend due to direct channel growth, Q2 had some unique benefits. EVP & CCO Andrew Nocella added that while not fully back to January levels, demand saw a significant positive inflection in July, with a six-point swing in sales and a double-digit acceleration in business demand.

Tom Wadewitz from UBS asked whether the $100 million cost savings program targeted for 2026 should be viewed as a net benefit to EBIT or as a gross figure that will likely be offset by ongoing inflationary pressures.

Answer

Brad Delco, SVP of Finance, stated the savings should be noticeable to shareholders, pointing to Q2 results where operating expenses (excluding insurance and medical) were down despite volume growth. EVP & CFO John Kuhlow added that while inflation will persist, the company has high conviction in removing the identified $100 million in costs to improve the path to target margins.

Tom Wadewitz questioned why JetBlue appears to be underperforming peers despite the progress on its JetForward strategy, asking if the plan is causing slippage elsewhere. He also asked for the percentage of May and June that is currently booked.

Answer

President Martin St. George attributed the relative underperformance to JetBlue's underexposure to international and premium segments, which are currently driving demand, and noted the demand slowdown is heavier in its core Northeast markets. He emphasized that JetForward is the right long-term plan to address this and that they are moving quickly to adjust capacity to the current environment. He also stated that May is about 70% booked and June is just under 50% booked.

Tom Wadewitz of UBS asked about the market impact from fast-growing retailers like Shein and Temu, and questioned whether wallet share expansion with existing customers remains a significant growth driver compared to new logo wins.

Answer

CEO Malcolm Wilson stated that GXO has not seen a particular impact on its business from the growth of Shein and Temu. CFO Baris Oran confirmed that growing wallet share with existing customers remains a core driver, accounting for at least 50% of wins over a multiyear period. Wilson provided the Zalando partnership as a prime example, where a successful initial operation in 2021 led to the new, large-scale flagship facility in France, illustrating the "land and expand" strategy.