CSX (CSX) Q3 2026 Earnings Call: Q&A Summary

Q: Chris Wetherbell from Wells Fargo asked about the potential productivity opportunity and process for 2027 given the strong margin expansion in 2026.

A: Steve Angel, President and Chief Executive Officer, stated that the team already has a little over 100 initiatives contributing to the productivity target for next year, and while 2027 will not be as big as 2026, it will still be a significant number.

Q: Brandon Oglenski from Barclays asked about the sequential progression of professional and other services (PSO) and labor costs from the third quarter to the fourth quarter.

A: Kevin Boone, EVP and Chief Financial Officer, explained that normal seasonality includes PSO moving up slightly during winter months and labor costs easing due to holiday vacations and the rolling off of capital programs, typically resulting in 200 to 300 basis points of margin degradation sequentially.

Q: Ken Hoexter from Bank of America asked about the structural nature of the PSO cost reduction and whether the 400 basis point year-over-year improvement could be repeated in the fourth quarter.

A: Kevin Boone, EVP and Chief Financial Officer, noted that fuel price volatility created about 100 basis points of margin pressure in the third quarter, and regarding PSO, the team targeted external supplier costs, asset utilization, and external labor rates while building a continuous improvement muscle.

Q: Brian Ossenbeck from JPMorgan asked about the operating department structure following Mike Quarry's retirement and whether a dual COO role or external search is planned.

A: Steve Angel, President and Chief Executive Officer, explained that Casey Albright and Doug Ryhorchuk will continue in their respective operational roles reporting directly to him, adding that his own extensive background in manufacturing operations and lean production will allow him to work closely with them.

Q: Jonathan Chappell from Evercore ISI asked about resourcing and operational efficiency in Atlanta and across the network heading into peak season.

A: Steve Angel, President and Chief Executive Officer, responded that October service improved over the third quarter, and the company is addressing capacity by investing in infrastructure such as a 50% switching and processing capacity expansion in Atlanta, along with active crew management and modest T&E headcount additions.

Q: Stephanie Moore from Jefferies asked how management views the pricing opportunity, excluding fuel, entering 2027 amid inflationary pressures.

A: An executive answered that pricing remains a key focus using a surgical approach, noting that same-store sales pricing is expected to be stronger than last year and discretionary merchandise pricing has accelerated throughout the course of the year.

Q: Scott Group from Wolfe Research asked about the sustainability of three consecutive years of volume growth and whether the network requires more people or locomotives to handle it.

A: Steve Angel, President and Chief Executive Officer, stated that he is encouraged by the growth initiatives and expects positive momentum into next year, while Kevin Boone previously confirmed they are adding modest headcount on the T&E side to properly man the network.

Q: Tom Wadewitz from UBS asked about the key drivers of domestic intermodal volume growth and the remaining runway for services like the Howard Street Tunnel double-stack corridor.

A: Maryclare Kenney, Senior Vice President and Chief Commercial Officer, stated that domestic growth has been driven by SMX and Howard Street Tunnel initiatives, and the company is optimistic heading into the upcoming bid season as truck capacity tightens.

Q: Dan Moore from Baird asked how the wide spread between highway and rail costs impacts the domestic intermodal bid season and yield potential.

A: Maryclare Kenney, Senior Vice President and Chief Commercial Officer, explained that international contracts are multiyear with fixed adjustments, whereas domestic annual contracts have a lag effect and will be priced to market and service value during the bid season starting right now.

Q: Richa Talwar from Deutsche Bank asked about bottlenecks to intermodal growth, customer conversion stickiness, and drayage driver capacity.

A: Maryclare Kenney, Senior Vice President and Chief Commercial Officer, emphasized that consistent and reliable service is paramount, noting that the national accounts program helps shippers identify conversion lanes and that drayage is more efficient than over-the-road trucking with more turns per day.

Q: Ari Rosa from Citigroup asked about progress on rail partnerships with BNSF, CN, and CP, and how they factor against opposition to proposed railroad mergers.

A: Maryclare Kenney, Senior Vice President and Chief Commercial Officer, noted that working closely with interline partners to find new and better transit and reliability solutions for customers has been a common and successful practice for CSX over many years.

Q: Walter Spracklin from RBC Capital Markets asked if any cost pressures or driver shortages are causing concern heading into 2027.

A: Kevin Boone, EVP and Chief Financial Officer, stated that while driver shortages exist across the market, CSX sees significant opportunity to drive costs out of the business, recruit effectively, and price to the market as capacity tightens.

Q: Vaske Majors from Stephens asked about field tests and the path to FRA approval for the start-to-stop fuel savings technology.

A: An executive answered that Trip Optimizer has provided proven benefits, while the 0-to-0 start-to-stop technology is partially implemented and undergoing FRA test processes prior to full fleet deployment upon approval.

Q: Jason Seidl from TD Cowen asked how tighter truck markets and higher fuel costs present opportunities for the carload business, particularly in forest products.

A: Maryclare Kenney, Senior Vice President and Chief Commercial Officer, responded that despite lackluster housing and paper mill closures last year, the team is working with building products and paper shippers to deliver new solutions and increase capacity as truck capacity tightens.

Q: Ravi Shanker from Morgan Stanley asked about unusual items and the run rate for the other revenue line.

A: Kevin Boone, EVP and Chief Financial Officer, explained that the third quarter upside related to the in-transit reserve and higher intermodal storage costs, and expects the fourth quarter run rate to be around the mid-30s per quarter average or slightly better.

Q: David Vernon from Bernstein asked how much incremental fuel revenue was generated by the carload fuel surcharges introduced in June.

A: Maryclare Kenney, Senior Vice President and Chief Commercial Officer, declined to provide a precise number, stating that the company ensures thoughtfulness in conversations with customers who understand similar trucking impacts.

Q: Jeff Kauffman from Citizens Bank asked where safety and productivity metrics should be in 12 to 24 months and what that means for operating ratio.

A: An executive reiterated that the entire company is dedicated to continuous improvement across safety, service, and financial metrics through initiatives spanning 2027 and 2028 to deliver best-in-class performance.