CSX CORP — Call Transcript 2025

Hello, everyone. Hopefully, everyone can hear and see me Okay. I'm Richard Harnain, and I welcome you to Deutsche Bank's Annual Transportation Conference. This is DB's fourth such dedicated transportation event and the second one in this shiny new, relatively new, New York headquarters here we have in Columbus Circle. Not breaking any new ground here from that perspective. That said, this one is especially meaningful for me, considering it's my first time hosting as Lead Transportation Analyst. I hope we can make it just as memorable for you all as I'm sure it's going to be for me and my team. A niche conference here for sure. We have 10 corporates attending, but 10 that we'd say are critical to the US transportation landscape. Very excited to have 140 people in the building to discuss the latest in trends on the transportation scene. A special thanks to all of you who came out. We really appreciate the support and we know how valuable your time is, so thank you. What an interesting time to have this in coverage of transportation, right? All this tariff drama that could potentially jeopardize trade and goods demand has made it especially challenging to recommend names in a space that thrives on trade and goods demand. Given all the market risk out there, we've been really selective in our recommendations. In this context, we see rails as a uniquely attractive subsector among the ones we cover, offering a blend of defensive and offensive characteristics. We're now Buy-rated in all three Class I U.S. rails we cover. We're very pleased to be kicking off the Fireside Chat series today with the one we most recently upgraded on a much improved quarter, CSX with Kevin Boone, Chief Commercial Officer. A warm welcome to you, Kevin. Thank you. Thank you for joining. Thank you for allowing me that probably too long of a preamble. A big thank you to the Head of IRM Strategy, Matt Korn, who's also here, and General Counsel Casey Luchen for attending as well. There is lots to dig into, so maybe we can get started. Absolutely. All right. Great to be here. Thank you for having us. We've got a lot to talk about. Definitely. I promise we'll get to the topic everyone really wants to talk about. Maybe we can start with what you're making of the demand environment. You know, Kevin, you talked about how unusual Q2 was in terms of production outages with customers. Those were expected to improve in Q3 and Q4. Are they starting to improve? It looks like volumes have been running up quite nicely. They're up 1% off of a flat base. Like in Q2, flat year-over-year. Now we're up 1% year-over-year. Maybe you can color that in for us on what's driving that. How optimistic are you that such acceleration can continue based on customer activity and feedback? Yeah, you touched on it. There's a lot of things, obviously, from a tariff perspective and other things that are impacting our customers. We saw some of that in the second quarter. I think it's fair to say in some of the markets that we anticipated maybe seeing a little bit of improvement, we are seeing it a little start to happen. I think further into the quarter, you'll hopefully continue to see that. On the chemical side, we mentioned one particular customer that had had some outages. That's slowly coming back a bit, but it's been a little bit slow there. On the auto side, we have seen some quality holds, other things that have been a little bit slower, I would say, quarter to date. We are seeing some signs of life there and are encouraged by what we see in the near term in terms of production. Some of those production headwinds may be a little bit behind us. It's been a little bit choppy here and there. I think customers are more or less looking for direction in the market and uncertainty around where the tariffs are going to play out. I think you'll see investments being made. Aggregates still with the industrial development side still remains very, very robust in the Southeast. We're seeing those volumes very, very strong. The metals team has done a particularly great job of winning business. We've seen some great momentum on that side. I will point out that you will see some strong performance out of our intermodal team. We've been working on a number of things, some new service lanes and other things that will start to pick up here in next month and into the fourth quarter, which we're really excited about. Great. Maybe if you tie that into other drivers of near-term profitability. On the cost side, there's some headwinds Q2 to Q3, like the unique labor deal that you talked about. There's some Q2 good guys that maybe don't repeat. I think they were in the purchase services area. On yields, on your last call, you updated us that it was going to be very dependent on coal prices. Coal prices are running up nicely quarter to date. Gas prices are down. Lots of puts and takes there. I think consensus is modeled in something like 100 basis points of sequential OR deterioration Q2 to Q3. Is that a reasonable expectation? Do you think you could do better than that? Again, good volumes, service, export coal pricing off that, but maybe some cost headwinds in that gas trend? Yeah, I think first on the export coal side, or just pricing in general, we said it would be slightly down quarter-over-quarter. We'll see where things trend through the quarter. You did mention we've seen a little bit of stability in the met coal prices, which is you got to start somewhere. So we're starting there. We still see very, very strong demand into the Southeastern utilities. That continues to be a really good story for us that hopefully will continue through the remainder of the year and into next year. That's helpful. On the cost side, and I'll have Matthew correct me if I missed anything here, we talked about a labor agreement to step up and the labor agreement that happens on July 1. That's roughly $20 million, I think we said. Matthew, we also highlighted some P&O purchase services headwind or benefits that we received in the second quarter that won't repeat in the third. Finally, we did have a restructuring, management restructuring. That'll be a one-time item in the quarter that would, I think, be quantified around $15 million-$20 million in the third quarter. Obviously, that has benefits on an ongoing basis beyond the third quarter that we'll benefit from. Those are the things, distinct items, I think, that we pointed out. Okay. So are those the only items you would maybe take together and then bridge off of Q2, and then maybe some volume help can help offset them? Yeah, I think we're blessed with a great railroad that has a lot of operating leverage as we put good volume on it. Not all volume is made the same. We're really looking at profitable growth as the focus of our team. As you see that volume come through, I think the incremental margins should be very powerful. Okay. Any early thoughts on Q4? I think the street has been flat, sequential margins. Your margins have fallen 200 basis points on average the past 10 years. Of course, this is not a normal year, though, for CSX and coming off of some. The good news is we're going to be finally lapping the export coal prices by the fourth quarter. That headwind on a year-over-year basis will be not what it has been this year. That is the good news. As we turn the corner to 2026, I think we'll see where interest rates and other things trend. We obviously have the industrial development story, which I'm sure we'll dig into more, that will continue to ramp up and benefit us. I talked about some of the intermodal momentum that we have that will really start to show up in the fourth quarter, which we're excited about. Okay. That Howard Street intermodal, you can't sell until 2026, right? We can start actually taking all the outer route miles by the fourth quarter. Some of those costs related to the rerouting, we talked about millions of miles that outer route. We'll be able to run trains through the Howard Street Tunnel in the fourth quarter. We just won't be able to double stack it until the second quarter of next year. Got it. Okay. Yeah, with both projects finishing in the fourth quarter, you're going to see about that roughly $2 million a month start to fall off in that fourth quarter. Perfect. All right. A point that really resonated with us from the last few earnings calls, and it was one that you made, was around your NPS scores, remaining near record highs despite all of this disruption that's happening that you face to start the year. As Chief Commercial Officer, I guess there's probably no one better suited to address this topic than you. With such high customer satisfaction, do you think you're in a better position to win more customers' wallet share as your network becomes more efficient? Have you quantified that? Yeah, I think 100%. I do want to point out that Shannon, who runs our Customer Service group, has done an amazing job of staying up in front of customers. Things will happen day to day. Storms happen. There are other things you have to adjust to. It's about communicating with the customers. It's really about mitigating the big cases where you're really missing the service on a consecutive level. There has been a lot of focus with our operating team and Shannon's group around consecutive missed switches. If you're going to have an issue, make sure you're delivering the service next day. Those are what customers really remember, that really prolonged service outage that they experience. That's what really impacts their decisions on a long-term basis of whether they want to give more volume to the railroad. We're running really, really well. Mike and I and the team have never been more aligned in terms of how we deliver that service to the customer. It's also aligned around how do we take cost out. That's still a real focus of the team, how do we create a really efficient service at the same time and deliver what our customers want so we can grow our volumes. At the same time, we're constantly looking at the network, how we could speed up the network, and how we can make it more consistent. I think with an improving trucking market, at some point, this trucking cycle, which has been, we're almost three years down a down trucking cycle, will start to improve. I think we'll really capitalize on that. I will say, despite a trucking market that's not really helpful right now, every week we go through opportunities and new wins. We are seeing truck conversions come in every week. I think that only accelerates as we get into next year and really capitalize on the service that we're delivering today. What about versus other railroads? Your competitive position relative to maybe NS or? I think we have the best service out there in the East. I think that's something that we hear from our customers, and it's consistency. We had a little bit of a hiccup into that first quarter, but our ability to react to it, adjust, make sure we didn't shut down plants, that we were proactive in our communication, I think really went a long way. I think this time around was very different than maybe going back to 2017 or 2018 where you saw some of that customer disruption. That's why you saw the scores continue to outperform in terms of the feedback that we're getting from our customers. Okay, great. Finally, you probably figured it would be impossible to have a conversation with a sell-side analyst without at least an attempt to talk rail M&A. I know Casey's here to help keep the guardrails on. Maybe I'll open the floor up to you first to speak very generally about what you can and can't say on the topic. Yeah, you know, certainly following the news by Union Pacific and Norfolk Southern, I know it's a hot topic, right, that people want to discuss. What are the implications of a Transcon and those things? I will say I'm very limited in what I can share today. I would like to reiterate what Joe said on the second quarter call, which was very clear in terms of we're open, we're engaging in ways to create shareholder value. We reiterated that. We're focused on driving profitable growth to the CSX franchise. Finally, how can we improve service? Those are three really tenets of what we're trying to deliver. It's all going to drive shareholder value. I can tell you the board is highly engaged and is well advised. Beyond that, I'm sure there will be a time to share more. At this moment, that's probably all I'm going to talk to. Okay. Maybe we can talk in broad strokes then, just on your competitive stance. You talked about you're getting rail conversion opportunities every week. How do you assess your competitive stance versus over-the-road trucking today, especially on Transcon? Do you think there is significant opportunity for enhancement, either by way of more rail collaboration or otherwise? Yeah, I won't comment specifically on the Transcon. We're always collaborating as a team, looking at our network and how we can deliver a faster service, more reliable service with Mike. Those opportunities are still pretty vast when we look at it. We've gotten through this first quarter period where obviously we had some service disruption. Now the team's really leaning in. You've seen, you're going to continue to see us tweak different areas where we're driving out cost and increasing speed on our network, which ultimately translates into greater volume. One specific area is intermodal. We're seeing algorithms right now. If we can deliver at a certain time and a certain cost, the algorithms continue to give us more and more volume. We're really trying to understand that with some of our customers that use those things. Some of the opportunity that we're seeing in the near term to really drive that. That's the fun part of where we are right now. We're really leaning in and, I would say, playing offense around that and really understanding what are the lanes that really offer valuable, profitable growth and targeting those in a different way. Okay, great. When you do, I guess, lose to trucking, what are some of the issues that customers cite? Is it mainly speed that's the primary factor? Are there other inefficiencies that you think you can work on to really woo more customers? Yeah, I think first and foremost is reliability. That's what customers want to understand. You're not going to disrupt my customers that I'm serving. You're not going to disrupt my plants that I'm trying to run. That's first and foremost. I think we've done a good job of continuing to build that trust with our customers over the last few years. Customers can have a long memory. They remember in 2012, that time where something happened and that plant shut down. Time is on our side. As we continue to consistently deliver month-over-month, quarter-over-quarter, and year-over-year, those opportunities are more and more. We've got to lean into it as well and explain what we do and why we're different and how we're prepared when their business comes back or when they see a lot of demand come that we can serve it. That's been the challenge for the industry, is when you've seen an upcycle, typically the railroads have struggled with that a bit. I think we're creating a lot of resilience in their network. That's why we're making these investments in the Howard Street Tunnel. That's why we're reinvesting in the Blue Ridge. It creates a lot of resiliency in our network. That, quite frankly, makes our network more unique than most because we have alternative routes where other railroads are more reliant on single routes. We can adjust. If there's storms or other things, we have a lot of flexibility within there. That's exciting as we look out. We know some of these markets, like housing and auto markets, will eventually be tailwinds. I think during my whole time in this role, they haven't been wind at my back necessarily. At some point, that will change. We talk a lot about how our network is going to be ready to handle all of that growth when we see it. Okay. Just thinking about your competitive position, I know you talked about some of the unique positive characteristics of the network. Just your ability to compete, do you think it will be negatively impacted if there was this other merger? Do you think, I guess, when customers look at your network, do they evaluate it differently on Transcon versus your East Coast, North, South service? Do you think they look at it as one complete package, i.e., that your competitive positioning might be undermined if one of your competitors has a better Transcon product? I'm going to go back to the original statement. I am going to reconfigure your question here. We have a lot of things on our network that we're working on, whether it's the industrial development side, which we talked about, is going to provide a lot of growth opportunities. We're at the beginning stages of that accelerating. There are a lot of things that we think we can do on our network today and in some of our yards that are going to create a lot of outer route miles or eliminate a lot of outer route miles for our network. That translates to a better service for our customers and allows us to go out and win share, convert modal share from mainly trucks. We're excited about those opportunities. I think that's the framework I think we're going to keep it in today in terms of that discussion. No, I appreciate you attempting the question. I know Matt was shaking his head and got nervous, but I think he's trying. Yeah. All right. Pivoting back to your CSX standalone again, if M&A doesn't happen or doesn't happen soon for you or your competitors, it sounds like you feel very confident in some of the operating momentum and ability to drive volume at CSX. Maybe you could just double tap on that. With merchandise from attractive industrial development project pipeline, you've spoken about being a good source of growth, the enhanced intermodal franchise once Howard Street done, coal demand potentially sustainable, especially with recent administration support. Just talk about the leverage you have to win over the medium term, long term, ex-M&A. Yeah, when I take a step back at the whole industry, I wouldn't trade our footprint for anybody else's footprint. When you look at where goods want to go, two-thirds of the U.S. population today are on our network. The most valuable consumers in the world are on our network. We have a lot of visibility to it, and we track this on a daily basis. The industrial development activity and industrial activity that we're seeing is concentrated on our network and our geographic footprint, whether it's the Southeast or the Midwest. That's going to create a lot of value over time, and we're really leveraging into that. We don't talk about the ports probably enough. The East Coast ports, given the dynamics around tariffs and other things, are probably advantaged or will be advantaged. We believe they will be versus the West Coast ports. As you see trade volumes shift from China to other parts of the world, we'll really benefit from that. You can see the investments that are happening, whether it's in Savannah or other ports along the East Coast. They see a bright future, and that's a big benefit from our network perspective of how can we push more of that west into the network and benefit from that. There are a lot of things going on. You touched on the coal side, on the domestic side, what was a headwind for our business. We're seeing a lot of opportunities, data centers. A huge draw on power demand over the next few years makes these assets more valuable. I touched on it, I think, on the last earnings call. Utilization rates on these utility plants are very low, and if you can go from 40%-60% utilization on, it's a significant opportunity for us. Those are the things that we're working with our customers to really drive. Utilities, maybe two years ago, was a headwind. We're seeing a very different market. The pressure to idle those plants or even the ratchet down utilization is not there. We're feeling that, given some of the demand that we're seeing here that we think is going to continue for the years ahead. Maybe we can talk about coal first. You talked about year-over-year that headwind kind of goes away in the fourth quarter. Do you think that opportunity for utilization advancement could be something that we see in the next month and year term, the next few quarters? We're highly focused on it. I think there is an opportunity. I just think we're arching, obviously, regulatory dynamics, I think, are helpful and don't put that implied pressure on these utilities to maybe ratchet down their utilization. That's helpful. Obviously, a very hot summer, and we're living through it in Florida, is not unhelpful. That's been a positive for us. The weather is a factor. I hope for a cold winter as well. That's helpful for our network as well. All right. Maybe we can talk about the industrial development pipeline that you referenced. You said it's unique to your franchise. A lot of these projects are on your network. You talked about hundreds of projects being a reason for the optimism for CSX despite the economic uncertainty out there. More specifically, I think Sean added there are 50 projects that are already in place this year, and then another 30 coming online in the back half of the year. Can you provide just some color around the margin profile and market exposures attached to that pipeline, maybe more near term? Maybe if I could just take a step back and why this is an interesting dynamic, why over the long term, I think, is a very different trend. First of all, over the last several decades, we've had a lot of industry leave our network and, quite frankly, everybody's network in the U.S. from a rail perspective. We believe that dynamic is shifting where we'll net up activity. When you think about the goods that come into the U.S. today, if they're coming into the Eastern port, about 15%-20% of those goods actually hit the railroad today. Most of them are being trucked to the dense population centers that are along the coast. If these goods are now being manufactured, we'll say, in the Midwest or the Southeast, not only do we potentially move the input products that go into manufacturing those goods, we also get to have the outbound into the East Coast population centers from the Midwest and Southeast. You go from maybe zero move for a product to two moves. That's pretty powerful when you think about those dynamics there. When we take a step back on the overall portfolio, it's really around a lot of different. It basically touches every market we touch today. It's a diverse portfolio. It's not concentrated in one area. We put up charts in the past that show it's not about just automotive. It's not about just steel. It's really across every one of the markets that we serve. We're excited about it. When you think about the margin profile, it's similar to our current business today. Merchandise is a very good, profitable business for us. We should have similar dynamics. The incremental part of that is most of this volume will move on trains that exist today. It'll go in our manifest business on trains that are moving through our network today, which is very powerful from an incremental margin perspective. What should we think about in terms of the modeling? What's a good incremental margin profile to put in for the out years, I guess, on that? Yeah, I think it's similar to the rest of our merchandise business. We look at pricing levels. We're providing a great service, and we get value for that service. Typically, the transportation costs aren't the driver of whether that project is going to come to life or not. It's the ability to identify a great site that has great access to our network. Those are the really important factors. Power is a big factor in terms of decision-making on those sites. I do have to give the team a lot of credit. We have a lot of sites available to customers that are shovel-ready, which has put us in the market and allowed us to capitalize on it very quickly. Okay. He talked about auto and the housing market remaining constrained. Investors remain particularly concerned, I think, especially about the housing market getting worse in the near to medium term. Can you hit on your long-term earnings growth target? Can you hit that long-term earnings growth target of high single digits, low double digits for 2024-2027 with those markets remaining under pressure? Do you embed some sort of recovery in your long-term outlook? Yeah, look, we have a diverse portfolio. That's what's great about what we do. When one market is not doing well, we've got to lean into other markets that have opportunities. That's what the team's working hard on. I talked about some of the things we're doing on the intermodal side and maybe a backdrop where we're seeing industrial production not positive. You've got to look for ways to grow. We've got a very engaged team that engages with our operating team to create more opportunities for us. We reiterated our guidance on the last earnings call. We see a path to delivering that. Obviously, having a little wind at our back is always, I would prefer that than not. We've got to find ways as a team to really find our own opportunities. We can't just rely on the economy to help us. We've got to gain share, modal share. Some of these things will eventually come. We can't predict if they're going to happen next year or in 2027 or 2028. In the absence of not knowing what's going to happen, we've got to drive our own opportunities. All right. Maybe shifting gears a bit, talk about the strategic value of your trucking business. Do you think it makes sense? Yeah. Synergies with your core business? Quality, chemicals is our largest segment of our business today, as everybody is aware. Quality gives us a unique opportunity to go to market and understand that market at a really intimate level in terms of how volumes are moving throughout the U.S. and then identifying opportunities, whether it's transloading, whether it's an ISO tank product, to really target a business that hasn't traditionally moved on the railroad. We are seeing a lot of momentum around that this year in a very challenged trucking market. We're seeing pretty extraordinary, pretty great growth, maybe not in triple digits, but close to that on a year-over-year basis, which is exciting. We're starting off on pretty low numbers. Randy and the team have really found some momentum with some of the largest customers. The great thing about the chemical industry, it's very sticky once you win it. That's the challenge, too, as you introduce a new product into the market. We've seen two very, very large customers start to adopt this product at a high level. You'll see others follow their lead, which we're encouraged by. The other thing that it really identifies or helps us is in our general discussions with our chemical customers, there are many discussions we've been able to bundle the product together and really offered us an opportunity, not only on the rail side, but also on the truck side, to have a different discussion with our customers. Randy, who leads our Quality Carriers, and I are going to go to Houston next week. We're going to see eight customers. The unique thing about that experience is we're not only bringing in the rail folks that work with us, but also the trucking side of their business is coming into the room. Getting those two groups together at the companies that we serve is usually a pretty tough task to do. Having that knowledge on both sides and being creative and coming up with solutions is really the opportunity that we're seeing. We probably need to do a better job. That's why we'll be in Houston to continue to capitalize on that. There is a lot of momentum around that and a lot of opportunities that it drives on the rail side, not just only on the truck side as well. I should mention, if anyone in the audience has questions, feel free to raise your hand and jump in. I just asked one on the chemicals. Is it all coming off the highway? Is there some coming off barge? Are there more? It's typically mostly off the highway. The barge is more difficult to compete with. We'll see opportunities. Obviously, there can be disruption on the Mississippi and other areas where we'll see opportunities here and there. Typically, barge is on water. Obviously, the economics, you can move a lot of volume on water pretty cheaply. Yeah, on the coal, you made the comments about customers maybe thinking about their business differently with the data centers backdrop. I think the regulatory side, right, the regulatory pressure from an environmental perspective might not quite be as robust as it was. I think at the margin, we're seeing that a bit in just the coal burn. They need a commitment to take the stockpiles. If they needed to take the stockpiles higher because they're not running at 40% anymore, how much would that mean to you at this point? If you think if we're in that 40% range and you could take it to 50%, 55%, 60%, that's fairly significant growth over time if we get to that point. Those conversations are happening. Those are opportunities, and it's something the team is working on all the time. We've got to, in that case, which is a good problem, we're going to have to look at and make sure the mine capacity is there. We've had a lot of mines, obviously, over the years shut down. I think there is mining capacity, but there'll have to be some investments there as well. What do you think on the timing for any of these coal plants announcing this type of thing? I mean, you've seen small. I don't think they'll announce it. I don't think it's going to be an announcement. Carloads? No, I don't think you'll just see it show up in the carloads as an opportunity for us. Okay. Any opportunity to add customers in your portfolio that do coal, or are you pretty full on? You can't move a coal plant around or a utility plant around. I would say it's really protecting our base, making sure they're competitive in the market, which they are today. Obviously, with $3-ish gas prices, that makes coal burn economical, which we like. We can all debate on, obviously, what they export, continue to export this product, whether that will tighten the market further. I think there's some optimism there that natural gas prices could trend higher. I'm not going to make a prediction today. There's some thought out there, and that only helps our economics. Maybe you can talk about your relationship with your intermodal channel partners. Are you pleased with the relationship as you lean into more growth on your intermodal side? Are you happy with that arrangement? Do you think that there's more opportunity for you to do things on your own? I think UNP does a little bit on the margin on that front. Yeah, I mean, we work with all our customers. Obviously, I think you're alluding to the industry and some of the things that are going on there. We're here to deliver really good service. We have the best intermodal service in the East. We're taking time out of the transit times, which translate to additional opportunities for us. Mike and team are very focused on running these trains on time. We have the best on-time performance that we've had in my time here, and that allows you to capitalize on any opportunity. We're here to continue to grow that business. We'll make the investments in profitable growth. This Howard Street Tunnel, from a network perspective, is going to be a big deal. We outlined the opportunity at our investor conference. Having that access, basically, the last major quarter on our railroad opened to double-stack capability. Think about Southeast and the Northeast; it is a huge opportunity that we're going to capitalize on that all our customers, all our partners in that area can benefit from. Okay. Final question. Maybe talk about that Howard Street opportunity a bit more. What does double-stack intermodal service really mean for you? What type of opportunities is it going to open up that you don't have today? Yeah, today we have the I-95 corridor, which largely is underutilized, in our opinion. A big part of that reason is the intermodal volume is not economical when you can't double stack. It was one of the things that surprised me when I came into CSX in 2017 and was eventually in the CFO role, is the economics really change when you can double stack that container. Having that opportunity to reach markets that we haven't before and compete with perhaps the shortest haul from Atlanta and Atlanta up into the Northeast is pretty powerful from that side. We're going to allow our customers that are aligned with us to compete for that volume. I think it'll also translate into additional opportunities to grow that market, which we're really focused on, take more trucks off the highway. We're unique. We have a unique franchise in Florida. How do we look at that and continue to drive more volume that exists today on the truck that can move rail going forward? Just wondering if you can share your observation about your partnership with CPKC, which extends your reach much beyond the East Coast into Mexico and so on. How's that doing? What's the kind of any kind of challenging point in terms of this logistically and smoothness of fluidity of the network? I think when we made the announcement, we had a lot of capital that we had to put in that line. You're going to continue to see that service continue to improve, which allows us to go after a different market there. We have monthly, if not biweekly, touch points with the CPKC on identifying additional volume, mainly concentrated in Mexico that we can go after. There are a lot of opportunities with that line and that access. It's pretty unique for us. It creates a more efficient path into our network into the Southeast. We're really excited about it. I know the CPKC would say similar things. It's not just in the intermodal market. We're seeing auto and other areas with opportunity to grow that business. The vast, vast majority of this is just truck conversion today. That's why we're excited about it. We're highly focused on growing the pie, and this is really an avenue to do that. CSX is the railroad that's probably the furthest away from its margin highs, for arguably temporary factors and reasons. If you think about your ability to get back to an OR with a five handle on it, how do you feel? Could it even be better than what you had before, considering all of these positive things that you spoke about with respect to driving greater efficiencies, improving your network, all these industrial projects, etc? No, what I do know is the business we're targeting today has a very powerful incremental margin profile. We have a network with a lot of fixed costs, and as we identify more volume, the right volume to put on our network that we're very excited about, I mentioned all the opportunities. I think we think that drops through at a very meaningful incremental margin. Sean's talked a little bit about that. At the same time, I can tell you Mike is out there every day looking for ways to take costs out of the network. Those two things in combination are very powerful and allow us to deliver, I think, on our expectations to continue to improve our margin profile over time. Great. What worries you the most, I guess? Yeah, there's always noise out there with, obviously, the political dynamics and those things. I think what the market's looking for is certainty, right? When I'm thinking as a corporate and I want to make an investment, you want to know what the rules of engagement are. I think having that certainty, the sooner we can get to that, where are the tariffs ultimately going to land? Where are these decisions ultimately going to land? The tax profile, all of those things are important. I think these policies, there's a real optimistic case for our business that could be made. We've got to settle in. Customers have to have the confidence to make the investments. They're already making the investments, to be clear. You can see the tax policy around 100% depreciation on the structures is huge. It's huge. It's a game changer. I think you're going to really see that unleashed, hopefully, in the next year. That really benefits our network over time. Political uncertainty is up there in terms of worries. If we can settle down a bit and customers can get more clarity on where things are going, obviously, we talk about interest rates. Some of our most important markets are sensitive to the interest rate environment. There is a case being made that we'll start to see rates come down a bit here. I think that would be really healthy as we move into next year for our business. We'll see. We know there's a deficit both on the auto side and on housing in general. There are deficits, right? We're running below what long-term demand would suggest in both of those areas. Eventually, we think we should get to a point where that would represent underlying growth in the markets. In the absence of that, this team's got to work hard to go and find and capture share in the market. I think we're doing a good job. We can always do better. We're highly, highly focused on that. I guess in light of that, just from last week's updates and just last night's updates, we kind of touched on this, but just customer conversations more near term, do they feel better or worse? I know there's still a cloud of uncertainty out there. Any changes in customer conversation? I don't know. I think it's still the uncertainty prevails right now. I think there's hope, right? I think there's hope that as we turn into next year and maybe we can build a little momentum into the fourth quarter that we can see it. I'm not breaking any news. The industrial economy is pretty anemic right now. We're seeing it across our business. That's why we're so focused on driving opportunities that we can control. We'll continue to do that. When those markets come back, we're going to be here to serve. We'll benefit from those opportunities. The network will be ready to handle it, especially after all these investments that we've made. Any other questions you have? Yeah, go ahead. I know you're limited in terms of the mergers. We know that the STB guideline is to enhance competition. I wanted to share some observation in terms of in your interfacing with other railroads and so on. There are kind of areas that competition can be enhanced, for example, reciprocal switching and access to network. Those kind of things. Are there kind of areas that can improve with maybe some concession? I'm not going to speak specifically to that. We're going to have opportunities, and Joe probably will lead the charge on that to discuss any part around specifically Transcon and those things. I will say this hasn't changed for me since I've been in this position or for us, quite frankly, all the management team. We see a lot of things that we can do from an efficiency standpoint, not only within our network, but interchanges, all those things. That hasn't changed, right? That continues to be an opportunity to drive modal share for the industry as we get better, more consistent. Over half our volume touches another railroad, so the customer experience doesn't end at the CSX network. It extends through their total experience. On the intermodal side, it doesn't end with just the rail service. It ends with how do we integrate with the truck better. Those things are things we need to continue to solve for, and they are opportunities for us. How do we use technology to create more visibility for the customers so they can manage their supply chain and their inventories better, right? We're behind the truck in that area. Those are things that we talk a lot about internally. All of these things remain opportunities to get better, and over time, they represent more opportunity to gain share in the market. I'm very, very optimistic on that. Technology, we have Steve who's leading those efforts for us. There's a lot of things that we can do to really make that customer experience better, where they're more willing to give some of their most valuable freight to the railroad and trust us with that freight because they can have confidence it's going to be delivered to their customers that need it on time. Kevin, could you just give some more tangible examples of what type of initiatives you're targeting and how maybe a more supportive regulatory backdrop is helping you implement some of those changes? I don't think the regulatory backdrop has really anything to do with us pursuing growth. I think they've always been supportive of us going after modal share. There are so many beneficiaries in that, the communities that we obviously serve, taking trucks off the highway, all those things. Transloading is something that we've highlighted that I would point out again. We've had a lot of success in our transloading business this year. It's far outgrowing our core business today, and you're going to continue to see us make those investments. It's a way to reach those merchandise customers that aren't traditionally on the railroad today. It's spreading our footprint out beyond just the physical infrastructure of the railroad, where if we don't touch them with our rail infrastructure, this is a way where we can combine a truck and transloading to reach them. It's something that's created a lot of valuable growth for us in a market that's pretty challenged this year. You'll continue to see us make those investments in that area. We're really looking at ways where we can grow the pie, because that's the best way we can create value over time, is growing the pie. We're going to compete every day with the railroad, and we have the best service out there to compete. We have the best relationships, and I expect us to win. If we really want to change the growth algorithm for what we've been able to achieve historically, it's really capitalizing on industrial development and finding new ways to win share with our existing customers. I think we're along that path, and what I think you'll see is as the truck market tightens a bit, you'll really see that start to accelerate even more than what we were seeing today. Last but not least, maybe you can just touch on capital allocation real quick. Priorities. How do you feel about where your stock is trading, buybacks? I'll say the first priority is always a reinvestment in the network. We have this valuable asset. We have to continue to maintain the best service in the East. That's the first use of capital. I will tell you, Mike is always looking for efficiencies on the maintenance capital side of things. There's probably opportunities to do better. I know Sean looks at that all the time. Being more efficient with our capital spend to maintain our railroad is something that we're highly focused on. Growth opportunities, right, and profitable growth. That's going to be the first use of our capital. Beyond that, we're fortunate to generate a lot of free cash flow. We've had a history of returning that to shareholders over time. I think I don't see anything changing with that philosophy going forward. Anything else, anyone? Okay, we'll wrap it there. Thanks again, Kevin. Appreciate you having us. Thank you.

Speaker 3: Hello, everyone. Hopefully, everyone can hear and see me Okay. I'm Richard Harnain, and I welcome you to Deutsche Bank's Annual Transportation Conference. This is DB's fourth such dedicated transportation event and the second one in this shiny new, relatively new, New York headquarters here we have in Columbus Circle. Not breaking any new ground here from that perspective. That said, this one is especially meaningful for me, considering it's my first time hosting as Lead Transportation Analyst. I hope we can make it just as memorable for you all as I'm sure it's going to be for me and my team. A niche conference here for sure. We have 10 corporates attending, but 10 that we'd say are critical to the US transportation landscape. Very excited to have 140 people in the building to discuss the latest in trends on the transportation scene. Hello, everyone. hello everyone Hopefully, everyone can hear and see me Okay. hopefully everyone can hear and see me okay I'm Richard Harnain, and I welcome you to Deutsche Bank's Annual Transportation Conference. i'm richard harnain and i welcome you to deutsche bank's annual transportation conference This is DB's fourth such dedicated transportation event and the second one in this shiny new, relatively new, New York headquarters here we have in Columbus Circle. this is db's fourth such dedicated transportation event and the second one in this shiny new relatively new new york headquarters here we have in columbus circle Not breaking any new ground here from that perspective. not breaking any new ground here from that perspective That said, this one is especially meaningful for me, considering it's my first time hosting as Lead Transportation Analyst. that said this one is especially meaningful for me considering it's my first time hosting as lead transportation analyst I hope we can make it just as memorable for you all as I'm sure it's going to be for me and my team. i hope we can make it just as memorable for you all as i'm sure it's going to be for me and my team A niche conference here for sure. a niche conference here for sure We have 10 corporates attending, but 10 that we'd say are critical to the US transportation landscape. we have 10 corporates attending but 10 that we'd say are critical to the us transportation landscape Very excited to have 140 people in the building to discuss the latest in trends on the transportation scene. very excited to have 140 people in the building to discuss the latest in trends on the transportation scene A special thanks to all of you who came out. We really appreciate the support and we know how valuable your time is, so thank you. What an interesting time to have this in coverage of transportation, right? All this tariff drama that could potentially jeopardize trade and goods demand has made it especially challenging to recommend names in a space that thrives on trade and goods demand. Given all the market risk out there, we've been really selective in our recommendations. In this context, we see rails as a uniquely attractive subsector among the ones we cover, offering a blend of defensive and offensive characteristics. We're now Buy-rated in all three Class I U.S. rails we cover. We're very pleased to be kicking off the Fireside Chat series today with the one we most recently upgraded on a much improved quarter, CSX with Kevin Boone, Chief Commercial Officer. A warm welcome to you, Kevin. A special thanks to all of you who came out. a special thanks to all of you who came out We really appreciate the support and we know how valuable your time is, so thank you. we really appreciate the support and we know how valuable your time is so thank you What an interesting time to have this in coverage of transportation, right? what an interesting time to have this in coverage of transportation right All this tariff drama that could potentially jeopardize trade and goods demand has made it especially challenging to recommend names in a space that thrives on trade and goods demand. all this tariff drama that could potentially jeopardize trade and goods demand has made it especially challenging to recommend names in a space that thrives on trade and goods demand Given all the market risk out there, we've been really selective in our recommendations. given all the market risk out there we've been really selective in our recommendations In this context, we see rails as a uniquely attractive subsector among the ones we cover, offering a blend of defensive and offensive characteristics. in this context we see rails as a uniquely attractive subsector among the ones we cover offering a blend of defensive and offensive characteristics We're now Buy-rated in all three Class I U.S. rails we cover. we're now buy-rated in all three class i u.s rails we cover We're very pleased to be kicking off the Fireside Chat series today with the one we most recently upgraded on a much improved quarter, CSX with Kevin Boone, Chief Commercial Officer. we're very pleased to be kicking off the fireside chat series today with the one we most recently upgraded on a much improved quarter csx with kevin boone chief commercial officer A warm welcome to you, Kevin. a warm welcome to you kevin

Speaker 2: Thank you. Thank you. thank you

Speaker 3: Thank you for joining. Thank you for allowing me that probably too long of a preamble. A big thank you to the Head of IRM Strategy, Matt Korn, who's also here, and General Counsel Casey Luchen for attending as well. There is lots to dig into, so maybe we can get started. Thank you for joining. thank you for joining Thank you for allowing me that probably too long of a preamble. thank you for allowing me that probably too long of a preamble A big thank you to the Head of IRM Strategy, Matt Korn, who's also here, and General Counsel Casey Luchen for attending as well. a big thank you to the head of irm strategy matt korn who's also here and general counsel casey luchen for attending as well There is lots to dig into, so maybe we can get started. there is lots to dig into so maybe we can get started

Speaker 2: Absolutely. Absolutely. absolutely

Speaker 3: All right. All right. all right

Speaker 2: Great to be here. Thank you for having us. We've got a lot to talk about. Great to be here. great to be here Thank you for having us. thank you for having us We've got a lot to talk about. we've got a lot to talk about

Speaker 3: Definitely. I promise we'll get to the topic everyone really wants to talk about. Maybe we can start with what you're making of the demand environment. You know, Kevin, you talked about how unusual Q2 was in terms of production outages with customers. Those were expected to improve in Q3 and Q4. Are they starting to improve? It looks like volumes have been running up quite nicely. They're up 1% off of a flat base. Like in Q2, flat year-over-year. Now we're up 1% year-over-year. Maybe you can color that in for us on what's driving that. How optimistic are you that such acceleration can continue based on customer activity and feedback? Definitely. definitely I promise we'll get to the topic everyone really wants to talk about. i promise we'll get to the topic everyone really wants to talk about Maybe we can start with what you're making of the demand environment. maybe we can start with what you're making of the demand environment You know, Kevin, you talked about how unusual Q2 was in terms of production outages with customers. you know kevin you talked about how unusual q2 was in terms of production outages with customers Those were expected to improve in Q3 and Q4. those were expected to improve in q3 and q4 Are they starting to improve? are they starting to improve It looks like volumes have been running up quite nicely. it looks like volumes have been running up quite nicely They're up 1% off of a flat base. they're up 1% off of a flat base Like in Q2, flat year- over- year. like in q2 flat year- over- year Now we're up 1% year- over- year. now we're up 1% year- over- year Maybe you can color that in for us on what's driving that. maybe you can color that in for us on what's driving that How optimistic are you that such acceleration can continue based on customer activity and feedback? how optimistic are you that such acceleration can continue based on customer activity and feedback

Speaker 2: Yeah, you touched on it. There's a lot of things, obviously, from a tariff perspective and other things that are impacting our customers. We saw some of that in the second quarter. I think it's fair to say in some of the markets that we anticipated maybe seeing a little bit of improvement, we are seeing it a little start to happen. I think further into the quarter, you'll hopefully continue to see that. On the chemical side, we mentioned one particular customer that had had some outages. That's slowly coming back a bit, but it's been a little bit slow there. On the auto side, we have seen some quality holds, other things that have been a little bit slower, I would say, quarter to date. We are seeing some signs of life there and are encouraged by what we see in the near term in terms of production. Yeah, you touched on it. yeah you touched on it There's a lot of things, obviously, from a tariff perspective and other things that are impacting our customers. there's a lot of things obviously from a tariff perspective and other things that are impacting our customers We saw some of that in the second quarter. we saw some of that in the second quarter I think it's fair to say in some of the markets that we anticipated maybe seeing a little bit of improvement, we are seeing it a little start to happen. i think it's fair to say in some of the markets that we anticipated maybe seeing a little bit of improvement we are seeing it a little start to happen I think further into the quarter, you'll hopefully continue to see that. i think further into the quarter you'll hopefully continue to see that On the chemical side, we mentioned one particular customer that had had some outages. on the chemical side we mentioned one particular customer that had had some outages That's slowly coming back a bit, but it's been a little bit slow there. that's slowly coming back a bit but it's been a little bit slow there On the auto side, we have seen some quality holds, other things that have been a little bit slower, I would say, quarter to date. on the auto side we have seen some quality holds other things that have been a little bit slower i would say quarter to date We are seeing some signs of life there and are encouraged by what we see in the near term in terms of production. we are seeing some signs of life there and are encouraged by what we see in the near term in terms of production Some of those production headwinds may be a little bit behind us. It's been a little bit choppy here and there. I think customers are more or less looking for direction in the market and uncertainty around where the tariffs are going to play out. I think you'll see investments being made. Aggregates still with the industrial development side still remains very, very robust in the Southeast. We're seeing those volumes very, very strong. The metals team has done a particularly great job of winning business. We've seen some great momentum on that side. I will point out that you will see some strong performance out of our intermodal team. We've been working on a number of things, some new service lanes and other things that will start to pick up here in next month and into the fourth quarter, which we're really excited about. Some of those production headwinds may be a little bit behind us. some of those production headwinds may be a little bit behind us It's been a little bit choppy here and there. it's been a little bit choppy here and there I think customers are more or less looking for direction in the market and uncertainty around where the tariffs are going to play out. i think customers are more or less looking for direction in the market and uncertainty around where the tariffs are going to play out I think you'll see investments being made. i think you'll see investments being made Aggregates still with the industrial development side still remains very, very robust in the Southeast. aggregates still with the industrial development side still remains very very robust in the southeast We're seeing those volumes very, very strong. we're seeing those volumes very very strong The metals team has done a particularly great job of winning business. the metals team has done a particularly great job of winning business We've seen some great momentum on that side. we've seen some great momentum on that side I will point out that you will see some strong performance out of our intermodal team. i will point out that you will see some strong performance out of our intermodal team We've been working on a number of things, some new service lanes and other things that will start to pick up here in next month and into the fourth quarter, which we're really excited about. we've been working on a number of things some new service lanes and other things that will start to pick up here in next month and into the fourth quarter which we're really excited about

Speaker 3: Great. Maybe if you tie that into other drivers of near-term profitability. On the cost side, there's some headwinds Q2 to Q3, like the unique labor deal that you talked about. There's some Q2 good guys that maybe don't repeat. I think they were in the purchase services area. On yields, on your last call, you updated us that it was going to be very dependent on coal prices. Coal prices are running up nicely quarter to date. Gas prices are down. Lots of puts and takes there. I think consensus is modeled in something like 100 basis points of sequential OR deterioration Q2 to Q3. Is that a reasonable expectation? Do you think you could do better than that? Again, good volumes, service, export coal pricing off that, but maybe some cost headwinds in that gas trend? Great. great Maybe if you tie that into other drivers of near-term profitability. maybe if you tie that into other drivers of near-term profitability On the cost side, there's some headwinds Q2 to Q3, like the unique labor deal that you talked about. on the cost side there's some headwinds q2 to q3 like the unique labor deal that you talked about There's some Q2 good guys that maybe don't repeat. there's some q2 good guys that maybe don't repeat I think they were in the purchase services area. i think they were in the purchase services area On yields, on your last call, you updated us that it was going to be very dependent on coal prices. on yields on your last call you updated us that it was going to be very dependent on coal prices Coal prices are running up nicely quarter to date. coal prices are running up nicely quarter to date Gas prices are down. gas prices are down Lots of puts and takes there. lots of puts and takes there I think consensus is modeled in something like 100 basis points of sequential OR deterioration Q2 to Q3. i think consensus is modeled in something like 100 basis points of sequential or deterioration q2 to q3 Is that a reasonable expectation? is that a reasonable expectation Do you think you could do better than that? do you think you could do better than that Again, good volumes, service, export coal pricing off that, but maybe some cost headwinds in that gas trend? again good volumes service export coal pricing off that but maybe some cost headwinds in that gas trend

Speaker 2: Yeah, I think first on the export coal side, or just pricing in general, we said it would be slightly down quarter-over-quarter. We'll see where things trend through the quarter. You did mention we've seen a little bit of stability in the met coal prices, which is you got to start somewhere. So we're starting there. We still see very, very strong demand into the Southeastern utilities. That continues to be a really good story for us that hopefully will continue through the remainder of the year and into next year. That's helpful. On the cost side, and I'll have Matthew correct me if I missed anything here, we talked about a labor agreement to step up and the labor agreement that happens on July 1. That's roughly $20 million, I think we said. Yeah, I think first on the export coal side, or just pricing in general, we said it would be slightly down quarter- over- quarter. yeah i think first on the export coal side or just pricing in general we said it would be slightly down quarter- over- quarter We'll see where things trend through the quarter. we'll see where things trend through the quarter You did mention we've seen a little bit of stability in the met coal prices, which is you got to start somewhere. you did mention we've seen a little bit of stability in the met coal prices which is you got to start somewhere So we're starting there. so we're starting there We still see very, very strong demand into the Southeastern utilities. we still see very very strong demand into the southeastern utilities That continues to be a really good story for us that hopefully will continue through the remainder of the year and into next year. that continues to be a really good story for us that hopefully will continue through the remainder of the year and into next year That's helpful. that's helpful On the cost side, and I'll have Matthew correct me if I missed anything here, we talked about a labor agreement to step up and the labor agreement that happens on July 1. on the cost side and i'll have matthew correct me if i missed anything here we talked about a labor agreement to step up and the labor agreement that happens on july 1 That's roughly $20 million, I think we said. that's roughly $20 million i think we said Matthew, we also highlighted some P&O purchase services headwind or benefits that we received in the second quarter that won't repeat in the third. Finally, we did have a restructuring, management restructuring. That'll be a one-time item in the quarter that would, I think, be quantified around $15 million-$20 million in the third quarter. Obviously, that has benefits on an ongoing basis beyond the third quarter that we'll benefit from. Those are the things, distinct items, I think, that we pointed out. Matthew, we also highlighted some P&O purchase services headwind or benefits that we received in the second quarter that won't repeat in the third. matthew we also highlighted some p&o purchase services headwind or benefits that we received in the second quarter that won't repeat in the third Finally, we did have a restructuring, management restructuring. finally we did have a restructuring management restructuring That'll be a one-time item in the quarter that would, I think, be quantified around $15 million- $20 million in the third quarter. that'll be a one-time item in the quarter that would i think be quantified around $15 million- $20 million in the third quarter Obviously, that has benefits on an ongoing basis beyond the third quarter that we'll benefit from. obviously that has benefits on an ongoing basis beyond the third quarter that we'll benefit from Those are the things, distinct items, I think, that we pointed out. those are the things distinct items i think that we pointed out

Speaker 3: Okay. So are those the only items you would maybe take together and then bridge off of Q2, and then maybe some volume help can help offset them? Okay. okay So are those the only items you would maybe take together and then bridge off of Q2, and then maybe some volume help can help offset them? so are those the only items you would maybe take together and then bridge off of q2 and then maybe some volume help can help offset them

Speaker 2: Yeah, I think we're blessed with a great railroad that has a lot of operating leverage as we put good volume on it. Not all volume is made the same. We're really looking at profitable growth as the focus of our team. As you see that volume come through, I think the incremental margins should be very powerful. Yeah, I think we're blessed with a great railroad that has a lot of operating leverage as we put good volume on it. yeah i think we're blessed with a great railroad that has a lot of operating leverage as we put good volume on it Not all volume is made the same. not all volume is made the same We're really looking at profitable growth as the focus of our team. we're really looking at profitable growth as the focus of our team As you see that volume come through, I think the incremental margins should be very powerful. as you see that volume come through i think the incremental margins should be very powerful

Speaker 3: Okay. Any early thoughts on Q4? I think the street has been flat, sequential margins. Your margins have fallen 200 basis points on average the past 10 years. Of course, this is not a normal year, though, for CSX and coming off of some. Okay. okay Any early thoughts on Q4? any early thoughts on q4 I think the street has been flat, sequential margins. i think the street has been flat sequential margins Your margins have fallen 200 basis points on average the past 10 years. your margins have fallen 200 basis points on average the past 10 years Of course, this is not a normal year, though, for CSX and coming off of some. of course this is not a normal year though for csx and coming off of some

Speaker 2: The good news is we're going to be finally lapping the export coal prices by the fourth quarter. That headwind on a year-over-year basis will be not what it has been this year. That is the good news. As we turn the corner to 2026, I think we'll see where interest rates and other things trend. We obviously have the industrial development story, which I'm sure we'll dig into more, that will continue to ramp up and benefit us. I talked about some of the intermodal momentum that we have that will really start to show up in the fourth quarter, which we're excited about. The good news is we're going to be finally lapping the export coal prices by the fourth quarter. the good news is we're going to be finally lapping the export coal prices by the fourth quarter That headwind on a year-over-year basis will be not what it has been this year. that headwind on a year-over-year basis will be not what it has been this year That is the good news. that is the good news As we turn the corner to 2026, I think we'll see where interest rates and other things trend. as we turn the corner to 2026 i think we'll see where interest rates and other things trend We obviously have the industrial development story, which I'm sure we'll dig into more, that will continue to ramp up and benefit us. we obviously have the industrial development story which i'm sure we'll dig into more that will continue to ramp up and benefit us I talked about some of the intermodal momentum that we have that will really start to show up in the fourth quarter, which we're excited about. i talked about some of the intermodal momentum that we have that will really start to show up in the fourth quarter which we're excited about

Speaker 3: Okay. That Howard Street intermodal, you can't sell until 2026, right? Okay. okay That Howard Street intermodal, you can't sell until 2026, right? that howard street intermodal you can't sell until 2026 right

Speaker 2: We can start actually taking all the outer route miles by the fourth quarter. Some of those costs related to the rerouting, we talked about millions of miles that outer route. We'll be able to run trains through the Howard Street Tunnel in the fourth quarter. We just won't be able to double stack it until the second quarter of next year. We can start actually taking all the outer route miles by the fourth quarter. we can start actually taking all the outer route miles by the fourth quarter Some of those costs related to the rerouting, we talked about millions of miles that outer route. some of those costs related to the rerouting we talked about millions of miles that outer route We'll be able to run trains through the Howard Street Tunnel in the fourth quarter. we'll be able to run trains through the howard street tunnel in the fourth quarter We just won't be able to double stack it until the second quarter of next year. we just won't be able to double stack it until the second quarter of next year

Speaker 3: Got it. Okay. Got it. got it Okay. okay

Speaker 2: Yeah, with both projects finishing in the fourth quarter, you're going to see about that roughly $2 million a month start to fall off in that fourth quarter. Yeah, with both projects finishing in the fourth quarter, you're going to see about that roughly $2 million a month start to fall off in that fourth quarter. yeah with both projects finishing in the fourth quarter you're going to see about that roughly $2 million a month start to fall off in that fourth quarter

Speaker 3: Perfect. All right. A point that really resonated with us from the last few earnings calls, and it was one that you made, was around your NPS scores, remaining near record highs despite all of this disruption that's happening that you face to start the year. As Chief Commercial Officer, I guess there's probably no one better suited to address this topic than you. With such high customer satisfaction, do you think you're in a better position to win more customers' wallet share as your network becomes more efficient? Have you quantified that? Perfect. perfect All right. all right A point that really resonated with us from the last few earnings calls, and it was one that you made, was around your NPS scores, remaining near record highs despite all of this disruption that's happening that you face to start the year. a point that really resonated with us from the last few earnings calls and it was one that you made was around your nps scores remaining near record highs despite all of this disruption that's happening that you face to start the year As Chief Commercial Officer, I guess there's probably no one better suited to address this topic than you. as chief commercial officer i guess there's probably no one better suited to address this topic than you With such high customer satisfaction, do you think you're in a better position to win more customers' wallet share as your network becomes more efficient? with such high customer satisfaction do you think you're in a better position to win more customers' wallet share as your network becomes more efficient Have you quantified that? have you quantified that

Speaker 2: Yeah, I think 100%. I do want to point out that Shannon, who runs our Customer Service group, has done an amazing job of staying up in front of customers. Things will happen day to day. Storms happen. There are other things you have to adjust to. It's about communicating with the customers. It's really about mitigating the big cases where you're really missing the service on a consecutive level. There has been a lot of focus with our operating team and Shannon's group around consecutive missed switches. If you're going to have an issue, make sure you're delivering the service next day. Those are what customers really remember, that really prolonged service outage that they experience. That's what really impacts their decisions on a long-term basis of whether they want to give more volume to the railroad. We're running really, really well. Yeah, I think 100%. yeah i think 100% I do want to point out that Shannon, who runs our Customer Service group, has done an amazing job of staying up in front of customers. i do want to point out that shannon who runs our customer service group has done an amazing job of staying up in front of customers Things will happen day to day. things will happen day to day Storms happen. There are other things you have to adjust to. storms happen. there are other things you have to adjust to It's about communicating with the customers. it's about communicating with the customers It's really about mitigating the big cases where you're really missing the service on a consecutive level. it's really about mitigating the big cases where you're really missing the service on a consecutive level There has been a lot of focus with our operating team and Shannon's group around consecutive missed switches. there has been a lot of focus with our operating team and shannon's group around consecutive missed switches If you're going to have an issue, make sure you're delivering the service next day. if you're going to have an issue make sure you're delivering the service next day Those are what customers really remember, that really prolonged service outage that they experience. those are what customers really remember that really prolonged service outage that they experience That's what really impacts their decisions on a long-term basis of whether they want to give more volume to the railroad. that's what really impacts their decisions on a long-term basis of whether they want to give more volume to the railroad We're running really, really well. we're running really really well Mike and I and the team have never been more aligned in terms of how we deliver that service to the customer. It's also aligned around how do we take cost out. That's still a real focus of the team, how do we create a really efficient service at the same time and deliver what our customers want so we can grow our volumes. At the same time, we're constantly looking at the network, how we could speed up the network, and how we can make it more consistent. I think with an improving trucking market, at some point, this trucking cycle, which has been, we're almost three years down a down trucking cycle, will start to improve. I think we'll really capitalize on that. I will say, despite a trucking market that's not really helpful right now, every week we go through opportunities and new wins. We are seeing truck conversions come in every week. I think that only accelerates as we get into next year and really capitalize on the service that we're delivering today. Mike and I and the team have never been more aligned in terms of how we deliver that service to the customer. mike and i and the team have never been more aligned in terms of how we deliver that service to the customer It's also aligned around how do we take cost out. it's also aligned around how do we take cost out That's still a real focus of the team, how do we create a really efficient service at the same time and deliver what our customers want so we can grow our volumes. that's still a real focus of the team how do we create a really efficient service at the same time and deliver what our customers want so we can grow our volumes At the same time, we're constantly looking at the network, how we could speed up the network, and how we can make it more consistent. at the same time we're constantly looking at the network how we could speed up the network and how we can make it more consistent I think with an improving trucking market, at some point, this trucking cycle, which has been, we're almost three years down a down trucking cycle, will start to improve. i think with an improving trucking market at some point this trucking cycle which has been we're almost three years down a down trucking cycle will start to improve I think we'll really capitalize on that. i think we'll really capitalize on that I will say, despite a trucking market that's not really helpful right now, every week we go through opportunities and new wins. i will say despite a trucking market that's not really helpful right now every week we go through opportunities and new wins We are seeing truck conversions come in every week. we are seeing truck conversions come in every week I think that only accelerates as we get into next year and really capitalize on the service that we're delivering today. i think that only accelerates as we get into next year and really capitalize on the service that we're delivering today

Speaker 3: What about versus other railroads? Your competitive position relative to maybe NS or? What about versus other railroads? what about versus other railroads Your competitive position relative to maybe NS or? your competitive position relative to maybe ns or

Speaker 2: I think we have the best service out there in the East. I think that's something that we hear from our customers, and it's consistency. We had a little bit of a hiccup into that first quarter, but our ability to react to it, adjust, make sure we didn't shut down plants, that we were proactive in our communication, I think really went a long way. I think this time around was very different than maybe going back to 2017 or 2018 where you saw some of that customer disruption. That's why you saw the scores continue to outperform in terms of the feedback that we're getting from our customers. I think we have the best service out there in the East. i think we have the best service out there in the east I think that's something that we hear from our customers, and it's consistency. i think that's something that we hear from our customers and it's consistency We had a little bit of a hiccup into that first quarter, but our ability to react to it, adjust, make sure we didn't shut down plants, that we were proactive in our communication, I think really went a long way. we had a little bit of a hiccup into that first quarter but our ability to react to it adjust make sure we didn't shut down plants that we were proactive in our communication i think really went a long way I think this time around was very different than maybe going back to 2017 or 2018 where you saw some of that customer disruption. i think this time around was very different than maybe going back to 2017 or 2018 where you saw some of that customer disruption That's why you saw the scores continue to outperform in terms of the feedback that we're getting from our customers. that's why you saw the scores continue to outperform in terms of the feedback that we're getting from our customers

Speaker 3: Okay, great. Finally, you probably figured it would be impossible to have a conversation with a sell-side analyst without at least an attempt to talk rail M&A. I know Casey's here to help keep the guardrails on. Maybe I'll open the floor up to you first to speak very generally about what you can and can't say on the topic. Okay, great. okay great Finally, you probably figured it would be impossible to have a conversation with a sell-side analyst without at least an attempt to talk rail M&A. finally you probably figured it would be impossible to have a conversation with a sell-side analyst without at least an attempt to talk rail m&a I know Casey's here to help keep the guardrails on. i know casey's here to help keep the guardrails on Maybe I'll open the floor up to you first to speak very generally about what you can and can't say on the topic. maybe i'll open the floor up to you first to speak very generally about what you can and can't say on the topic

Speaker 2: Yeah, you know, certainly following the news by Union Pacific and Norfolk Southern, I know it's a hot topic, right, that people want to discuss. What are the implications of a Transcon and those things? I will say I'm very limited in what I can share today. I would like to reiterate what Joe said on the second quarter call, which was very clear in terms of we're open, we're engaging in ways to create shareholder value. We reiterated that. We're focused on driving profitable growth to the CSX franchise. Finally, how can we improve service? Those are three really tenets of what we're trying to deliver. It's all going to drive shareholder value. I can tell you the board is highly engaged and is well advised. Beyond that, I'm sure there will be a time to share more. At this moment, that's probably all I'm going to talk to. Yeah, you know, certainly following the news by Union Pacific and Norfolk Southern, I know it's a hot topic, right, that people want to discuss. yeah you know certainly following the news by union pacific and norfolk southern i know it's a hot topic right that people want to discuss What are the implications of a Transcon and those things? what are the implications of a transcon and those things I will say I'm very limited in what I can share today. i will say i'm very limited in what i can share today I would like to reiterate what Joe said on the second quarter call, which was very clear in terms of we're open, we're engaging in ways to create shareholder value. i would like to reiterate what joe said on the second quarter call which was very clear in terms of we're open we're engaging in ways to create shareholder value We reiterated that. we reiterated that We're focused on driving profitable growth to the CSX franchise. we're focused on driving profitable growth to the csx franchise Finally, how can we improve service? finally how can we improve service Those are three really tenets of what we're trying to deliver. those are three really tenets of what we're trying to deliver It's all going to drive shareholder value. it's all going to drive shareholder value I can tell you the board is highly engaged and is well advised. i can tell you the board is highly engaged and is well advised Beyond that, I'm sure there will be a time to share more. beyond that i'm sure there will be a time to share more At this moment, that's probably all I'm going to talk to. at this moment that's probably all i'm going to talk to

Speaker 3: Okay. Maybe we can talk in broad strokes then, just on your competitive stance. You talked about you're getting rail conversion opportunities every week. How do you assess your competitive stance versus over-the-road trucking today, especially on Transcon? Do you think there is significant opportunity for enhancement, either by way of more rail collaboration or otherwise? Okay. okay Maybe we can talk in broad strokes then, just on your competitive stance. maybe we can talk in broad strokes then just on your competitive stance You talked about you're getting rail conversion opportunities every week. you talked about you're getting rail conversion opportunities every week How do you assess your competitive stance versus over-the-road trucking today, especially on Transcon? how do you assess your competitive stance versus over-the-road trucking today especially on transcon Do you think there is significant opportunity for enhancement, either by way of more rail collaboration or otherwise? do you think there is significant opportunity for enhancement either by way of more rail collaboration or otherwise

Speaker 2: Yeah, I won't comment specifically on the Transcon. We're always collaborating as a team, looking at our network and how we can deliver a faster service, more reliable service with Mike. Those opportunities are still pretty vast when we look at it. We've gotten through this first quarter period where obviously we had some service disruption. Now the team's really leaning in. You've seen, you're going to continue to see us tweak different areas where we're driving out cost and increasing speed on our network, which ultimately translates into greater volume. One specific area is intermodal. We're seeing algorithms right now. If we can deliver at a certain time and a certain cost, the algorithms continue to give us more and more volume. We're really trying to understand that with some of our customers that use those things. Yeah, I won't comment specifically on the Transcon. yeah i won't comment specifically on the transcon We're always collaborating as a team, looking at our network and how we can deliver a faster service, more reliable service with Mike. we're always collaborating as a team looking at our network and how we can deliver a faster service more reliable service with mike Those opportunities are still pretty vast when we look at it. those opportunities are still pretty vast when we look at it We've gotten through this first quarter period where obviously we had some service disruption. we've gotten through this first quarter period where obviously we had some service disruption Now the team's really leaning in. now the team's really leaning in You've seen, you're going to continue to see us tweak different areas where we're driving out cost and increasing speed on our network, which ultimately translates into greater volume. you've seen you're going to continue to see us tweak different areas where we're driving out cost and increasing speed on our network which ultimately translates into greater volume One specific area is intermodal. one specific area is intermodal We're seeing algorithms right now. we're seeing algorithms right now If we can deliver at a certain time and a certain cost, the algorithms continue to give us more and more volume. if we can deliver at a certain time and a certain cost the algorithms continue to give us more and more volume We're really trying to understand that with some of our customers that use those things. we're really trying to understand that with some of our customers that use those things Some of the opportunity that we're seeing in the near term to really drive that. That's the fun part of where we are right now. We're really leaning in and, I would say, playing offense around that and really understanding what are the lanes that really offer valuable, profitable growth and targeting those in a different way. Some of the opportunity that we're seeing in the near term to really drive that. some of the opportunity that we're seeing in the near term to really drive that That's the fun part of where we are right now. that's the fun part of where we are right now We're really leaning in and, I would say, playing offense around that and really understanding what are the lanes that really offer valuable, profitable growth and targeting those in a different way. we're really leaning in and i would say playing offense around that and really understanding what are the lanes that really offer valuable profitable growth and targeting those in a different way

Speaker 3: Okay, great. When you do, I guess, lose to trucking, what are some of the issues that customers cite? Is it mainly speed that's the primary factor? Are there other inefficiencies that you think you can work on to really woo more customers? Okay, great. okay great When you do, I guess, lose to trucking, what are some of the issues that customers cite? when you do i guess lose to trucking what are some of the issues that customers cite Is it mainly speed that's the primary factor? is it mainly speed that's the primary factor Are there other inefficiencies that you think you can work on to really woo more customers? are there other inefficiencies that you think you can work on to really woo more customers

Speaker 2: Yeah, I think first and foremost is reliability. That's what customers want to understand. You're not going to disrupt my customers that I'm serving. You're not going to disrupt my plants that I'm trying to run. That's first and foremost. I think we've done a good job of continuing to build that trust with our customers over the last few years. Customers can have a long memory. They remember in 2012, that time where something happened and that plant shut down. Time is on our side. As we continue to consistently deliver month-over-month, quarter-over-quarter, and year-over-year, those opportunities are more and more. We've got to lean into it as well and explain what we do and why we're different and how we're prepared when their business comes back or when they see a lot of demand come that we can serve it. Yeah, I think first and foremost is reliability. yeah i think first and foremost is reliability That's what customers want to understand. that's what customers want to understand You're not going to disrupt my customers that I'm serving. you're not going to disrupt my customers that i'm serving You're not going to disrupt my plants that I'm trying to run. you're not going to disrupt my plants that i'm trying to run That's first and foremost. that's first and foremost I think we've done a good job of continuing to build that trust with our customers over the last few years. i think we've done a good job of continuing to build that trust with our customers over the last few years Customers can have a long memory. customers can have a long memory They remember in 2012, that time where something happened and that plant shut down. they remember in 2012 that time where something happened and that plant shut down Time is on our side. time is on our side As we continue to consistently deliver month- over- month, quarter- over- quarter, and year- over- year, those opportunities are more and more. as we continue to consistently deliver month- over- month quarter- over- quarter and year- over- year those opportunities are more and more We've got to lean into it as well and explain what we do and why we're different and how we're prepared when their business comes back or when they see a lot of demand come that we can serve it. we've got to lean into it as well and explain what we do and why we're different and how we're prepared when their business comes back or when they see a lot of demand come that we can serve it That's been the challenge for the industry, is when you've seen an upcycle, typically the railroads have struggled with that a bit. I think we're creating a lot of resilience in their network. That's why we're making these investments in the Howard Street Tunnel. That's why we're reinvesting in the Blue Ridge. It creates a lot of resiliency in our network. That, quite frankly, makes our network more unique than most because we have alternative routes where other railroads are more reliant on single routes. We can adjust. If there's storms or other things, we have a lot of flexibility within there. That's exciting as we look out. We know some of these markets, like housing and auto markets, will eventually be tailwinds. I think during my whole time in this role, they haven't been wind at my back necessarily. At some point, that will change. We talk a lot about how our network is going to be ready to handle all of that growth when we see it. That's been the challenge for the industry, is when you've seen an upcycle, typically the railroads have struggled with that a bit. that's been the challenge for the industry is when you've seen an upcycle typically the railroads have struggled with that a bit I think we're creating a lot of resilience in their network. i think we're creating a lot of resilience in their network That's why we're making these investments in the Howard Street Tunnel . that's why we're making these investments in the howard street tunnel That's why we're reinvesting in the Blue Ridge. that's why we're reinvesting in the blue ridge It creates a lot of resiliency in our network. it creates a lot of resiliency in our network That, quite frankly, makes our network more unique than most because we have alternative routes where other railroads are more reliant on single routes. that quite frankly makes our network more unique than most because we have alternative routes where other railroads are more reliant on single routes We can adjust. we can adjust If there's storms or other things, we have a lot of flexibility within there. if there's storms or other things we have a lot of flexibility within there That's exciting as we look out. that's exciting as we look out We know some of these markets, like housing and auto markets, will eventually be tailwinds. we know some of these markets like housing and auto markets will eventually be tailwinds I think during my whole time in this role, they haven't been wind at my back necessarily. i think during my whole time in this role they haven't been wind at my back necessarily At some point, that will change. at some point that will change We talk a lot about how our network is going to be ready to handle all of that growth when we see it. we talk a lot about how our network is going to be ready to handle all of that growth when we see it

Speaker 3: Okay. Just thinking about your competitive position, I know you talked about some of the unique positive characteristics of the network. Just your ability to compete, do you think it will be negatively impacted if there was this other merger? Do you think, I guess, when customers look at your network, do they evaluate it differently on Transcon versus your East Coast, North, South service? Do you think they look at it as one complete package, i.e., that your competitive positioning might be undermined if one of your competitors has a better Transcon product? Okay. okay Just thinking about your competitive position, I know you talked about some of the unique positive characteristics of the network. just thinking about your competitive position i know you talked about some of the unique positive characteristics of the network Just your ability to compete, do you think it will be negatively impacted if there was this other merger? just your ability to compete do you think it will be negatively impacted if there was this other merger Do you think, I guess, when customers look at your network, do they evaluate it differently on Transcon versus your East Coast, North, South service? do you think i guess when customers look at your network do they evaluate it differently on transcon versus your east coast north south service Do you think they look at it as one complete package, i.e., that your competitive positioning might be undermined if one of your competitors has a better Transcon product? do you think they look at it as one complete package i.e that your competitive positioning might be undermined if one of your competitors has a better transcon product

Speaker 2: I'm going to go back to the original statement. I am going to reconfigure your question here. We have a lot of things on our network that we're working on, whether it's the industrial development side, which we talked about, is going to provide a lot of growth opportunities. We're at the beginning stages of that accelerating. There are a lot of things that we think we can do on our network today and in some of our yards that are going to create a lot of outer route miles or eliminate a lot of outer route miles for our network. That translates to a better service for our customers and allows us to go out and win share, convert modal share from mainly trucks. We're excited about those opportunities. I think that's the framework I think we're going to keep it in today in terms of that discussion. I'm going to go back to the original statement. i'm going to go back to the original statement I am going to reconfigure your question here. i am going to reconfigure your question here We have a lot of things on our network that we're working on, whether it's the industrial development side, which we talked about, is going to provide a lot of growth opportunities. we have a lot of things on our network that we're working on whether it's the industrial development side which we talked about is going to provide a lot of growth opportunities We're at the beginning stages of that accelerating. There are a lot of things that we think we can do on our network today and in some of our yards that are going to create a lot of outer route miles or eliminate a lot of outer route miles for our network. we're at the beginning stages of that accelerating. there are a lot of things that we think we can do on our network today and in some of our yards that are going to create a lot of outer route miles or eliminate a lot of outer route miles for our network That translates to a better service for our customers and allows us to go out and win share, convert modal share from mainly trucks. that translates to a better service for our customers and allows us to go out and win share convert modal share from mainly trucks We're excited about those opportunities. we're excited about those opportunities I think that's the framework I think we're going to keep it in today in terms of that discussion. i think that's the framework i think we're going to keep it in today in terms of that discussion

Speaker 3: No, I appreciate you attempting the question. I know Matt was shaking his head and got nervous, but I think he's trying. No, I appreciate you attempting the question. no i appreciate you attempting the question I know Matt was shaking his head and got nervous, but I think he's trying. i know matt was shaking his head and got nervous but i think he's trying

Speaker 2: Yeah. Yeah. yeah

Speaker 3: All right. Pivoting back to your CSX standalone again, if M&A doesn't happen or doesn't happen soon for you or your competitors, it sounds like you feel very confident in some of the operating momentum and ability to drive volume at CSX. Maybe you could just double tap on that. With merchandise from attractive industrial development project pipeline, you've spoken about being a good source of growth, the enhanced intermodal franchise once Howard Street done, coal demand potentially sustainable, especially with recent administration support. Just talk about the leverage you have to win over the medium term, long term, ex-M&A. All right. all right Pivoting back to your CSX standalone again, if M&A doesn't happen or doesn't happen soon for you or your competitors, it sounds like you feel very confident in some of the operating momentum and ability to drive volume at CSX. pivoting back to your csx standalone again if m&a doesn't happen or doesn't happen soon for you or your competitors it sounds like you feel very confident in some of the operating momentum and ability to drive volume at csx Maybe you could just double tap on that. maybe you could just double tap on that With merchandise from attractive industrial development project pipeline, you've spoken about being a good source of growth, the enhanced intermodal franchise once Howard Street done, coal demand potentially sustainable, especially with recent administration support. with merchandise from attractive industrial development project pipeline you've spoken about being a good source of growth the enhanced intermodal franchise once howard street done coal demand potentially sustainable especially with recent administration support Just talk about the leverage you have to win over the medium term, long term, ex-M&A. just talk about the leverage you have to win over the medium term long term ex-m&a

Speaker 2: Yeah, when I take a step back at the whole industry, I wouldn't trade our footprint for anybody else's footprint. When you look at where goods want to go, two-thirds of the U.S. population today are on our network. The most valuable consumers in the world are on our network. We have a lot of visibility to it, and we track this on a daily basis. The industrial development activity and industrial activity that we're seeing is concentrated on our network and our geographic footprint, whether it's the Southeast or the Midwest. That's going to create a lot of value over time, and we're really leveraging into that. We don't talk about the ports probably enough. The East Coast ports, given the dynamics around tariffs and other things, are probably advantaged or will be advantaged. We believe they will be versus the West Coast ports. Yeah, when I take a step back at the whole industry, I wouldn't trade our footprint for anybody else's footprint. yeah when i take a step back at the whole industry i wouldn't trade our footprint for anybody else's footprint When you look at where goods want to go, two-thirds of the U.S. population today are on our network. when you look at where goods want to go two-thirds of the u.s population today are on our network The most valuable consumers in the world are on our network. the most valuable consumers in the world are on our network We have a lot of visibility to it, and we track this on a daily basis. we have a lot of visibility to it and we track this on a daily basis The industrial development activity and industrial activity that we're seeing is concentrated on our network and our geographic footprint, whether it's the Southeast or the Midwest. the industrial development activity and industrial activity that we're seeing is concentrated on our network and our geographic footprint whether it's the southeast or the midwest That's going to create a lot of value over time, and we're really leveraging into that. that's going to create a lot of value over time and we're really leveraging into that We don't talk about the ports probably enough. we don't talk about the ports probably enough The East Coast ports, given the dynamics around tariffs and other things, are probably advantaged or will be advantaged. the east coast ports given the dynamics around tariffs and other things are probably advantaged or will be advantaged We believe they will be versus the West Coast ports. we believe they will be versus the west coast ports As you see trade volumes shift from China to other parts of the world, we'll really benefit from that. You can see the investments that are happening, whether it's in Savannah or other ports along the East Coast. They see a bright future, and that's a big benefit from our network perspective of how can we push more of that west into the network and benefit from that. There are a lot of things going on. You touched on the coal side, on the domestic side, what was a headwind for our business. We're seeing a lot of opportunities, data centers. A huge draw on power demand over the next few years makes these assets more valuable. I touched on it, I think, on the last earnings call. As you see trade volumes shift from China to other parts of the world, we'll really benefit from that. as you see trade volumes shift from china to other parts of the world we'll really benefit from that You can see the investments that are happening, whether it's in Savannah or other ports along the East Coast. you can see the investments that are happening whether it's in savannah or other ports along the east coast They see a bright future, and that's a big benefit from our network perspective of how can we push more of that west into the network and benefit from that. they see a bright future and that's a big benefit from our network perspective of how can we push more of that west into the network and benefit from that There are a lot of things going on. there are a lot of things going on You touched on the coal side, on the domestic side, what was a headwind for our business. you touched on the coal side on the domestic side what was a headwind for our business We're seeing a lot of opportunities, data centers. we're seeing a lot of opportunities data centers A huge draw on power demand over the next few years makes these assets more valuable. a huge draw on power demand over the next few years makes these assets more valuable I touched on it, I think, on the last earnings call. i touched on it i think on the last earnings call Utilization rates on these utility plants are very low, and if you can go from 40%-60% utilization on, it's a significant opportunity for us. Those are the things that we're working with our customers to really drive. Utilities, maybe two years ago, was a headwind. We're seeing a very different market. The pressure to idle those plants or even the ratchet down utilization is not there. We're feeling that, given some of the demand that we're seeing here that we think is going to continue for the years ahead. Utilization rates on these utility plants are very low, and if you can go from 40%- 60% utilization on, it's a significant opportunity for us. utilization rates on these utility plants are very low and if you can go from 40%- 60% utilization on it's a significant opportunity for us Those are the things that we're working with our customers to really drive. those are the things that we're working with our customers to really drive Utilities, maybe two years ago, was a headwind. utilities maybe two years ago was a headwind We're seeing a very different market. we're seeing a very different market The pressure to idle those plants or even the ratchet down utilization is not there. the pressure to idle those plants or even the ratchet down utilization is not there We're feeling that, given some of the demand that we're seeing here that we think is going to continue for the years ahead. we're feeling that given some of the demand that we're seeing here that we think is going to continue for the years ahead

Speaker 3: Maybe we can talk about coal first. You talked about year-over-year that headwind kind of goes away in the fourth quarter. Do you think that opportunity for utilization advancement could be something that we see in the next month and year term, the next few quarters? Maybe we can talk about coal first. maybe we can talk about coal first You talked about year- over- year that headwind kind of goes away in the fourth quarter. you talked about year- over- year that headwind kind of goes away in the fourth quarter Do you think that opportunity for utilization advancement could be something that we see in the next month and year term, the next few quarters? do you think that opportunity for utilization advancement could be something that we see in the next month and year term the next few quarters

Speaker 2: We're highly focused on it. I think there is an opportunity. I just think we're arching, obviously, regulatory dynamics, I think, are helpful and don't put that implied pressure on these utilities to maybe ratchet down their utilization. That's helpful. Obviously, a very hot summer, and we're living through it in Florida, is not unhelpful. That's been a positive for us. The weather is a factor. I hope for a cold winter as well. That's helpful for our network as well. We're highly focused on it. we're highly focused on it I think there is an opportunity. i think there is an opportunity I just think we're arching, obviously, regulatory dynamics, I think, are helpful and don't put that implied pressure on these utilities to maybe ratchet down their utilization. i just think we're arching obviously regulatory dynamics i think are helpful and don't put that implied pressure on these utilities to maybe ratchet down their utilization That's helpful. that's helpful Obviously, a very hot summer, and we're living through it in Florida, is not unhelpful. obviously a very hot summer and we're living through it in florida is not unhelpful That's been a positive for us. that's been a positive for us The weather is a factor. the weather is a factor I hope for a cold winter as well. i hope for a cold winter as well That's helpful for our network as well. that's helpful for our network as well

Speaker 3: All right. Maybe we can talk about the industrial development pipeline that you referenced. You said it's unique to your franchise. A lot of these projects are on your network. You talked about hundreds of projects being a reason for the optimism for CSX despite the economic uncertainty out there. More specifically, I think Sean added there are 50 projects that are already in place this year, and then another 30 coming online in the back half of the year. Can you provide just some color around the margin profile and market exposures attached to that pipeline, maybe more near term? All right. all right Maybe we can talk about the industrial development pipeline that you referenced. You said it's unique to your franchise. maybe we can talk about the industrial development pipeline that you referenced you said it's unique to your franchise A lot of these projects are on your network. a lot of these projects are on your network You talked about hundreds of projects being a reason for the optimism for CSX despite the economic uncertainty out there. you talked about hundreds of projects being a reason for the optimism for csx despite the economic uncertainty out there More specifically, I think Sean added there are 50 projects that are already in place this year, and then another 30 coming online in the back half of the year. more specifically i think sean added there are 50 projects that are already in place this year and then another 30 coming online in the back half of the year Can you provide just some color around the margin profile and market exposures attached to that pipeline, maybe more near term? can you provide just some color around the margin profile and market exposures attached to that pipeline maybe more near term

Speaker 2: Maybe if I could just take a step back and why this is an interesting dynamic, why over the long term, I think, is a very different trend. First of all, over the last several decades, we've had a lot of industry leave our network and, quite frankly, everybody's network in the U.S. from a rail perspective. We believe that dynamic is shifting where we'll net up activity. When you think about the goods that come into the U.S. today, if they're coming into the Eastern port, about 15%-20% of those goods actually hit the railroad today. Most of them are being trucked to the dense population centers that are along the coast. Maybe if I could just take a step back and why this is an interesting dynamic, why over the long term, I think, is a very different trend. maybe if i could just take a step back and why this is an interesting dynamic why over the long term i think is a very different trend First of all, over the last several decades, we've had a lot of industry leave our network and, quite frankly, everybody's network in the U.S. from a rail perspective. first of all over the last several decades we've had a lot of industry leave our network and quite frankly everybody's network in the u.s from a rail perspective We believe that dynamic is shifting where we'll net up activity. we believe that dynamic is shifting where we'll net up activity When you think about the goods that come into the U.S. today, if they're coming into the Eastern port, about 15%- 20% of those goods actually hit the railroad today. when you think about the goods that come into the u.s today if they're coming into the eastern port about 15%- 20% of those goods actually hit the railroad today Most of them are being trucked to the dense population centers that are along the coast. most of them are being trucked to the dense population centers that are along the coast If these goods are now being manufactured, we'll say, in the Midwest or the Southeast, not only do we potentially move the input products that go into manufacturing those goods, we also get to have the outbound into the East Coast population centers from the Midwest and Southeast. You go from maybe zero move for a product to two moves. That's pretty powerful when you think about those dynamics there. When we take a step back on the overall portfolio, it's really around a lot of different. It basically touches every market we touch today. It's a diverse portfolio. It's not concentrated in one area. We put up charts in the past that show it's not about just automotive. It's not about just steel. It's really across every one of the markets that we serve. We're excited about it. If these goods are now being manufactured, we'll say, in the Midwest or the Southeast, not only do we potentially move the input products that go into manufacturing those goods, we also get to have the outbound into the East Coast population centers from the Midwest and Southeast. if these goods are now being manufactured we'll say in the midwest or the southeast not only do we potentially move the input products that go into manufacturing those goods we also get to have the outbound into the east coast population centers from the midwest and southeast You go from maybe zero move for a product to two moves. you go from maybe zero move for a product to two moves That's pretty powerful when you think about those dynamics there. that's pretty powerful when you think about those dynamics there When we take a step back on the overall portfolio, it's really around a lot of different. when we take a step back on the overall portfolio it's really around a lot of different It basically touches every market we touch today. it basically touches every market we touch today It's a diverse portfolio. it's a diverse portfolio It's not concentrated in one area. it's not concentrated in one area We put up charts in the past that show it's not about just automotive. we put up charts in the past that show it's not about just automotive It's not about just steel. it's not about just steel It's really across every one of the markets that we serve. it's really across every one of the markets that we serve We're excited about it. we're excited about it When you think about the margin profile, it's similar to our current business today. Merchandise is a very good, profitable business for us. We should have similar dynamics. The incremental part of that is most of this volume will move on trains that exist today. It'll go in our manifest business on trains that are moving through our network today, which is very powerful from an incremental margin perspective. When you think about the margin profile, it's similar to our current business today. when you think about the margin profile it's similar to our current business today Merchandise is a very good, profitable business for us. merchandise is a very good profitable business for us We should have similar dynamics. we should have similar dynamics The incremental part of that is most of this volume will move on trains that exist today. the incremental part of that is most of this volume will move on trains that exist today It'll go in our manifest business on trains that are moving through our network today, which is very powerful from an incremental margin perspective. it'll go in our manifest business on trains that are moving through our network today which is very powerful from an incremental margin perspective

Speaker 3: What should we think about in terms of the modeling? What's a good incremental margin profile to put in for the out years, I guess, on that? What should we think about in terms of the modeling? what should we think about in terms of the modeling What's a good incremental margin profile to put in for the out years, I guess, on that? what's a good incremental margin profile to put in for the out years i guess on that

Speaker 2: Yeah, I think it's similar to the rest of our merchandise business. We look at pricing levels. We're providing a great service, and we get value for that service. Typically, the transportation costs aren't the driver of whether that project is going to come to life or not. It's the ability to identify a great site that has great access to our network. Those are the really important factors. Power is a big factor in terms of decision-making on those sites. I do have to give the team a lot of credit. We have a lot of sites available to customers that are shovel-ready, which has put us in the market and allowed us to capitalize on it very quickly. Yeah, I think it's similar to the rest of our merchandise business. yeah i think it's similar to the rest of our merchandise business We look at pricing levels. we look at pricing levels We're providing a great service, and we get value for that service. we're providing a great service and we get value for that service Typically, the transportation costs aren't the driver of whether that project is going to come to life or not. typically the transportation costs aren't the driver of whether that project is going to come to life or not It's the ability to identify a great site that has great access to our network. it's the ability to identify a great site that has great access to our network Those are the really important factors. those are the really important factors Power is a big factor in terms of decision-making on those sites. power is a big factor in terms of decision-making on those sites I do have to give the team a lot of credit. i do have to give the team a lot of credit We have a lot of sites available to customers that are shovel-ready, which has put us in the market and allowed us to capitalize on it very quickly. we have a lot of sites available to customers that are shovel-ready which has put us in the market and allowed us to capitalize on it very quickly

Speaker 3: Okay. He talked about auto and the housing market remaining constrained. Investors remain particularly concerned, I think, especially about the housing market getting worse in the near to medium term. Can you hit on your long-term earnings growth target? Can you hit that long-term earnings growth target of high single digits, low double digits for 2024-2027 with those markets remaining under pressure? Do you embed some sort of recovery in your long-term outlook? Okay. okay He talked about auto and the housing market remaining constrained. he talked about auto and the housing market remaining constrained Investors remain particularly concerned, I think, especially about the housing market getting worse in the near to medium term. investors remain particularly concerned i think especially about the housing market getting worse in the near to medium term Can you hit on your long-term earnings growth target? can you hit on your long-term earnings growth target Can you hit that long-term earnings growth target of high single digits, low double digits for 2024- 2027 with those markets remaining under pressure? can you hit that long-term earnings growth target of high single digits low double digits for 2024- 2027 with those markets remaining under pressure Do you embed some sort of recovery in your long-term outlook? do you embed some sort of recovery in your long-term outlook

Speaker 2: Yeah, look, we have a diverse portfolio. That's what's great about what we do. When one market is not doing well, we've got to lean into other markets that have opportunities. That's what the team's working hard on. I talked about some of the things we're doing on the intermodal side and maybe a backdrop where we're seeing industrial production not positive. You've got to look for ways to grow. We've got a very engaged team that engages with our operating team to create more opportunities for us. We reiterated our guidance on the last earnings call. We see a path to delivering that. Obviously, having a little wind at our back is always, I would prefer that than not. We've got to find ways as a team to really find our own opportunities. We can't just rely on the economy to help us. Yeah, look, we have a diverse portfolio. yeah look we have a diverse portfolio That's what's great about what we do. that's what's great about what we do When one market is not doing well, we've got to lean into other markets that have opportunities. when one market is not doing well we've got to lean into other markets that have opportunities That's what the team's working hard on. that's what the team's working hard on I talked about some of the things we're doing on the intermodal side and maybe a backdrop where we're seeing industrial production not positive. i talked about some of the things we're doing on the intermodal side and maybe a backdrop where we're seeing industrial production not positive You've got to look for ways to grow. you've got to look for ways to grow We've got a very engaged team that engages with our operating team to create more opportunities for us. we've got a very engaged team that engages with our operating team to create more opportunities for us We reiterated our guidance on the last earnings call. we reiterated our guidance on the last earnings call We see a path to delivering that. we see a path to delivering that Obviously, having a little wind at our back is always, I would prefer that than not. obviously having a little wind at our back is always i would prefer that than not We've got to find ways as a team to really find our own opportunities. we've got to find ways as a team to really find our own opportunities We can't just rely on the economy to help us. we can't just rely on the economy to help us We've got to gain share, modal share. Some of these things will eventually come. We can't predict if they're going to happen next year or in 2027 or 2028. In the absence of not knowing what's going to happen, we've got to drive our own opportunities. We've got to gain share, modal share. we've got to gain share modal share Some of these things will eventually come. some of these things will eventually come We can't predict if they're going to happen next year or in 2027 or 2028. we can't predict if they're going to happen next year or in 2027 or 2028 In the absence of not knowing what's going to happen, we've got to drive our own opportunities. in the absence of not knowing what's going to happen we've got to drive our own opportunities

Speaker 3: All right. Maybe shifting gears a bit, talk about the strategic value of your trucking business. Do you think it makes sense? All right. all right Maybe shifting gears a bit, talk about the strategic value of your trucking business. maybe shifting gears a bit talk about the strategic value of your trucking business Do you think it makes sense? do you think it makes sense

Speaker 2: Yeah. Yeah. yeah

Speaker 3: Synergies with your core business? Synergies with your core business? synergies with your core business

Speaker 2: Quality, chemicals is our largest segment of our business today, as everybody is aware. Quality gives us a unique opportunity to go to market and understand that market at a really intimate level in terms of how volumes are moving throughout the U.S. and then identifying opportunities, whether it's transloading, whether it's an ISO tank product, to really target a business that hasn't traditionally moved on the railroad. We are seeing a lot of momentum around that this year in a very challenged trucking market. We're seeing pretty extraordinary, pretty great growth, maybe not in triple digits, but close to that on a year-over-year basis, which is exciting. We're starting off on pretty low numbers. Randy and the team have really found some momentum with some of the largest customers. The great thing about the chemical industry, it's very sticky once you win it. Quality, chemicals is our largest segment of our business today, as everybody is aware. quality chemicals is our largest segment of our business today as everybody is aware Quality gives us a unique opportunity to go to market and understand that market at a really intimate level in terms of how volumes are moving throughout the U.S. and then identifying opportunities, whether it's transloading, whether it's an ISO tank product, to really target a business that hasn't traditionally moved on the railroad. quality gives us a unique opportunity to go to market and understand that market at a really intimate level in terms of how volumes are moving throughout the u.s and then identifying opportunities whether it's transloading whether it's an iso tank product to really target a business that hasn't traditionally moved on the railroad We are seeing a lot of momentum around that this year in a very challenged trucking market. we are seeing a lot of momentum around that this year in a very challenged trucking market We're seeing pretty extraordinary, pretty great growth, maybe not in triple digits, but close to that on a year-over-year basis, which is exciting. we're seeing pretty extraordinary pretty great growth maybe not in triple digits but close to that on a year-over-year basis which is exciting We're starting off on pretty low numbers. we're starting off on pretty low numbers Randy and the team have really found some momentum with some of the largest customers. randy and the team have really found some momentum with some of the largest customers The great thing about the chemical industry, it's very sticky once you win it. the great thing about the chemical industry it's very sticky once you win it That's the challenge, too, as you introduce a new product into the market. We've seen two very, very large customers start to adopt this product at a high level. You'll see others follow their lead, which we're encouraged by. The other thing that it really identifies or helps us is in our general discussions with our chemical customers, there are many discussions we've been able to bundle the product together and really offered us an opportunity, not only on the rail side, but also on the truck side, to have a different discussion with our customers. Randy, who leads our Quality Carriers, and I are going to go to Houston next week. We're going to see eight customers. The unique thing about that experience is we're not only bringing in the rail folks that work with us, but also the trucking side of their business is coming into the room. That's the challenge, too, as you introduce a new product into the market. that's the challenge too as you introduce a new product into the market We've seen two very, very large customers start to adopt this product at a high level. we've seen two very very large customers start to adopt this product at a high level You'll see others follow their lead, which we're encouraged by. you'll see others follow their lead which we're encouraged by The other thing that it really identifies or helps us is in our general discussions with our chemical customers, there are many discussions we've been able to bundle the product together and really offered us an opportunity, not only on the rail side, but also on the truck side, to have a different discussion with our customers. the other thing that it really identifies or helps us is in our general discussions with our chemical customers, there are many discussions we've been able to bundle the product together and really offered us an opportunity not only on the rail side but also on the truck side to have a different discussion with our customers Randy, who leads our Quality Carriers, and I are going to go to Houston next week. randy who leads our quality carriers and i are going to go to houston next week We're going to see eight customers. we're going to see eight customers The unique thing about that experience is we're not only bringing in the rail folks that work with us, but also the trucking side of their business is coming into the room. the unique thing about that experience is we're not only bringing in the rail folks that work with us but also the trucking side of their business is coming into the room Getting those two groups together at the companies that we serve is usually a pretty tough task to do. Having that knowledge on both sides and being creative and coming up with solutions is really the opportunity that we're seeing. We probably need to do a better job. That's why we'll be in Houston to continue to capitalize on that. There is a lot of momentum around that and a lot of opportunities that it drives on the rail side, not just only on the truck side as well. Getting those two groups together at the companies that we serve is usually a pretty tough task to do. getting those two groups together at the companies that we serve is usually a pretty tough task to do Having that knowledge on both sides and being creative and coming up with solutions is really the opportunity that we're seeing. having that knowledge on both sides and being creative and coming up with solutions is really the opportunity that we're seeing We probably need to do a better job. we probably need to do a better job That's why we'll be in Houston to continue to capitalize on that. that's why we'll be in houston to continue to capitalize on that There is a lot of momentum around that and a lot of opportunities that it drives on the rail side, not just only on the truck side as well. there is a lot of momentum around that and a lot of opportunities that it drives on the rail side not just only on the truck side as well

Speaker 3: I should mention, if anyone in the audience has questions, feel free to raise your hand and jump in. I should mention, if anyone in the audience has questions, feel free to raise your hand and jump in. i should mention if anyone in the audience has questions feel free to raise your hand and jump in I just asked one on the chemicals. Is it all coming off the highway? Is there some coming off barge? Are there more? I just asked one on the chemicals. i just asked one on the chemicals Is it all coming off the highway? is it all coming off the highway Is there some coming off barge? is there some coming off barge Are there more? are there more

Speaker 2: It's typically mostly off the highway. The barge is more difficult to compete with. We'll see opportunities. Obviously, there can be disruption on the Mississippi and other areas where we'll see opportunities here and there. Typically, barge is on water. Obviously, the economics, you can move a lot of volume on water pretty cheaply. It's typically mostly off the highway. it's typically mostly off the highway The barge is more difficult to compete with. the barge is more difficult to compete with We'll see opportunities. we'll see opportunities Obviously, there can be disruption on the Mississippi and other areas where we'll see opportunities here and there. obviously there can be disruption on the mississippi and other areas where we'll see opportunities here and there Typically, barge is on water. typically barge is on water Obviously, the economics, you can move a lot of volume on water pretty cheaply. obviously the economics you can move a lot of volume on water pretty cheaply Yeah, on the coal, you made the comments about customers maybe thinking about their business differently with the data centers backdrop. Yeah, on the coal, you made the comments about customers maybe thinking about their business differently with the data centers backdrop. yeah on the coal you made the comments about customers maybe thinking about their business differently with the data centers backdrop I think the regulatory side, right, the regulatory pressure from an environmental perspective might not quite be as robust as it was. I think at the margin, we're seeing that a bit in just the coal burn. I think the regulatory side, right, the regulatory pressure from an environmental perspective might not quite be as robust as it was. i think the regulatory side right the regulatory pressure from an environmental perspective might not quite be as robust as it was I think at the margin, we're seeing that a bit in just the coal burn. i think at the margin we're seeing that a bit in just the coal burn They need a commitment to take the stockpiles. If they needed to take the stockpiles higher because they're not running at 40% anymore, how much would that mean to you at this point? They need a commitment to take the stockpiles. they need a commitment to take the stockpiles If they needed to take the stockpiles higher because they're not running at 40% anymore, how much would that mean to you at this point? if they needed to take the stockpiles higher because they're not running at 40% anymore how much would that mean to you at this point If you think if we're in that 40% range and you could take it to 50%, 55%, 60%, that's fairly significant growth over time if we get to that point. Those conversations are happening. Those are opportunities, and it's something the team is working on all the time. We've got to, in that case, which is a good problem, we're going to have to look at and make sure the mine capacity is there. We've had a lot of mines, obviously, over the years shut down. I think there is mining capacity, but there'll have to be some investments there as well. If you think if we're in that 40% range and you could take it to 50%, 55%, 60%, that's fairly significant growth over time if we get to that point. if you think if we're in that 40% range and you could take it to 50% 55% 60% that's fairly significant growth over time if we get to that point Those conversations are happening. those conversations are happening Those are opportunities, and it's something the team is working on all the time. those are opportunities and it's something the team is working on all the time We've got to, in that case, which is a good problem, we're going to have to look at and make sure the mine capacity is there. we've got to in that case which is a good problem we're going to have to look at and make sure the mine capacity is there We've had a lot of mines, obviously, over the years shut down. we've had a lot of mines obviously over the years shut down I think there is mining capacity, but there'll have to be some investments there as well. i think there is mining capacity but there'll have to be some investments there as well What do you think on the timing for any of these coal plants announcing this type of thing? I mean, you've seen small. What do you think on the timing for any of these coal plants announcing this type of thing? what do you think on the timing for any of these coal plants announcing this type of thing i I mean, you've seen small. i mean you've seen small I don't think they'll announce it. I don't think it's going to be an announcement. I don't think they'll announce it. i don't think they'll announce it I don't think it's going to be an announcement. i don't think it's going to be an announcement Carloads? Carloads? carloads No, I don't think you'll just see it show up in the carloads as an opportunity for us. No, I don't think you'll just see it show up in the carloads as an opportunity for us. no i don't think you'll just see it show up in the carloads as an opportunity for us Okay. Okay. okay

Speaker 3: Any opportunity to add customers in your portfolio that do coal, or are you pretty full on? Any opportunity to add customers in your portfolio that do coal, or are you pretty full on? any opportunity to add customers in your portfolio that do coal or are you pretty full on

Speaker 2: You can't move a coal plant around or a utility plant around. I would say it's really protecting our base, making sure they're competitive in the market, which they are today. Obviously, with $3-ish gas prices, that makes coal burn economical, which we like. We can all debate on, obviously, what they export, continue to export this product, whether that will tighten the market further. I think there's some optimism there that natural gas prices could trend higher. I'm not going to make a prediction today. There's some thought out there, and that only helps our economics. You can't move a coal plant around or a utility plant around. you can't move a coal plant around or a utility plant around I would say it's really protecting our base, making sure they're competitive in the market, which they are today. i would say it's really protecting our base making sure they're competitive in the market which they are today Obviously, with $3-ish gas prices, that makes coal burn economical, which we like. obviously with $3-ish gas prices that makes coal burn economical which we like We can all debate on, obviously, what they export, continue to export this product, whether that will tighten the market further. we can all debate on obviously what they export continue to export this product whether that will tighten the market further I think there's some optimism there that natural gas prices could trend higher. i think there's some optimism there that natural gas prices could trend higher I'm not going to make a prediction today. i'm not going to make a prediction today There's some thought out there, and that only helps our economics. there's some thought out there and that only helps our economics

Speaker 3: Maybe you can talk about your relationship with your intermodal channel partners. Are you pleased with the relationship as you lean into more growth on your intermodal side? Are you happy with that arrangement? Do you think that there's more opportunity for you to do things on your own? I think UNP does a little bit on the margin on that front. Maybe you can talk about your relationship with your intermodal channel partners. maybe you can talk about your relationship with your intermodal channel partners Are you pleased with the relationship as you lean into more growth on your intermodal side? are you pleased with the relationship as you lean into more growth on your intermodal side Are you happy with that arrangement? are you happy with that arrangement Do you think that there's more opportunity for you to do things on your own? do you think that there's more opportunity for you to do things on your own I think UNP does a little bit on the margin on that front. i think unp does a little bit on the margin on that front

Speaker 2: Yeah, I mean, we work with all our customers. Obviously, I think you're alluding to the industry and some of the things that are going on there. We're here to deliver really good service. We have the best intermodal service in the East. We're taking time out of the transit times, which translate to additional opportunities for us. Mike and team are very focused on running these trains on time. We have the best on-time performance that we've had in my time here, and that allows you to capitalize on any opportunity. We're here to continue to grow that business. We'll make the investments in profitable growth. This Howard Street Tunnel, from a network perspective, is going to be a big deal. We outlined the opportunity at our investor conference. Having that access, basically, the last major quarter on our railroad opened to double-stack capability. Yeah, I mean, we work with all our customers. yeah i mean we work with all our customers Obviously, I think you're alluding to the industry and some of the things that are going on there. obviously i think you're alluding to the industry and some of the things that are going on there We're here to deliver really good service. we're here to deliver really good service We have the best intermodal service in the East. we have the best intermodal service in the east We're taking time out of the transit times, which translate to additional opportunities for us. we're taking time out of the transit times which translate to additional opportunities for us Mike and team are very focused on running these trains on time. mike and team are very focused on running these trains on time We have the best on-time performance that we've had in my time here, and that allows you to capitalize on any opportunity. we have the best on-time performance that we've had in my time here and that allows you to capitalize on any opportunity We're here to continue to grow that business. we're here to continue to grow that business We'll make the investments in profitable growth. we'll make the investments in profitable growth This Howard Street Tunnel, from a network perspective, is going to be a big deal. this howard street tunnel from a network perspective is going to be a big deal We outlined the opportunity at our investor conference. we outlined the opportunity at our investor conference Having that access, basically, the last major quarter on our railroad opened to double-stack capability. having that access basically the last major quarter on our railroad opened to double-stack capability Think about Southeast and the Northeast; it is a huge opportunity that we're going to capitalize on that all our customers, all our partners in that area can benefit from. Think about Southeast and the Northeast; it is a huge opportunity that we're going to capitalize on that all our customers, all our partners in that area can benefit from. think about southeast and the northeast it is a huge opportunity that we're going to capitalize on that all our customers all our partners in that area can benefit from

Speaker 3: Okay. Final question. Maybe talk about that Howard Street opportunity a bit more. What does double-stack intermodal service really mean for you? What type of opportunities is it going to open up that you don't have today? Okay. okay final Final question. final question Maybe talk about that Howard Street opportunity a bit more. maybe talk about that howard street opportunity a bit more What does double-stack intermodal service really mean for you? what does double-stack intermodal service really mean for you What type of opportunities is it going to open up that you don't have today? what type of opportunities is it going to open up that you don't have today

Speaker 2: Yeah, today we have the I-95 corridor, which largely is underutilized, in our opinion. A big part of that reason is the intermodal volume is not economical when you can't double stack. It was one of the things that surprised me when I came into CSX in 2017 and was eventually in the CFO role, is the economics really change when you can double stack that container. Having that opportunity to reach markets that we haven't before and compete with perhaps the shortest haul from Atlanta and Atlanta up into the Northeast is pretty powerful from that side. We're going to allow our customers that are aligned with us to compete for that volume. I think it'll also translate into additional opportunities to grow that market, which we're really focused on, take more trucks off the highway. We're unique. We have a unique franchise in Florida. How do we look at that and continue to drive more volume that exists today on the truck that can move rail going forward? Yeah, today we have the I-95 corridor, which largely is underutilized, in our opinion. yeah today we have the i-95 corridor which largely is underutilized in our opinion A big part of that reason is the intermodal volume is not economical when you can't double stack. a big part of that reason is the intermodal volume is not economical when you can't double stack It was one of the things that surprised me when I came into CSX in 2017 and was eventually in the CFO role, is the economics really change when you can double stack that container. it was one of the things that surprised me when i came into csx in 2017 and was eventually in the cfo role is the economics really change when you can double stack that container Having that opportunity to reach markets that we haven't before and compete with perhaps the shortest haul from Atlanta and Atlanta up into the Northeast is pretty powerful from that side. having that opportunity to reach markets that we haven't before and compete with perhaps the shortest haul from atlanta and atlanta up into the northeast is pretty powerful from that side We're going to allow our customers that are aligned with us to compete for that volume. we're going to allow our customers that are aligned with us to compete for that volume I think it'll also translate into additional opportunities to grow that market, which we're really focused on, take more trucks off the highway. i think it'll also translate into additional opportunities to grow that market which we're really focused on take more trucks off the highway We're unique. we're unique We have a unique franchise in Florida. we have a unique franchise in florida How do we look at that and continue to drive more volume that exists today on the truck that can move rail going forward? how do we look at that and continue to drive more volume that exists today on the truck that can move rail going forward Just wondering if you can share your observation about your partnership with CPKC, which extends your reach much beyond the East Coast into Mexico and so on. How's that doing? What's the kind of any kind of challenging point in terms of this logistically and smoothness of fluidity of the network? Just wondering if you can share your observation about your partnership with CPKC, which extends your reach much beyond the East Coast into Mexico and so on. just wondering if you can share your observation about your partnership with cpkc which extends your reach much beyond the east coast into mexico and so on How's that doing? how's that doing What's the kind of any kind of challenging point in terms of this logistically and smoothness of fluidity of the network? what's the kind of any kind of challenging point in terms of this logistically and smoothness of fluidity of the network I think when we made the announcement, we had a lot of capital that we had to put in that line. You're going to continue to see that service continue to improve, which allows us to go after a different market there. We have monthly, if not biweekly, touch points with the CPKC on identifying additional volume, mainly concentrated in Mexico that we can go after. There are a lot of opportunities with that line and that access. It's pretty unique for us. It creates a more efficient path into our network into the Southeast. We're really excited about it. I know the CPKC would say similar things. It's not just in the intermodal market. We're seeing auto and other areas with opportunity to grow that business. The vast, vast majority of this is just truck conversion today. That's why we're excited about it. We're highly focused on growing the pie, and this is really an avenue to do that. I think when we made the announcement, we had a lot of capital that we had to put in that line. i think when we made the announcement we had a lot of capital that we had to put in that line You're going to continue to see that service continue to improve, which allows us to go after a different market there. you're going to continue to see that service continue to improve which allows us to go after a different market there We have monthly, if not biweekly, touch points with the CPKC on identifying additional volume, mainly concentrated in Mexico that we can go after. we have monthly if not biweekly touch points with the cpkc on identifying additional volume mainly concentrated in mexico that we can go after There are a lot of opportunities with that line and that access. there are a lot of opportunities with that line and that access It's pretty unique for us. it's pretty unique for us It creates a more efficient path into our network into the Southeast. it creates a more efficient path into our network into the southeast We're really excited about it. we're really excited about it I know the CPKC would say similar things. i know the cpkc would say similar things It's not just in the intermodal market. it's not just in the intermodal market We're seeing auto and other areas with opportunity to grow that business. we're seeing auto and other areas with opportunity to grow that business The vast, vast majority of this is just truck conversion today. the vast vast majority of this is just truck conversion today That's why we're excited about it. that's why we're excited about it We're highly focused on growing the pie, and this is really an avenue to do that. we're highly focused on growing the pie and this is really an avenue to do that

Speaker 3: CSX is the railroad that's probably the furthest away from its margin highs, for arguably temporary factors and reasons. If you think about your ability to get back to an OR with a five handle on it, how do you feel? Could it even be better than what you had before, considering all of these positive things that you spoke about with respect to driving greater efficiencies, improving your network, all these industrial projects, etc? CSX is the railroad that's probably the furthest away from its margin highs, for arguably temporary factors and reasons. csx is the railroad that's probably the furthest away from its margin highs for arguably temporary factors and reasons If you think about your ability to get back to an OR with a five handle on it, how do you feel? if you think about your ability to get back to an or with a five handle on it how do you feel Could it even be better than what you had before, considering all of these positive things that you spoke about with respect to driving greater efficiencies, improving your network, all these industrial projects, et c? could it even be better than what you had before considering all of these positive things that you spoke about with respect to driving greater efficiencies improving your network all these industrial projects et c

Speaker 2: No, what I do know is the business we're targeting today has a very powerful incremental margin profile. We have a network with a lot of fixed costs, and as we identify more volume, the right volume to put on our network that we're very excited about, I mentioned all the opportunities. I think we think that drops through at a very meaningful incremental margin. Sean's talked a little bit about that. At the same time, I can tell you Mike is out there every day looking for ways to take costs out of the network. Those two things in combination are very powerful and allow us to deliver, I think, on our expectations to continue to improve our margin profile over time. No, what I do know is the business we're targeting today has a very powerful incremental margin profile. no what i do know is the business we're targeting today has a very powerful incremental margin profile We have a network with a lot of fixed costs, and as we identify more volume, the right volume to put on our network that we're very excited about, I mentioned all the opportunities. we have a network with a lot of fixed costs and as we identify more volume the right volume to put on our network that we're very excited about i mentioned all the opportunities I think we think that drops through at a very meaningful incremental margin. i think we think that drops through at a very meaningful incremental margin Sean's talked a little bit about that. sean's talked a little bit about that At the same time, I can tell you Mike is out there every day looking for ways to take costs out of the network. at the same time i can tell you mike is out there every day looking for ways to take costs out of the network Those two things in combination are very powerful and allow us to deliver, I think, on our expectations to continue to improve our margin profile over time. those two things in combination are very powerful and allow us to deliver i think on our expectations to continue to improve our margin profile over time

Speaker 3: Great. What worries you the most, I guess? Great. great What worries you the most, I guess? what worries you the most i guess

Speaker 2: Yeah, there's always noise out there with, obviously, the political dynamics and those things. I think what the market's looking for is certainty, right? When I'm thinking as a corporate and I want to make an investment, you want to know what the rules of engagement are. I think having that certainty, the sooner we can get to that, where are the tariffs ultimately going to land? Where are these decisions ultimately going to land? The tax profile, all of those things are important. I think these policies, there's a real optimistic case for our business that could be made. We've got to settle in. Customers have to have the confidence to make the investments. They're already making the investments, to be clear. You can see the tax policy around 100% depreciation on the structures is huge. It's huge. It's a game changer. Yeah, there's always noise out there with, obviously, the political dynamics and those things. yeah there's always noise out there with obviously the political dynamics and those things I think what the market's looking for is certainty, right? i think what the market's looking for is certainty right When I'm thinking as a corporate and I want to make an investment, you want to know what the rules of engagement are. when i'm thinking as a corporate and i want to make an investment you want to know what the rules of engagement are I think having that certainty, the sooner we can get to that, where are the tariffs ultimately going to land? i think having that certainty the sooner we can get to that where are the tariffs ultimately going to land Where are these decisions ultimately going to land? where are these decisions ultimately going to land The tax profile, all of those things are important. the tax profile all of those things are important I think these policies, there's a real optimistic case for our business that could be made. i think these policies there's a real optimistic case for our business that could be made We've got to settle in. we've got to settle in Customers have to have the confidence to make the investments. customers have to have the confidence to make the investments They're already making the investments, to be clear. they're already making the investments to be clear You can see the tax policy around 100% depreciation on the structures is huge. you can see the tax policy around 100% depreciation on the structures is huge It's huge. it's huge It's a game changer. it's a game changer I think you're going to really see that unleashed, hopefully, in the next year. That really benefits our network over time. Political uncertainty is up there in terms of worries. If we can settle down a bit and customers can get more clarity on where things are going, obviously, we talk about interest rates. Some of our most important markets are sensitive to the interest rate environment. There is a case being made that we'll start to see rates come down a bit here. I think that would be really healthy as we move into next year for our business. We'll see. We know there's a deficit both on the auto side and on housing in general. There are deficits, right? We're running below what long-term demand would suggest in both of those areas. I think you're going to really see that unleashed, hopefully, in the next year. i think you're going to really see that unleashed hopefully in the next year That really benefits our network over time. that really benefits our network over time Political uncertainty is up there in terms of worries. political uncertainty is up there in terms of worries If we can settle down a bit and customers can get more clarity on where things are going, obviously, we talk about interest rates. if we can settle down a bit and customers can get more clarity on where things are going obviously we talk about interest rates Some of our most important markets are sensitive to the interest rate environment. some of our most important markets are sensitive to the interest rate environment There is a case being made that we'll start to see rates come down a bit here. there is a case being made that we'll start to see rates come down a bit here I think that would be really healthy as we move into next year for our business. i think that would be really healthy as we move into next year for our business We'll see. we'll see We know there's a deficit both on the auto side and on housing in general. There are deficits, right? we know there's a deficit both on the auto side and on housing in general. there are deficits right We're running below what long-term demand would suggest in both of those areas. we're running below what long-term demand would suggest in both of those areas Eventually, we think we should get to a point where that would represent underlying growth in the markets. In the absence of that, this team's got to work hard to go and find and capture share in the market. I think we're doing a good job. We can always do better. We're highly, highly focused on that. Eventually, we think we should get to a point where that would represent underlying growth in the markets. eventually we think we should get to a point where that would represent underlying growth in the markets In the absence of that, this team's got to work hard to go and find and capture share in the market. in the absence of that this team's got to work hard to go and find and capture share in the market I think we're doing a good job. i think we're doing a good job We can always do better. we can always do better We're highly, highly focused on that. we're highly highly focused on that

Speaker 3: I guess in light of that, just from last week's updates and just last night's updates, we kind of touched on this, but just customer conversations more near term, do they feel better or worse? I know there's still a cloud of uncertainty out there. Any changes in customer conversation? I guess in light of that, just from last week's updates and just last night's updates, we kind of touched on this, but just customer conversations more near term, do they feel better or worse? i guess in light of that just from last week's updates and just last night's updates we kind of touched on this but just customer conversations more near term do they feel better or worse I know there's still a cloud of uncertainty out there. i know there's still a cloud of uncertainty out there Any changes in customer conversation? any changes in customer conversation

Speaker 2: I don't know. I think it's still the uncertainty prevails right now. I think there's hope, right? I think there's hope that as we turn into next year and maybe we can build a little momentum into the fourth quarter that we can see it. I'm not breaking any news. The industrial economy is pretty anemic right now. We're seeing it across our business. That's why we're so focused on driving opportunities that we can control. We'll continue to do that. When those markets come back, we're going to be here to serve. We'll benefit from those opportunities. The network will be ready to handle it, especially after all these investments that we've made. I don't know. i don't know I think it's still the uncertainty prevails right now. i think it's still the uncertainty prevails right now I think there's hope, right? i think there's hope right I think there's hope that as we turn into next year and maybe we can build a little momentum into the fourth quarter that we can see it. i think there's hope that as we turn into next year and maybe we can build a little momentum into the fourth quarter that we can see it I'm not breaking any news. i'm not breaking any news The industrial economy is pretty anemic right now. the industrial economy is pretty anemic right now We're seeing it across our business. we're seeing it across our business That's why we're so focused on driving opportunities that we can control. that's why we're so focused on driving opportunities that we can control We'll continue to do that. we'll continue to do that When those markets come back, we're going to be here to serve. when those markets come back we're going to be here to serve We'll benefit from those opportunities. we'll benefit from those opportunities The network will be ready to handle it, especially after all these investments that we've made. the network will be ready to handle it especially after all these investments that we've made

Speaker 3: Any other questions you have? Yeah, go ahead. Any other questions you have? any other questions you have Yeah, go ahead. yeah go ahead I know you're limited in terms of the mergers. We know that the STB guideline is to enhance competition. I wanted to share some observation in terms of in your interfacing with other railroads and so on. There are kind of areas that competition can be enhanced, for example, reciprocal switching and access to network. Those kind of things. Are there kind of areas that can improve with maybe some concession? I know you're limited in terms of the mergers. i know you're limited in terms of the mergers We know that the STB guideline is to enhance competition. we know that the stb guideline is to enhance competition I wanted to share some observation in terms of in your interfacing with other railroads and so on. i wanted to share some observation in terms of in your interfacing with other railroads and so on There are kind of areas that competition can be enhanced, for example, reciprocal switching and access to network. there are kind of areas that competition can be enhanced for example reciprocal switching and access to network Those kind of things. those kind of things Are there kind of areas that can improve with maybe some concession? are there kind of areas that can improve with maybe some concession

Speaker 2: I'm not going to speak specifically to that. We're going to have opportunities, and Joe probably will lead the charge on that to discuss any part around specifically Transcon and those things. I will say this hasn't changed for me since I've been in this position or for us, quite frankly, all the management team. We see a lot of things that we can do from an efficiency standpoint, not only within our network, but interchanges, all those things. That hasn't changed, right? That continues to be an opportunity to drive modal share for the industry as we get better, more consistent. Over half our volume touches another railroad, so the customer experience doesn't end at the CSX network. It extends through their total experience. On the intermodal side, it doesn't end with just the rail service. It ends with how do we integrate with the truck better. I'm not going to speak specifically to that. i'm not going to speak specifically to that We're going to have opportunities, and Joe probably will lead the charge on that to discuss any part around specifically Transcon and those things. we're going to have opportunities and joe probably will lead the charge on that to discuss any part around specifically transcon and those things I will say this hasn't changed for me since I've been in this position or for us, quite frankly, all the management team. i will say this hasn't changed for me since i've been in this position or for us quite frankly all the management team We see a lot of things that we can do from an efficiency standpoint, not only within our network, but interchanges, all those things. we see a lot of things that we can do from an efficiency standpoint not only within our network but interchanges all those things That hasn't changed, right? that hasn't changed right That continues to be an opportunity to drive modal share for the industry as we get better, more consistent. that continues to be an opportunity to drive modal share for the industry as we get better more consistent Over half our volume touches another railroad, so the customer experience doesn't end at the CSX network. over half our volume touches another railroad so the customer experience doesn't end at the csx network It extends through their total experience. it extends through their total experience On the intermodal side, it doesn't end with just the rail service. on the intermodal side it doesn't end with just the rail service It ends with how do we integrate with the truck better. it ends with how do we integrate with the truck better Those things are things we need to continue to solve for, and they are opportunities for us. How do we use technology to create more visibility for the customers so they can manage their supply chain and their inventories better, right? We're behind the truck in that area. Those are things that we talk a lot about internally. All of these things remain opportunities to get better, and over time, they represent more opportunity to gain share in the market. I'm very, very optimistic on that. Technology, we have Steve who's leading those efforts for us. Those things are things we need to continue to solve for, and they are opportunities for us. those things are things we need to continue to solve for and they are opportunities for us How do we use technology to create more visibility for the customers so they can manage their supply chain and their inventories better, right? how do we use technology to create more visibility for the customers so they can manage their supply chain and their inventories better right We're behind the truck in that area. we're behind the truck in that area Those are things that we talk a lot about internally. those are things that we talk a lot about internally All of these things remain opportunities to get better, and over time, they represent more opportunity to gain share in the market. all of these things remain opportunities to get better and over time they represent more opportunity to gain share in the market I'm very, very optimistic on that. i'm very very optimistic on that Technology, we have Steve who's leading those efforts for us. technology we have steve who's leading those efforts for us There's a lot of things that we can do to really make that customer experience better, where they're more willing to give some of their most valuable freight to the railroad and trust us with that freight because they can have confidence it's going to be delivered to their customers that need it on time. There's a lot of things that we can do to really make that customer experience better, where they're more willing to give some of their most valuable freight to the railroad and trust us with that freight because they can have confidence it's going to be delivered to their customers that need it on time. there's a lot of things that we can do to really make that customer experience better where they're more willing to give some of their most valuable freight to the railroad and trust us with that freight because they can have confidence it's going to be delivered to their customers that need it on time

Speaker 3: Kevin, could you just give some more tangible examples of what type of initiatives you're targeting and how maybe a more supportive regulatory backdrop is helping you implement some of those changes? Kevin, could you just give some more tangible examples of what type of initiatives you're targeting and how maybe a more supportive regulatory backdrop is helping you implement some of those changes? kevin could you just give some more tangible examples of what type of initiatives you're targeting and how maybe a more supportive regulatory backdrop is helping you implement some of those changes

Speaker 2: I don't think the regulatory backdrop has really anything to do with us pursuing growth. I think they've always been supportive of us going after modal share. There are so many beneficiaries in that, the communities that we obviously serve, taking trucks off the highway, all those things. Transloading is something that we've highlighted that I would point out again. We've had a lot of success in our transloading business this year. It's far outgrowing our core business today, and you're going to continue to see us make those investments. It's a way to reach those merchandise customers that aren't traditionally on the railroad today. It's spreading our footprint out beyond just the physical infrastructure of the railroad, where if we don't touch them with our rail infrastructure, this is a way where we can combine a truck and transloading to reach them. I don't think the regulatory backdrop has really anything to do with us pursuing growth. i don't think the regulatory backdrop has really anything to do with us pursuing growth I think they've always been supportive of us going after modal share. i think they've always been supportive of us going after modal share There are so many beneficiaries in that, the communities that we obviously serve, taking trucks off the highway, all those things. there are so many beneficiaries in that the communities that we obviously serve taking trucks off the highway all those things Transloading is something that we've highlighted that I would point out again. transloading is something that we've highlighted that i would point out again We've had a lot of success in our transloading business this year. we've had a lot of success in our transloading business this year It's far outgrowing our core business today, and you're going to continue to see us make those investments. it's far outgrowing our core business today and you're going to continue to see us make those investments It's a way to reach those merchandise customers that aren't traditionally on the railroad today. it's a way to reach those merchandise customers that aren't traditionally on the railroad today It's spreading our footprint out beyond just the physical infrastructure of the railroad, where if we don't touch them with our rail infrastructure, this is a way where we can combine a truck and transloading to reach them. it's spreading our footprint out beyond just the physical infrastructure of the railroad where if we don't touch them with our rail infrastructure this is a way where we can combine a truck and transloading to reach them It's something that's created a lot of valuable growth for us in a market that's pretty challenged this year. You'll continue to see us make those investments in that area. We're really looking at ways where we can grow the pie, because that's the best way we can create value over time, is growing the pie. We're going to compete every day with the railroad, and we have the best service out there to compete. We have the best relationships, and I expect us to win. If we really want to change the growth algorithm for what we've been able to achieve historically, it's really capitalizing on industrial development and finding new ways to win share with our existing customers. I think we're along that path, and what I think you'll see is as the truck market tightens a bit, you'll really see that start to accelerate even more than what we were seeing today. It's something that's created a lot of valuable growth for us in a market that's pretty challenged this year. it's something that's created a lot of valuable growth for us in a market that's pretty challenged this year You'll continue to see us make those investments in that area. you'll continue to see us make those investments in that area We're really looking at ways where we can grow the pie, because that's the best way we can create value over time, is growing the pie. we're really looking at ways where we can grow the pie because that's the best way we can create value over time is growing the pie We're going to compete every day with the railroad, and we have the best service out there to compete. we're going to compete every day with the railroad and we have the best service out there to compete We have the best relationships, and I expect us to win. we have the best relationships and i expect us to win If we really want to change the growth algorithm for what we've been able to achieve historically, it's really capitalizing on industrial development and finding new ways to win share with our existing customers. if we really want to change the growth algorithm for what we've been able to achieve historically it's really capitalizing on industrial development and finding new ways to win share with our existing customers I think we're along that path, and what I think you'll see is as the truck market tightens a bit, you'll really see that start to accelerate even more than what we were seeing today. i think we're along that path and what i think you'll see is as the truck market tightens a bit you'll really see that start to accelerate even more than what we were seeing today

Speaker 3: Last but not least, maybe you can just touch on capital allocation real quick. Priorities. How do you feel about where your stock is trading, buybacks? Last but not least, maybe you can just touch on capital allocation real quick. Priorities. last but not least maybe you can just touch on capital allocation real quick priorities How do you feel about where your stock is trading, buybacks? how do you feel about where your stock is trading buybacks

Speaker 2: I'll say the first priority is always a reinvestment in the network. We have this valuable asset. We have to continue to maintain the best service in the East. That's the first use of capital. I will tell you, Mike is always looking for efficiencies on the maintenance capital side of things. There's probably opportunities to do better. I know Sean looks at that all the time. Being more efficient with our capital spend to maintain our railroad is something that we're highly focused on. Growth opportunities, right, and profitable growth. That's going to be the first use of our capital. Beyond that, we're fortunate to generate a lot of free cash flow. We've had a history of returning that to shareholders over time. I think I don't see anything changing with that philosophy going forward. I'll say the first priority is always a reinvestment in the network. i'll say the first priority is always a reinvestment in the network We have this valuable asset. we have this valuable asset We have to continue to maintain the best service in the East. we have to continue to maintain the best service in the east That's the first use of capital. that's the first use of capital I will tell you, Mike is always looking for efficiencies on the maintenance capital side of things. i will tell you mike is always looking for efficiencies on the maintenance capital side of things There's probably opportunities to do better. there's probably opportunities to do better I know Sean looks at that all the time. i know sean looks at that all the time Being more efficient with our capital spend to maintain our railroad is something that we're highly focused on. being more efficient with our capital spend to maintain our railroad is something that we're highly focused on Growth opportunities, right, and profitable growth. growth opportunities right and profitable growth That's going to be the first use of our capital. that's going to be the first use of our capital Beyond that, we're fortunate to generate a lot of free cash flow. beyond that we're fortunate to generate a lot of free cash flow We've had a history of returning that to shareholders over time. we've had a history of returning that to shareholders over time I think I don't see anything changing with that philosophy going forward. i think i don't see anything changing with that philosophy going forward

Speaker 3: Anything else, anyone? Okay, we'll wrap it there. Thanks again, Kevin. Anything else, anyone? anything else anyone Okay, we'll wrap it there. Thanks again, Kevin. okay we'll wrap it there thanks again kevin

Speaker 2: Appreciate you having us. Appreciate you having us. appreciate you having us

Speaker 3: Thank you. Thank you. thank you