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Introduction & Market Context
CSX Corporation (NASDAQ:CSX) released its first quarter 2025 earnings presentation on April 16, revealing a significant decline in financial performance amid operational challenges and lower coal revenue. The company reported earnings per share of $0.34, down 24% from $0.45 in the same period last year and missing analyst expectations of $0.38. Total (EPA:TTEF) revenue decreased by 7% to $3.42 billion, also falling short of the forecasted $3.51 billion.
Following the earnings announcement, CSX shares fell 2.08% in regular trading to $27.34 and declined further by 0.91% to $27.10 in after-hours trading. The stock is now trading near its 52-week low of $26.22, reflecting investor concerns about the company’s near-term performance challenges.
Quarterly Performance Highlights
CSX’s first quarter results showed declines across most key financial metrics. Total volume decreased by 1% year-over-year to 1,518,000 units, while revenue fell 7% to $3.42 billion. Operating income declined significantly by 22% to $1.04 billion, resulting in an operating margin of 30.4%, down 590 basis points from 36.3% in Q1 2024.
As shown in the following comprehensive income statement from the company’s presentation:
The decline in profitability was primarily driven by lower revenue combined with a 2% increase in expenses. Net earnings decreased by 27% to $646 million, while earnings per share fell 24% to $0.34, benefiting slightly from a 4% reduction in average shares outstanding due to the company’s share repurchase program.
Despite the earnings decline, CSX maintained stable free cash flow before dividends at $559 million, nearly unchanged from $560 million in Q1 2024. The company continued to return significant capital to shareholders, with $245 million in share repurchases and $751 million in dividends during the quarter.
Operational Challenges
CSX faced significant operational challenges during the quarter, primarily related to network disruptions, congestion, and severe winter weather. The company’s service and fluidity metrics deteriorated compared to both the previous quarter and the same period last year, as illustrated in the following chart:
Train velocity decreased to 17.6 mph, down 3% year-over-year, while dwell time increased by 19% to 11.5 hours. Cars online rose 6% to 132,200 units, indicating network congestion. These operational challenges resulted in approximately $45 million in additional costs during the quarter.
During the earnings call, CEO Joe Hinrichs acknowledged the performance issues, stating, "We take full accountability for our performance this quarter," while COO Mike Cory emphasized, "Improving the fluidity of the network is essential."
The company attributed much of the operational difficulty to two major infrastructure projects: the Howard Street Tunnel closure and the Blue Ridge subdivision rebuild. These projects have forced CSX to reroute significant traffic, making it more challenging to recover from weather events and other disruptions.
Segment Performance
CSX’s segment performance was mixed, with coal revenue showing the most significant decline while intermodal volume provided a bright spot. The merchandise segment, which represents the largest portion of CSX’s business, saw both revenue and volume decrease by 2% year-over-year:
The coal segment experienced the most substantial decline, with revenue dropping 27% to $461 million on a 9% volume decrease. This significant revenue decline was primarily driven by lower export coal benchmark prices:
In contrast, the intermodal segment showed resilience with a 2% volume increase to 716,000 units, although revenue still declined by 3% to $493 million due to lower fuel surcharges and mix changes:
The company noted that international intermodal activity showed positive momentum, benefiting from favorable partner alignments, while domestic volumes were building after a slower seasonal start.
Industrial Development & Growth Initiatives
Despite near-term challenges, CSX’s industrial development initiatives remain on track. The company reported that 24 new facilities were placed in service during Q1 2025, representing approximately 28,000 carloads at full ramp. The pipeline of potential projects continues to grow, approaching 600 projects, with 25% either under contract or nearing site selection.
As illustrated in the following map of industrial development projects:
CSX expects 40-50 more projects to start service this year, with customer projects representing $10 billion of total investment scheduled to begin operations on the CSX network in 2025. This industrial development momentum provides a foundation for future growth beyond the current operational challenges.
Expense Management
CSX’s expenses increased by 2% or $38 million year-over-year, with significant variances across expense categories. The company provided a detailed breakdown of these expenses in its presentation:
Labor and fringe expenses increased by $16 million to $821 million, primarily due to inflation, while purchased services and other expenses rose by $54 million to $774 million, with about half of this increase attributed to network disruptions and weather. Fuel expense decreased by $50 million to $275 million, benefiting from lower prices per gallon and improved efficiency.
The company noted that headcount has remained stable over the past year and is expected to remain flat through 2025, indicating a focus on productivity improvement rather than workforce expansion.
Capital Allocation & Shareholder Returns
CSX continued to invest in its network while returning substantial capital to shareholders. First quarter property additions totaled $719 million, including $133 million for the Blue Ridge rebuild project. Despite these investments, the company maintained strong shareholder distributions:
Total shareholder returns in Q1 2025 reached nearly $1 billion, with $245 million in share repurchases and $751 million in dividends, a significant increase from the $482 million returned in Q1 2024. The company emphasized its commitment to a balanced and opportunistic approach to capital returns, factoring in the current share valuation while monitoring demand shifts and broader economic conditions.
Forward-Looking Statements
Looking ahead, CSX provided guidance for the remainder of 2025, though with increased caution given market uncertainties:
The company still expects full-year volume growth, though it acknowledged that market uncertainty and trade policy changes increase the range of possible outcomes. Revenue will be impacted by lower coal benchmarks, diesel prices, and volume mix, particularly in the first half of the year.
Management characterized Q1 as an earnings trough, with expectations for improvement as the company gains fluidity, implements efficiency initiatives, and delivers labor productivity. Capital expenditures are expected to remain roughly flat year-over-year, excluding hurricane rebuild spending.
During the earnings call, CEO Joe Hinrichs expressed confidence in the company’s ability to recover, stating, "We’re well positioned to facilitate and benefit from the continued long-term trend toward expansion of U.S. Manufacturing capacity." However, the company faces ongoing challenges from infrastructure projects, potential tariff impacts on international trade, and commodity price volatility.
Full presentation:
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