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Date

April 22, 2026, 4:30 p.m. ET

Call participants

  • Chairman and Chief Executive Officer — Steve Angel
  • Executive Vice President and Chief Operating Officer — Michael A. Cory
  • Executive Vice President and Chief Financial Officer — Kevin S. Boone
  • Executive Vice President, Sales and Marketing — Mary Claire Kenny

Takeaways

  • Total Revenue -- Increased 2% on 3% total volume growth, with pricing gains and higher fuel recovery offset by negative business mix impact.
  • Operating Expense -- Fell by 6%, reflecting over $100 million in efficiency savings, real estate gains, and cost reductions, partly offset by inflation and higher fuel prices.
  • Operating Income -- Rose 20% due to improved efficiency and increased volumes.
  • Earnings per Share -- Up 26%, reflecting margin expansion and disciplined capital management.
  • FRA Injury Rate -- Improved by 13% with a 9% reduction in people hours, signaling enhanced safety performance.
  • Train Accident Rate -- Improved by over 30%, contributing to network reliability.
  • First-Quarter Fuel Efficiency -- Achieved a record 0.97 gallons per thousand gross ton miles, with a March result of 0.93, the best since 2021.
  • Headcount -- Down 5%, supporting labor cost reductions of 1%, including a $10 million overtime expense decline.
  • Vehicle Fleet -- Reduced by 7% compared to 2024, decreasing both operating expense and capital spend.
  • PS&O Cost Reductions -- Realized as a result of increased accountability and elimination of discretionary and wasteful spending.
  • Intermodal Volume -- Grew 6%, with intermodal revenue up 5%, supported by new business in both international and domestic markets.
  • Merchandise Volume -- Remained flat; minerals segment grew 4% in volume, while forest products volume dropped 9% due to weak housing demand and prior-year closures.
  • Coal Revenue -- Declined 1% on 1% lower volume, with domestic utility coal up, exports down, and RPU up from a favorable mix.
  • Business Mix Effect -- Drove a 1% decline in total revenue per unit, despite flat or positive segment pricing.
  • Howard Street Tunnel -- Final bridge completion expected within a week, unlocking double-stack east-west access and halving transit time between key markets.
  • 2026 Revenue Guidance -- Updated to "mid-single digits" growth including fuel, revised from "low single digits," contingent on elevated diesel prices.
  • Operating Margin Guidance -- Full-year margin expansion forecast increased to 200-300 basis points, now anticipated toward the high end.
  • Capital Spending -- Expected to remain below $2.4 billion for the year.
  • Free Cash Flow -- Projected to grow over 60% compared to 2025.
  • Industrial Development -- Twenty-one projects entered service in the quarter, expected to contribute 33,000 annual carloads at full ramp; full-year target is 100 projects, representing an approximately 50% volume increase over last year's 85 projects.

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Risks

  • Steve Angel noted, “market conditions remain uncertain,” citing inflationary pressure and potential negative effects on consumer sentiment linked to conflict in the Middle East and rising energy prices.
  • Forest products segment volume dropped 9%, with Mary Claire Kenny stating, “demand remains impacted by weak housing,” and additional facility closures occurred year-to-date.
  • Automotive continues to be “pressured by lower production and the extended retooling of a major plant,” resulting in headwinds for that business.
  • Mary Claire Kenny said, “energy cost inflation poses risk to consumer demand and imports” especially on intermodal and export coal markets.

Summary

CSX Corporation (CSX 0.41%) delivered revenue and volume growth paired with substantial efficiency improvements and significant increases in operating income and EPS. Management raised full-year revenue guidance to mid-single-digit growth—mainly due to fuel surcharge escalation—and expects operating margin expansion toward the upper end of a recently raised 200-300 basis-point range. The Howard Street Tunnel is set to double intermodal and East-West corridor capacity, while broad-based cost reduction and asset productivity initiatives continued to lower operating expenses, capital spend, and asset base, supporting an over 60% projected increase in free cash flow. Industrial development remains a key driver, with 100 projects expected to go live in 2026, targeting a 50% unit volume ramp on last year, while improved safety metrics, labor discipline, and operational enhancements reinforce management’s goal of sustainable best-in-class performance.

  • Mary Claire Kenny said, “new services typically take a couple of bid seasons to really get to full ramp,” indicating gradual volume realization from large infrastructure improvements.
  • Kevin S. Boone explained, “over 100 different initiatives” are driving current and future efficiency gains, with a focus already moving toward 2027 productivity planning.
  • Real estate gains contributed $44 million to first-quarter results but are not expected to recur at a similar scale for the remainder of the year.
  • Chairman Steve Angel articulated the strategic priority as “improving our operating margin performance, growing operating income,” and more prudent project selection based on predictive analytics.
  • Pricing on intermodal remains predominantly contract-driven, especially in international, which is “not highly correlated to changes in the truck market.”

Industry glossary

  • FRA Injury Rate: The rate of reportable injuries per 200,000 employee hours, as defined by the Federal Railroad Administration.
  • PS&O: Purchased Services and Other expenses, a cost line comprising third-party services, utilities, and broad-based discretionary operating costs.
  • RPU: Revenue per unit, a key yield metric indicating average revenue earned per carload or intermodal unit.
  • SMX: CSX’s new intermodal service product delivering truck-competitive transit between the Southeast U.S., Dallas, and Mexico, jointly operated with CPKC.
  • Curfew Execution: A railroading term for scheduled track outages to perform maintenance or construction, requiring disciplined coordination to minimize operational impact.

Full Conference Call Transcript

Steve Angel: Good afternoon, and thank you for joining our call. I am pleased with the strong start to the year that our railroaders have delivered. We made great strides in safety, managed through weather challenges, and advanced our efforts to improve efficiency and streamline our cost structure. The progress we have made can be seen clearly in our quarterly results. Volume and revenue grew year over year, while operating expense moved substantially lower, which led to significant margin expansion and EPS growth. Solid earnings and continued capital discipline helped drive higher free cash flow. Altogether, this represents an encouraging first step toward our goal of best-in-class performance.

At the same time, we recognize that we are still early in the process, and market conditions remain uncertain. As Mary Claire will discuss, conflict in the Middle East and rising energy prices are creating opportunities for some of our customers, but this has also added to broader concerns about inflationary pressure and potential effects on consumer sentiment. What remains constant is our focus on execution. Our team is responding to customer needs by expanding our service offerings, improving transit times, and converting freight from truck to rail. We are also moving forward on a wide range of cost initiatives as we push to develop the productivity muscle required to sustain performance over the long term.

I will now turn the call over to Michael A. Cory to cover our safety and operational highlights.

Michael A. Cory: Thank you, Steve. Slide five shows highlights for our safety and operational performance. Best-in-class performance starts with safety, and we made good progress in the first quarter. Our FRA injury rate improved by 13% compared to last year, that is with a 9% reduction in people hours. Our train accident rate improved by over 30%. Operating safely benefits our employees and our customers; it allows us to run a more fluid, efficient network. We remain committed to developing a culture at CSX Corporation where effective risk awareness and safe operating practices are consistent across our organization. Operationally, we successfully managed through the severe winter storms that covered most of the Midwestern and Northeastern United States through the quarter.

Our key metrics compare favorably to last year, when closures due to the Blue Ridge reconstruction and the Howard Street Tunnel project impacted our resilience. Train speed, dwell, and cars online all improved on a year-over-year basis. We also delivered record first quarter fuel efficiency of 0.97 gallons per thousand gross ton miles and achieved 0.93 gallons per thousand GTMs in March, our best performance since 2021. Performance at our intermodal terminals has been very good, even as we have absorbed substantial new volume. For example, the team at Fairburn in Atlanta handled a 15% increase in intermodal lifts with our expanded domestic business in the Southeast while maintaining service our customers can count on.

As well, the team has been very effective in finding and eliminating inefficiencies. Our engineering and network groups have been improving productivity substantially through more efficient use of work blocks and better overall coordination with our transportation groups. We have seen double-digit efficiency improvement in rail and tie installation to start the year through disciplined curfew execution. I am extremely proud of this team and what we have accomplished. There is so much more that we are working toward. We have great momentum, and our goal is to build on these successes as we progress through the rest of the year. With that, I will turn it over to Kevin for financial results for the quarter.

Kevin S. Boone: Thank you, Mike, and good afternoon. As both Mike and Steve noted, 2026 is off to a strong start. Volume and revenue are up, while costs are lower across the company throughout CSX Corporation to drive efficiencies. These results reflect significant work and partnership in nearly every part of the business while maintaining our commitments to safety and customer service. Total revenue increased 2% on 3% volume growth, as pricing gains and higher fuel recovery were offset by business mix impacts. Total expenses fell by 6% from the steps taken to improve our cost structure and improve network fluidity. As a result, operating income increased 20%, with earnings per share up 26%.

Turning to the next slide, total first quarter expense decreased by $153 million compared to the prior year. The variance includes over $100 million of year-over-year efficiency savings plus other benefits from real estate and the lapping of network disruption costs, partly offset by inflation and higher fuel prices. Labor costs were 1% lower, as a 5% reduction in headcount paired with a $10 million reduction in overtime expense offset inflation. PS&O savings were broad-based, benefiting from increased accountability for discretionary costs, eliminating wasteful spend, and improved asset utilization.

As an example, CSX Corporation’s vehicle fleet is 7% smaller relative to 2024, including opportunities we found to turn in costly equipment rentals that will reduce both operating expense and capital spend. We will continue to press on these costs at the individual asset level, and new tools will support accountability and address unsafe and inefficient driving practices. We are bringing cost control to the front lines of the organization, educating our leaders on costs beyond their own budget. As Mike mentioned, our engineering group has found ways to drive efficiency, including less use of overtime labor, which will reduce capital spend this year.

Along the same lines, we are improving visibility of freight car hire expense, so our field leaders can support the network center in managing the cost pool of over $1 million of spend per day. While fuel expense was a headwind in the quarter, given higher diesel prices, we delivered a record first quarter fuel efficiency and remain focused on reducing both locomotive and non-locomotive fuel spend. As we move into the second quarter, we do expect some non-seasonal expense from incentive compensation, timing of contractual locomotive costs, including overhauls, and advisory costs related to industry consolidation.

As Steve noted, our focus is on creating a sustainable efficiency process that provides our leaders with tools and data visibility while empowering these same leaders to take action. We are not lacking opportunity to continue to improve as we look forward to the years ahead. With that, I will turn it over to Mary Claire to review revenue results.

Mary Claire Kenny: Thank you, Kevin, and good afternoon, everyone. Our business performed well in the first quarter due to the great work of the commercial team and our strong partnership with the operations group. Early on, cold weather and storms weighed on shipments in certain markets, but our network was resilient. We stayed connected with our customers and finished March with momentum, supported by new business, reliable service, and favorable trends in select markets. We had a good start to the year, and we see several positive indicators entering spring. Looking forward, we remain nimble and customer-focused while executing on initiatives to expand our network reach, improve our customers’ experience, and drive profitable growth.

Slide 10 covers first quarter volume and revenue performance. Overall, total volume was up 3% in the quarter, while revenue was up 2%. Business mix impacts led to a 1% decline in total revenue per unit. In merchandise, volume was flat year over year, while revenue and RPU grew 2%. Same-store pricing was in line with our expectations, so total merchandise revenue per unit was impacted by mix. Looking at some of the individual markets, minerals growth led merchandise, up 4% in volume, supported by cement and salt shipments. Chemicals was supported by higher frac sand shipments as data center demand drives natural gas production, and strength in plastics as domestic producers benefited from overseas supply chain disruptions.

Fertilizers saw gains as phosphate exports out of the Bone Valley improved. On the other hand, forest products continued to drag with volume down 9%. We are facing difficult comps as we cycle closures that occurred in 2025, while demand remains impacted by weak housing. One emerging positive here is that shippers are looking more to rail conversion as they weigh the impacts of higher fuel and trucking costs. Intermodal was strong this quarter, with revenue up 5% on a 6% increase in volume. New business with key customers benefited us in both international and domestic markets.

Mix was also a factor, with RPU down 1% as we saw substantial growth in our inland ports business, which tends to be shorter length of haul. Finally, revenue for our coal business declined 1% on 1% lower volume, with domestic tonnage slightly up and exports slightly down. Utility coal demand remains high, and strong operational performance in March supported customer restocking, but export shipments were impacted by cold weather that temporarily reduced loading. Sequentially, global met coal benchmarks remained largely flat, but coal RPU benefited from a favorable mix. Slide 11 covers highlights of our market expectations for the rest of 2026.

Starting with merchandise, we see near-term opportunities in chemicals, as domestic plastic producers have a stable supply of feedstocks and look to capitalize on global supply imbalances. Commodities like aggregates, cement, and construction steel remain in high demand for infrastructure projects. Our metals business should also benefit from the ramp-up of new facilities we serve. Housing affordability remains a real headwind, particularly with our forest products business, where we have seen additional closures year to date. Automotive continues to be pressured by lower production and the extended retooling of a major plant on our network. Our intermodal business has good momentum, with tighter trucking supply and higher diesel prices creating tailwinds for freight conversions.

Customers are also responding well to new, faster service options. We are completing the final infrastructure improvements on the former Meridian & Bigbee Railroad and we will soon be launching improved service with CPKC on our SMX product. SMX provides truck-competitive transit between major markets in the Southeast, with Dallas and Mexico, and recent investments will enhance both speed and efficiency. Additionally, the final infrastructure improvements around the Howard Street Tunnel clearances are nearing completion. When complete, we will shave a day off our East-West transit and will connect markets in the Southeast with markets in the Northeast more efficiently than ever before. Our international performance has been strong against challenging year-ago comps.

Though energy cost inflation poses risk to consumer demand and imports, export coal should see the benefits of reopened mines. Power demand remains strong, supporting domestic utility volumes. We do have two facilities on our network now scheduled to shut down in the second quarter, but plant-life extensions present potential upside. Global met prices remain relatively stable, and we expect that to persist amid challenged global steel demand. On the next slide, I will provide an update on our industrial development program. Our team is positioning CSX Corporation rail as a compelling solution for new and expanding manufacturing facilities. Our pipeline of approximately 600 active projects remains strong.

Twenty-one projects went into service over the first quarter alone, which should contribute an estimated 33 thousand annual carloads at full ramp. For the full year, we expect approximately 100 projects to enter service. This is a very strong year, with multiple facilities coming online that were approved three to four years ago. For context, these 100 projects are expected to contribute roughly 50% more volume at full ramp than last year’s 85 projects combined. The map on this slide gives detail on our Q1 projects in service, including highlights for three key projects.

We worked with Keystone Terminals, a bulk commodity terminal in Jacksonville, Florida, to develop a new rail extension enabling synthetic gypsum shipments to move on our network. Martin Marietta expanded a rail-served aggregate loading facility in Green Cove Springs, Florida, with new rail infrastructure. With strong demand in this market, this facility is expected to reach full ramp by the end of Q2. We also supported Diamond Pet Foods with a multistate site search that settled in Indiana. Our team worked with the company to develop a complete track design that was incorporated into their site plan.

I am proud of the depth of work across our sales, marketing, and industrial development teams as they continue to build the strong customer and community relationships that underpin our growth efforts. With that, I will pass it back to Steve.

Steve Angel: Thank you, Mary Claire. Now we will review our updated guidance for—

Kevin S. Boone: 2026 on slide 14. Our revenue performance was in line with our expectations and showed favorable trends as the quarter progressed. We remain encouraged by the opportunities ahead for the balance of the year. The change to our top-line outlook is largely driven by higher-than-expected energy prices, particularly diesel, which will begin to lift fuel-related revenue starting in the second quarter. Including fuel, and assuming diesel prices follow the forward curve as of this week, we now expect full-year revenue growth in the mid-single digits versus low single digits previously. As you know, higher fuel increases our revenue and our expenses, which can pressure reported margin.

That said, we are pleased with our cost performance year to date, and as I described, we have a broad range of productivity efforts underway that position us well for next year and beyond. As a result, we anticipate year-over-year operating margin expansion of 200 to 300 basis points, but we now expect results to trend toward the high end of that range. We still expect total 2026 capital spending to be below $2.4 billion, and we now anticipate—

Steve Angel: Free cash flow to grow by more than 60% compared to 2025. In closing, I want to thank everyone at CSX Corporation for their contributions to a successful quarter. We remain focused on our goals and are confident in our ability to continue this momentum through 2026 and beyond. And with that, Matthew, we will open it up for questions.

Matthew James Korn: Thank you, Steve. We will now proceed with the question and answer session. In order to ensure that we maximize everyone’s opportunity, we ask that you please limit yourselves to one and only one question. Abby, with that, we are ready to begin. Thank you.

Operator: Yes, if you have dialed in and would like to ask a question, please press 1 on your telephone keypad to raise your hand and join the queue. If you are called upon to ask your question and are listening via speakerphone on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Again, it is 1 to join the queue. Our first question comes from the line of Christian F. Wetherbee with Wells Fargo. Your line is open.

Christian F. Wetherbee: Yes, hey, thanks. Good afternoon, guys. I guess, just looking at the guidance here, maybe we will start where you guys wrapped up. In my math, higher fuel adds about 100 basis points to the operating ratio or takes away 100 basis points from the operating margin as we think out through the rest of the year. And so to maintain it and then, obviously, bias the high end is a good outcome. I was hoping maybe you could outline some of the productivity opportunities that you have uncovered—maybe could put some numbers around it, that would be great—but also what is left to come as the year progresses?

How should we be thinking about that upper end of the 200 to 300 basis point range as we go through the next several quarters?

Kevin S. Boone: Yes, Chris, thank you. Obviously very, very happy with the start to the year. When we convened in the fourth and came up with a plan, that plan consisted of over 100 different initiatives. That is a lot of work by a lot of different people throughout the organization coming together and driving progress. Quite frankly, a lot of the things that we knew were there, the team delivered maybe even more quickly than we thought they would, and you are seeing that in the first quarter results. I think your math around the fuel surcharges is relatively directionally correct.

Obviously, a lot of uncertainty on where fuel will end up through the rest of the year, but when you look at the initiatives, clearly you saw a lot of progress on the PS&O line item, and that is a lot of work everywhere. I talked about vehicles. When you look at energy costs, that is one that we are really talking a lot about internally—not only locomotive fuel, but fuel related to vehicles and other areas, utilities. Utility spend is a big part of our spend as well. I would say energy over the next few months is going to be in the crosshairs of everything we are trying to do to drive efficiencies.

Vehicle spend, as I mentioned, but the list goes on and on, and we continue to develop that. What our progress has done is given us the opportunity to now think about 2027 and start to build that pipeline. So I am excited about that progress. I cannot thank Mike and his team enough for all their work. It has been a group effort to go after it, and I expect us to continue down this path. We have to hold on to these initiatives, so that will be the big focus as we continue through the year—delivering on the plan that we set forth in the fourth quarter.

Operator: Our next question comes from the line of Kenneth Scott Hoexter with Bank of America. Your line is open.

Kenneth Scott Hoexter: Hey, great. Good afternoon, and really great to hear and great job on the cost side and the progress there. Exciting to watch the potential. If we think about, Mary Claire, the service, the Howard Street Tunnel, Port of Baltimore project, maybe just talk about timing and scalability of when the double-stacking is going to be fully launched and loaded? And then how quickly can we see it? Because you are already posting mid-single-digit growth now. What can the system handle, and how quickly can we see that volume ramp up? Thanks.

Mary Claire Kenny: Yes. I would say on the Howard Street Tunnel, we have talked a little bit about it before, but we are really excited about this project. It has been a long time coming, and the operating team really did a phenomenal job last year getting the work on our end completed. The last bridge should be complete in the next week or so, and then we will have double-stack access. We have talked about it before. There are a couple of things this unlocks for us. One, it is additional capacity and efficiency on the East-West corridor. So you think about going from Western U.S. to Baltimore or vice versa, even Chicago to and from Baltimore.

It essentially doubles our capacity there, and it is also going to take about a day out of our current transit. We are really excited about that. It also grants us efficiency on the I-95 corridor. We have really fast service, great service from Florida up into Jersey and Baltimore. Once again, we will have double the capacity there, and we are excited to unlock that. The third component is it allows us to efficiently serve markets that we really could not before. We are adding connection points when you think about places like Atlanta up into the Northeast—and when I say Northeast, New Jersey, Chambersburg, Philadelphia, places like that.

That is newer service that we have not traditionally offered because we could not be efficient with that in the past. That will take some time to build. We have been talking to our channel partners and shippers for a while about this; they are very excited about it. We are coming to the tail end of this year’s bid season, but we are seeing some traction, and that will continue to build over the course of the next year or so. From my past experience, I would tell you new services typically take a couple of bid seasons to really get to full ramp.

Operator: Our next question comes from the line of Stephanie Moore with Jefferies. Your line is open.

Stephanie Moore: Great. Thank you for the question. I wanted to maybe touch on what you are seeing from an overall macro and freight environment. I believe your guidance—at least the prior guidance—did not assume any kind of macro recovery. I am assuming the current revenue guidance also does not assume any macro recovery. Just wanted to get your sense on what you are seeing in the market and the level of conservatism with that underlying assumption. Thanks.

Mary Claire Kenny: Yes. I will do a little update on the markets. I talked about some in the prepared remarks. As we came into this year—what we talked about back in January—we saw opportunities in a few markets, but we also saw broader headwinds with industrial production. Baselining what we said in January, we talked about areas around infrastructure investment we still felt very positive about. Think about the aggregate side of the business; think about metals that go into construction—pipe, plate, rebar—those areas we felt good about. We also felt good about our domestic intermodal business with truck conversion opportunity and new services that we had launched.

On the other side, a lot of our business is tied to housing and automotive, and those markets have been pretty bleak. As we sit here today, we have not really seen improvement in either of those areas. Auto production still right now is forecast to be down about 2% this year. We have mentioned a few times we have a large plant on our network that is down for the year for retooling, and that is another headwind for us. On the housing side, it is an affordability issue. Interest rates are still high, and they have bounced back up a little bit after everything that has happened in the Middle East. Those are still headwinds.

Additionally, in our forest products business, we talked last year about paper and pulp mill closures that we have to overlap, and we will not really surpass those until later this year. Those elements from the beginning of this year have not changed. Where we have seen a bit of a difference is, one, with the conflict in the Middle East, we saw improvement at the tail end of last quarter and into the beginning of this quarter in the plastics business. Domestic producers have opportunity here given feedstocks.

Not sure how long that will last, but that has been a more positive upside than we expected coming into this year, when we originally had seen global oversupply in that area. The second area is, with higher fuel prices, that increases the value proposition of rail. We are more optimistic today than we were in January in terms of truck conversion opportunities—primarily in our domestic intermodal business, but some other areas too, like our forest product segment.

Operator: Our next question comes from the line of Scott H. Group with Wolfe Research. Your line is open.

Scott H. Group: Hey, thanks, guys. So I do not know if Steve or Kevin— we have seen just such massive inflation in that PS&O line the last four years. You touched on it a bit earlier, but seeing some good progress in the first quarter on lowering that— is the $60 million a good run rate, or is there more opportunity to go on fixing this PS&O line? And then maybe if I can— there is just a lot of noise. We had a gain in Q1. We have got fuel moving around. Any thoughts on how to think about sequential margin improvement from Q1 to Q2? Thank you, guys.

Kevin S. Boone: Yes. PS&O makes up a lot of different things. I would say Steve would say we are never done there. The procurement team continues to push our vendors for value, and that is going to continue in earnest. There are a lot of different components. It was an area where I and the team definitely saw a lot of opportunities for improvement. In terms of sustainability, we are going to continue to go after it, and, as I mentioned earlier, Mike and team along with the finance team are already pivoting to 2027 and looking at all the cost line items and seeing where there is opportunity. There is absolutely more to come.

We are going to layer it in and be very thoughtful on how we think about those costs. Looking at second quarter, we will not have the real estate gain that occurred in the first quarter of $44 million. I did mention the overhauls on the engine side that will be a little bit higher than what we saw in the first quarter, and transaction-related costs that I mentioned. I would also say fuel at higher levels for the second quarter—which we anticipate being higher than on average for the first quarter—will by default have some pressure on the margin side just given where fuel prices are today.

But that only motivates the team to go after those costs and drive more efficiency. The focus right now is to deliver the plan that we laid out in the fourth quarter and make sure that everybody is being held accountable to that, then start to build a pipeline for the years ahead to continue the cost efforts going forward.

Operator: Our next question comes from the line of Brian Patrick Ossenbeck with JPMorgan. Your line is open.

Brian Patrick Ossenbeck: Hey, good afternoon. Thanks for taking the question. Maybe just one quick follow-up for Kevin to start: the gain on sale—I know this can be lumpy. Is that what you expected coming into the year in terms of a run rate for the rest of the quarters? How should we be thinking about that in the back half of the year, since you said it is not going to occur into Q2? And a broader question for Mike: obviously a lot of productivity gains are starting to come through.

Maybe the dwell time being a little bit elevated in some of these terminals that we are looking at does not have as much of an impact as we might think from the outside looking in, but I would like to get your perspective. While there are easier comps year over year and it is still improving out of tough weather, some of the areas are up quite a bit in terms of the dwell time. Is that a mix perspective? Is that reworking some of the yard and the systems? I would like to hear your thoughts more on that point in particular. Thank you.

Kevin S. Boone: Alright. Let us take care of the real estate. We did anticipate this coming into the year—the $44 million. I would not expect anything of this size the remainder of the year. We always have some small things that come through, and Christina and her team do a great job of identifying those things, but nothing as material to this point. There are always things out there, and whether we are able to convert them and pull them forward, we will see—but not currently in the plan for this year.

Michael A. Cory: Thanks for the question, Brian. As Kevin talked about before, our productivity initiatives are really broad-based and across all operations. The overall focus is on waste, cutting overhead, and especially improving our capital efficiency. We have been really disciplined with our engineering work teams’ start times and the full completion of their allotted time. As an example, this year we have been close to 100% on our curfews—the track outages—versus, I would say, 60% to 70% the last preceding years. In cases where we do not get the work done, that is a safety liability, and the overall cost is tremendous.

In some cases, to get this work done this year, we have impacted our train and yard plans because we are instilling new methods of performing the work. Closing down a line or a portion of the yard for 24 hours and working continuously has caused some rerouting of trains and traffic, and it has caused delay. That is not our design, but more so a learning opportunity at this point to gain that efficiency to see if we can do it. The plan going forward is to build the right plan around the work that we are doing and the things we are learning from.

The focus in the last 30 to 45 days on these efficiency opportunities is really starting to show us where not only we have to dig in and improve, but also places that we need to do some capital work. Some examples we are in progress on: in our yard in Cincinnati, we are completing power switches this year, and we have begun the work in Nashville the same way. We have identified work on sidings over some of our busy Southern corridors to increase fluid activity. Our focus is always on improving those operating metrics, and as much as we are deeply engaged on safety and service, we are driving equally as hard on the internal metrics.

We are trying different things to create overall productivity. We are all very aware of the dwell and the train speed, and that is a huge focus for us, and we will bring that back in line, but we are not going to stop trying to get smarter and better in how we deploy all our costs.

Operator: Our next question comes from the line of Brandon Oglenski with Barclays. Your line is open.

Brandon Oglenski: Hi, good afternoon, and thanks for taking the question. Steve, you are another quarter into the job here, and I know you and the team have aspirations to drive higher return on invested capital. This question is a little open-ended, but I would like to get your input on it. As you look at it today, to drive a higher ROIC in the future, is it really asset productivity, improved business mix or pricing, cost efficiencies, or all of the above? Would love to get some direction on that. Thank you.

Steve Angel: Sure. You have a numerator and a denominator in return on invested capital. I have had a lot of experience with this over the years. The best way to drive return on invested capital is to drive the numerator. That is improving our operating margin performance, growing operating income—that is the top line. You have seen our guidance for the year. You have heard both Kevin and Mike talk about the fact that we are working on 2027 productivity initiatives as well as executing during 2026. That is really the secret to driving that top line—to make sure we build that productivity muscle so that we can count on that contribution year in, year out.

On the capital side—the denominator—it is being more prudent in terms of how we spend capital. Certainly that has an impact. Mike talked about how we are performing our engineering work in concert with transportation so that we are much more efficient and effective in terms of how we execute significant projects. I would say we were kind of in a mode where we had lots of projects going on simultaneously, not really making the progress we needed in bringing them to conclusion. By working more in a block mode, we are able to execute large projects more quickly, more efficiently, spend less dollars, and get the benefit of that investment. That is just one example on the capital side.

Kevin is heavily involved managing the capital funding process. We look at every project now. Everyone has to stand on its own. We follow them individually. We are going to make sure we are executing the way we need to execute. Longer term, when you look at capital spend, I think predictive analytics can play a major role in focusing our capital spend, certainly on the infrastructure side. We can prioritize that spend based on what is needed—not necessarily what we think we need to do from a maintenance standpoint, but what the analytics and the data tell us we need to prioritize in terms of spend.

As we move down that path and do a better job with that, I would expect our overall capital spend would be lower year over year because we are spending the money on the right things as opposed to what we believe based on experience we need to spend the money on. All that is a long answer to say that is how I think about return on invested capital. We said we want to be best in class in a lot of metrics. That is one of them. The way to do that is continue to drive that numerator north, grow our earnings year over year, and manage our capital spend very effectively.

That is how we will do it.

Operator: Our next question comes from the line of Thomas Richard Wadewitz with UBS. Your line is open.

Thomas Richard Wadewitz: Yes, good afternoon. Wanted to ask a bit about the pricing side. There has been a pretty substantial and rapid tightening in the spot market, and I think contract rates going up quite a bit too. For Mary Claire or broader, how should we think about the time lag between that and what you could see in intermodal or merchandise pricing? Is there some of that can benefit you in the second half, or is this really like, it is great to see, but we should expect more pricing in 2027? Then within the quarter, are you seeing any change in underlying pricing in merchandise?

I know you talked about mix being a headwind, but is that kind of similar to what it has been or any change there? Thank you.

Mary Claire Kenny: Yes, thanks for the question. We talked about pricing last quarter as well, and I would say it is an area I looked at as I came into this role. We have said before that on a same-store basis, pricing should be better this year than what we saw last year. We deliver an important service product for our customer, and it is important that we ensure we are pricing appropriately and getting the value for the service we deliver. In merchandise pricing over the course of this year, discretionary pricing—what we can touch—has been solid, and that will benefit us as we get later into this year and certainly into next year.

We have mentioned before that of our total book, it is only about 50% that we can touch in any given year, so we cannot touch everything at the same time, and there is a lag effect. As you think about the intermodal side of the business, we continue to focus on price there just as we do in other markets, but it is different than other segments. For example, in international intermodal, it is pretty heavily concentrated, primarily contracted under long-term deals, and it is not highly correlated to changes in the truck market. So that is a little bit of a different area for us.

Operator: Our next question comes from the line of Ariel Luis Rosa with Citigroup. Your line is open.

Ariel Luis Rosa: Good afternoon. Congrats on some strong results here. Steve, I am curious for an update on the M&A situation. Last year, we heard a lot of concern that a transcon merger could leave CSX Corporation at a competitive disadvantage. Clearly, a lot of good progress is going on. As we step back and think about what the business looks like a year from now, two years from now, three years from now, to what extent is that a concern? What steps are you taking to position the business for that? Mary Claire talked about the build in the intermodal business opened up by the Howard Street Tunnel and some of the opportunities there.

Just give us your updated thoughts on where vulnerabilities might lie and how CSX Corporation is positioned for that future if it does unfold.

Steve Angel: Number one is doing what we are doing today and continuing to execute at a high level in the base business. Mary Claire talked about some of the growth opportunities that we have, of which there are quite a few. Obviously there are uncertainties out there in the market, but we feel pretty good about our growth opportunities. We feel good about how we are operating, our focus on capital, etc. A lot of things are going positively in that light. The way I think about the merger—and you have heard me say this before—it is a long process. One I was involved with took three years from beginning to end.

A lot of time is going to lapse between now and some conclusion, whatever that is. I would look at any industry consolidation and say that if you are in that industry, there will be some challenges you have to manage, and there will be some opportunities to capitalize on. I suspect if this merger goes through, we will see both. But it is going to take a good bit of time. We do not know what the end result will be. In the interim, we are going to focus on execution and make sure that whatever happens down the road, we will be going into that situation from a position of strength.

That has always been my view, and that is where we will be.

Operator: Our next question comes from the line of Richa Harnain with Deutsche Bank. Your line is open.

Richa Harnain: Hi, thanks for the time, everyone. I wanted to ask about the 21 projects that are expected to contribute—Mary Claire, you said 33,000 in annual carloads at full ramp. When do you expect to get to full ramp? And you have a total of 100 projects expected for the year; do the incremental 80 or so have the same impact as the 21? At that contribution level, we could get to very strong carload growth implied on an annual basis. I just wanted to make sure I was not missing anything or understanding the cadence of that. If we can drill into that, that would be great. Thanks.

Mary Claire Kenny: Yes, thanks for the question. Every project is a little bit different, and the 21 projects are across multiple different business units. When I think about our industrial development efforts—what we saw last year, this year, and in the future pipeline—they vary. There are some larger projects. Last year, we talked about an auto plant that came online that, over time, once it gets up to full ramp, will be pretty sizable. It started out with one vehicle, and it will take time for that to ramp. We also have other projects in areas where it is a few thousand carloads. It is smaller in scale and revenue.

The good thing is it is a diverse pipeline, and we are excited about that. It is not heavily concentrated in one particular area. As we think about changes in the market, that gives us a benefit as we think about the future. We are excited about it. That is probably all we are going to give from a guidance perspective at this point on ID, but we are certainly excited about the pipeline that we see, and it is an area that we will continue to develop as we go forward.

Operator: Our next question comes from the line of Jonathan B. Chappell with Evercore ISI. Your line is open.

Jonathan B. Chappell: Thank you. Good afternoon. Mary Claire, the one segment we probably have not touched on from a pricing or yield perspective is coal—up about 3% sequentially, the first time in several years—basically flat year over year, also the first time since 2022. Is this a function of some of the index headwinds finally easing? Is it a mix benefit? Did some of the commodity price volatility help coal maybe vis-à-vis oil? Long way of getting to: is this the start of a recovery, or when you think about coal RPU for the rest of this year, should we extrapolate 1Q?

Mary Claire Kenny: Yes, thank you. On the export coal side, last year we saw the benchmarks come down throughout the course of the year. By the time we got to the fourth quarter, they were substantially lower than where they started in January. Into the first quarter of this year, the primary benchmark that we are tied to on the high-vol side has been relatively stable. So we had probably the biggest year-over-year impact in the first quarter, and as we saw those benchmark prices come down last year, that gap will close some if benchmarks stay where they are today, which is our current expectation and what is in our forward thoughts.

On the domestic side of the business, we see good demand. There is strong demand for power—data centers and continued investment in that infrastructure are going to continue to pull on power. We feel good about domestic demand. We have mentioned before there are a couple of utilities on our network that are planned to close this quarter, but with the power demand that is out there right now, we expect there could be some extensions associated with those. So we see the domestic overall market as strong, but in terms of impact for us, part of it will be determined by whether we see these closures come about or we see extensions on those facilities.

Operator: Our next question comes from the line of Jason H. Seidl with TD Cowen. Your line is open.

Jason H. Seidl: Hey, thank you, operator. Question for Mike. Mike, we have the bridges opening up here to enable you guys to run double-stack, and you have made some changes on freight flows around Chicago. What else is on track for the remainder of the year that will help productivity and push margins? Thanks.

Michael A. Cory: Jason, in Chicago, just to clarify, we are streamlining our service by running direct from origin points on CSX Corporation to our connecting carriers and belt lines for processing to other carriers. We have always used belt carriers to forward traffic, and now we are combining all the traffic that comes from outside of Chicago through Chicago with a belt carrier. It reduces the handlings, reduces time on all the traffic, and on the reverse, it works the same way. Across the rest of the network, we are looking at a cross-section of productivity initiatives, and we have some really good teamwork going on.

Our engineering group is delivering quite a bit of efficiency that we see extrapolating out through the year, and they are working extremely well with our network group. So Casey Albright and Deborah Horchuck are really driving, and we learn more efficiencies every day, Jason. The things that we do not know are what we are going after. On the intermodal side, to Mary Claire’s earlier points about offering faster service lanes and getting that new business, we are putting expansion into our Atlanta terminal in Fairburn. Carrie Crozier and the team are driving some good results there.

We are looking for as much productivity in terms of reducing handling, speeding up traffic, and getting rid of inefficiencies that have been inside all of operations—not just through dwell and train speed. There is a lot more out there within the entire group that we are going after.

Operator: Our next question comes from the line of Walter Noel Spracklin with RBC Capital. Your line is open.

Walter Noel Spracklin: Yes, thanks so much. Good afternoon. Mary Claire, this question is for you. You touched on the pipeline of projects that you have in the works. I am trying to separate what you would get in terms of growth from company-specific projects in total versus what you are seeing in terms of pressure in the macro. Obviously, the net is that you are guiding for flat. Just curious if that is plus two on projects, minus two on macro—something less or more than that? Again, just trying to isolate your company-specific growth so that hopefully, when the market improves and we see some macro improvement, we can layer company-specific opportunities on top of that.

Mary Claire Kenny: Thank you. We told you about the projects that we have in the pipeline. We have added strong business over the course of the last several years through ID, and we expect that to continue. We have received questions over time around what broader macro forces have impacted industrial development. On our side, our pipeline has continued to remain strong. We have seen in a few areas where projects have ramped a little slower than what we originally expected due to the macro economy. We also had closures that impacted our network last year, primarily concentrated in the pulp and paper mill side of the business, and some of our customers were driving efficiency within their own business.

Still, net of that, we see incremental opportunity with ID. I cannot project the full future in terms of whether we will see something else happen this year in the matter of a closure, but for right now, we think this is certainly a net positive for us.

Operator: As a reminder, it is star 1 if you would like to ask a question. Our next question comes from the line of Ravi Shanker with Morgan Stanley. Your line is open.

Ravi Shanker: Great, thanks. Good afternoon, everyone. Just a two-parter for Kevin. I think you highlighted some cost headwinds in your commentary—incentive comp and a couple of other things. Can you give us a little more color on quantity and timing of those items? Also, you said a couple of times that you are pivoting to 2027 in the productivity actions. Can you unpack that a little bit more? Is that because 2026 gets pretty much baked and any incremental gains are going to come in 2027? Or is it because the nature of those actions is more long term?

Kevin S. Boone: Yes. First, unpacking the second quarter commentary: the things I would point out again are the engine overhauls, some additional costs with transaction costs, and then on the fuel side, with higher fuel price you will see some of that flow through, from the margin profile. Outside of that, I am probably not going to be more specific, but from a PS&O perspective on a sequential basis, it will not be the normal seasonality you would see based on some of those items I discussed. On why we are talking about 2027: yes, we do have a plan in place for 2026. Are we going to hopefully find things, as Mike said—he is finding things all the time? Yes.

We want to create a muscle, as Steve said, in the cadence of continuous improvement. The things we want to do in 2027, we have to start now and have a plan together by the middle of the year so we can execute and build momentum. We talk about exit rates in any given year, and we want to build an exit rate in 2026 and in 2027 to make sure we are delivering on year-over-year improvement consistently. That is what the team is focused on for the remainder of this quarter and going into next year.

The 100-plus initiatives that we have for this year—we have to make sure we stay on track and continue to add to those as well.

Operator: Our next question comes from the line of David Scott Vernon with Bernstein. Your line is open.

David Scott Vernon: If we think about the framework for the guidance—the 5% top line, obviously including fuel—I am wondering if you are also getting a little bit more optimistic or less optimistic on the volume side, and if there is any disaggregation between price and quantity in the updated guidance. And then, Mike, when you look at the headcount and the staffing level you are at right now, are you at a level where you are comfortable being able to handle low single-digit growth, or are we going to need to refill the talent pool a little bit? How are you thinking about headcount underlying the guidance you gave us today?

Kevin S. Boone: On the revenue side, Mary Claire and Steve highlighted that the majority of the upward pressure on our guidance in terms of revenue is largely around the fuel side of things and energy costs, but those are impacting positively some markets. There are a lot of moving parts in the economy right now. We are watching that. Mary Claire did touch on that we exited the first quarter positively, and we will see if that continues. We are hopeful that continues, and a small amount of that has been embedded in our forward guidance. I will throw it over to Mike.

Michael A. Cory: Yes, David. We feel comfortable right now with our current headcount levels. We may see an uptick in T&E labor in Q2 to Q3 where we generally see a little bit higher volume and some peak vacation time. But we are going to continue to carefully manage our attrition levels and always look for ways to be effective and productive with our workforce. We are staying very close with Mary Claire and her team to ensure we are hiring for volume where we need it. We are comfortable right now.

Operator: Ladies and gentlemen, that concludes our question and answer session, as well as today’s call. We thank you for your participation, and you may now disconnect.