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CSX CORP (CSX)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 results showed sequential recovery but softer year-over-year: revenue $3.57B (-3% y/y, +4% q/q), operating income $1.28B (-11% y/y, +23% q/q), operating margin 35.9% (-320 bps y/y, +550 bps q/q), and EPS $0.44 (-10% y/y, +29% q/q) .
  • Versus S&P Global consensus, EPS beat by ~$0.02 while revenue was essentially in line/slightly below; prior quarter (Q1) missed both revenue and EPS on operational disruptions; Q4 2024 EPS was in line (on an adjusted basis) while revenue modestly missed* .
  • Coal pricing (exports) and lower fuel surcharge weighed on yields; intermodal volume grew and other revenue benefited from improved cycle times, while network fluidity and cost efficiency improved through the quarter .
  • Guidance unchanged: management still expects full-year volume growth; Q3 cost items include a 4% union wage step-up (~$20M sequential) and a $15–$20M restructuring charge, offset by ~$30M annualized savings; H2 cash flow aided by ~$250M permanent bonus depreciation benefit .

What Went Well and What Went Wrong

  • What Went Well

    • Network service and cost execution accelerated: “significant sequential improvements in network fluidity and cost efficiency…apparent in our financial results,” with operating margin +550 bps q/q to 35.9% .
    • Customer momentum and commercial pipeline: NPS “was the highest it’s ever been,” with 25 new industrial projects in Q2 (49 YTD) and ~30 more nearing completion; intermodal international volume grew despite diesel headwinds .
    • Domestic coal supported by higher utility burn and faster cycle times; management sees positive domestic trends and potential for mine restarts to bolster exports later in the year .

  • What Went Wrong

    • Yield headwinds: lower export coal benchmark pricing (Australian benchmark avg. ~$184/t vs $242 y/y) and reduced fuel recovery drove a 3% y/y revenue decline; coal RPU down 16% y/y .
    • Ongoing network disruption costs (~$10M/month) from two major projects and Q2 congestion/reroute impacts; Q2 expense +2% y/y despite fuel savings .
    • Operational KPIs still below prior year: train velocity -4% y/y, dwell +2%, carload TPC -6%, intermodal TPC -4%—though performance improved steadily from April to June .

Financial Results

MetricQ4 2024Q1 2025Q2 2025
Revenue ($B)$3.539 $3.423 $3.574
Operating Income ($B)$1.106 $1.041 $1.283
Operating Margin (%)31.3% 30.4% 35.9%
Diluted EPS ($)$0.38 GAAP; $0.42 adj. $0.34 $0.44

Results vs S&P Global consensus and prior periods*:

MetricQ4 2024 Cons.Q4 2024 ActualQ1 2025 Cons.Q1 2025 ActualQ2 2025 Cons.Q2 2025 Actual
Revenue ($B)$3.559*$3.539 $3.456*$3.423 $3.580*$3.574
EPS ($)$0.42*$0.42 adj. $0.368*$0.34 $0.416*$0.44

Segment breakdown (Q2 2024 → Q2 2025):

SegmentVolume (K units)Revenue ($M)RPU ($)
Chemicals174 → 164 (−6%) 722 → 701 (−3%) 4,149 → 4,274 (+3%)
Ag & Food115 → 117 (+2%) 406 → 418 (+3%) 3,530 → 3,573 (+1%)
Automotive105 → 103 (−2%) 336 → 320 (−5%) 3,200 → 3,107 (−3%)
Minerals97 → 99 (+2%) 207 → 218 (+5%) 2,134 → 2,202 (+3%)
Forest Products74 → 70 (−5%) 269 → 250 (−7%) 3,635 → 3,571 (−2%)
Metals & Equip.68 → 70 (+3%) 230 → 224 (−3%) 3,382 → 3,200 (−5%)
Fertilizers50 → 47 (−6%) 126 → 126 (0%) 2,520 → 2,681 (+6%)
Total Merchandise683 → 670 (−2%) 2,296 → 2,257 (−2%) 3,362 → 3,369 (0%)
Intermodal716 → 729 (+2%) 506 → 491 (−3%) 707 → 674 (−5%)
Coal179 → 181 (+1%) 563 → 477 (−15%) 3,145 → 2,635 (−16%)
Trucking—221 → 211 (−5%) —
Other—115 → 138 (+20%) —
Total1,578 → 1,580 (0%) 3,701 → 3,574 (−3%) 2,345 → 2,262 (−4%)

KPIs and cost drivers:

KPIQ2 2024Q1 2025Q2 2025
Train Velocity (mph)18.2 17.6 17.5
Dwell (hours)10.2 11.5 10.4
Carload TPC (%)80% 69% 75%
Intermodal TPC (%)94% 90% 90%
Fuel surcharge revenue ($M)275 217 222
Fuel price/gal ($)2.66 2.85 2.33
Total fuel expense ($M)301 325 269
Coal tonnage (M tons) – Domestic9.5 9.2 10.2
Coal tonnage (M tons) – Export10.6 10.2 10.1

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
VolumeFY 2025Expect overall volume growth Expect overall volume growth Maintained
Wage increase (union)Q3 2025—+4% effective July 1; ~$20M sequential labor impact New detail
Restructuring (mgmt.)Q3 2025—$15–$20M charge; ~$30M annualized savings New
Network disruption costs2025~+$10M/month until projects complete Same; costs persist through 2025 Maintained
Capital projects2025/2026Howard St. Tunnel & Blue Ridge completion in Q4 2025; double-stack capability Q2 2026 after bridge clearances Unchanged timelines Maintained
CapEx2025~$2.5B excluding Blue Ridge ~$2.5B ex-Blue Ridge; ~$295M Blue Ridge YTD spend Maintained/updated actuals
Bonus depreciationH2 2025—+~$250M cash flow benefit in H2 New
DividendQ3 2025 payment—$0.13/sh payable Sep 15, 2025 Announced

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4’24, Q1’25)Current Period (Q2’25)Trend
Network projects (Howard St. Tunnel, Blue Ridge)Hurricanes/Key Bridge and project-related constraints; ops metrics under pressure Projects tracking on schedule; completion Q4’25; double-stack capability in Q2’26 after bridge work Improving execution; clear timelines
Service/Operations KPIsQ4: mixed KPIs y/y; Q1: velocity/dwell/trip plan deteriorated Sequential improvement throughout Q2; margins +550 bps q/q; cost discipline Recovery in progress
Coal marketsQ4: export constrained; domestic down Export benchmark down; RPU −16% y/y; domestic supported by higher burn; potential mine restarts Domestic stabilizing; export pressured
Intermodal and tariffsQ4: int’l volumes up; domestic growth; trucking soft Int’l unit growth aided by tariff timing; domestic flat amid soft trucking; new Myrtlewood interchange opportunities Mixed; building growth avenues
Pricing & yieldsQ1: lower fuel recovery; mix headwinds Merchandise pricing positive, but fuel and mix weigh; aim for better net pricing as service improves Seeking improvement
Technology/efficiency—Yard inspection drones; car health monitoring; structural efficiency and emerging tech to drive savings Investment for productivity
Regulatory/industry—STB feedback positive during Q1 challenges; management open to opportunities creating shareholder value (no M&A specifics) Constructive tone

Management Commentary

  • CEO Joe Hinrichs: “Significant sequential improvements in network fluidity and cost efficiency…While uncertainty continues to impact select industrial markets, we remain focused on completing two major infrastructure projects…” .
  • COO Mike Cory: “Our recovery is a real true testament to the hard work…train velocity continues to improve…both major projects are tracking on schedule…ready for the fourth quarter” .
  • CCO Kevin Boone: “Total net promoter score…was the highest it’s ever been…industrial development pipeline…25 projects in Q2…49 YTD; another ~30 nearing completion” .
  • CFO Sean Pelkey: “Operating income increased $242M from Q1…margins improved by 550 bps…Q3 labor +$20M sequential; $15–$20M restructuring charge; ~$30M annualized savings; ~$250M H2 cash flow benefit from bonus depreciation” .

Q&A Highlights

  • Service sustainability and drivers: Management detailed actions (war room coverage, selective locomotive adds, engineering work shifts) beyond weather improvements; expects further KPIs improvement post-project completion .
  • Margin cadence: Q3 seasonally lower than Q2; wage step-up (~$20M), restructuring ($15–$20M), and ~$20M less favorable PS&O items vs Q2; export coal pricing a watch item .
  • Coal outlook: Domestic utility demand improving; export pressured by benchmark and outages; expect modest RPU decline q/q and y/y headwinds smaller in H2; aim for y/y growth by Q4 .
  • Other revenue and “lumps”: Q2 benefited from lower freight-in-transit reserves as cycle times improved; run-rate $115–$120M/quarter absent further cycle time gains; ~$20M PS&O tailwind in Q2 becomes headwind in Q3 .
  • Capital and projects: Howard Street usable in Q4’25; double-stack by Q2’26 post bridge clearances; Blue Ridge rebuild ready in Q4’25; reroute costs (~$10M/month) cease after completion .

Estimates Context

  • Q2 2025: EPS $0.44 vs $0.416* (beat); revenue $3.574B vs $3.580B* (in line/slight miss). 24 EPS estimates; 18 revenue estimates*.
  • Q1 2025: EPS $0.34 vs $0.368* (miss); revenue $3.423B vs $3.456B* (miss). 25 EPS estimates; 18 revenue estimates*.
  • Q4 2024: EPS $0.42 adjusted vs $0.420* (in line); revenue $3.539B vs $3.560B* (miss). 24 EPS estimates; 16 revenue estimates*.
PeriodEPS Cons.*EPS ActualRev Cons. ($B)*Rev Actual ($B)
Q4 20240.419970.42 adj. 3.559193.539
Q1 20250.368240.34 3.455643.423
Q2 20250.416270.44 3.579603.574

Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Sequential recovery is real: substantial q/q margin expansion (+550 bps) driven by service improvements and cost discipline; trajectory into H2 favors continued operational normalization .
  • Yield headwinds abating into H2: coal and diesel compare headwinds shrink in H2 vs H1; management expects potential y/y growth by Q4 if export coal and comps evolve as expected .
  • Near-term cost watch: Q3 labor step-up (~$20M), one-time restructuring ($15–$20M), and removal of ~$20M PS&O tailwinds temper sequential margin progression before 2026 structural benefits arrive .
  • Strategic catalysts: Q4’25 completion of Blue Ridge and Howard Street projects, with double-stack capability by Q2’26, unlocks capacity and intermodal growth; myrtlewood interchange and BNSF partnership expand truck conversion opportunities .
  • Commercial momentum: record NPS, robust industrial development pipeline (49 YTD, ~30 pending) and targeted wallet-share conversions support medium-term growth despite mixed macro .
  • Cash returns intact: dividend maintained at $0.13/sh and H2 cash flow aided by ~$250M bonus depreciation benefit; capex ~$2.5B ex-Blue Ridge remains disciplined .
  • Monitor coal and trucking cycles: domestic coal strength offsets export pressure; trucking softness weighs on Quality Carriers and domestic intermodal RPU—pricing power should improve as service remains strong and trucking tightens .