CSX at Baird Conference: Strategic Growth Amid Industry Shifts

On Tuesday, 11 November 2025, CSX Corporation (NASDAQ:CSX) participated in the Baird 55th Annual Global Industrial Conference. The discussion, led by CFO Kevin Boone, highlighted the company's strategic initiatives, focusing on operational efficiency and growth amidst industry consolidation. While CSX is optimistic about leveraging infrastructure investments for future growth, it remains cautious about potential mergers.

Key Takeaways

• CSX is committed to operational efficiency and shareholder value, regardless of industry mergers.
• Completion of the Howard Street Tunnel is expected by Q2 of next year, promising $100 million in annual savings.
• The company is enhancing its intermodal operations and forming strategic partnerships to improve competitiveness.
• Digital transformation initiatives are underway to enhance decision-making and productivity.

Financial Results

• Infrastructure Projects:

- Howard Street Tunnel's completion is anticipated by Q2 next year, leading to $100 million in annual savings.

- The Blue Ridge Subdivision has been rebuilt to improve network resiliency.

• Cost Management:

- Focus on capital discipline to enhance efficiency in rail replacement and overall spending.

- Technology investments are expected to reduce costs and boost productivity.

• Capital Allocation:

- Continued investments aimed at growth opportunities, with a focus on returns on invested capital.

• Share Buybacks:

- CSX will maintain an opportunistic approach to share buybacks, leveraging its healthy cash flow.

Operational Updates

• Service Improvements:

- Recovery from service disruptions due to storms has been significant, with improvements in train speed and dwell times.

• Infrastructure:

- The Howard Street Tunnel's completion will enhance intermodal fluidity and growth opportunities.

- The Blue Ridge Subdivision's rebuilding enhances network resiliency and offers alternative routing.

• Partnerships:

- The Meridian Speedway connection with CPKC links Mexico and the southwestern U.S. to CSX.

- Collaborations with other Class I railroads like UP are ongoing.

• Technology:

- Digital transformation and cloud migration are in early stages, aimed at improving data access and decision-making.

• Intermodal Operations:

- Focus on providing the best intermodal operations, with seamless customer experiences through haulage agreements.

Future Outlook

• 2026 Planning Period:

- Plans are under development, with a focus on financial discipline and capital efficiency.

• Growth Opportunities:

- Intermodal growth is expected from Howard Street Tunnel completion, alongside truck conversions.

• Competitive Landscape:

- CSX is preparing to compete effectively, focusing on service, pricing, and partnerships.

• Technology Investments:

- Expected to drive cost reductions and improve productivity in the long term.

Q&A Highlights

• Buyback Strategy:

- CSX will remain opportunistic in its buyback strategy.

• Capital Budgeting:

- A more efficient approach to capital spending is being adopted, especially in rail replacement.

• Automation:

- The company is exploring automation opportunities, with optimism about regulatory support.

• UPNS Merger:

- CSX is prepared to compete in intermodal through enhanced customer experiences and network advantages.

In conclusion, CSX remains focused on strengthening its operations and capitalizing on growth opportunities. For more detailed insights, readers are encouraged to refer to the full conference call transcript.

Full transcript - Baird 55th Annual Global Industrial Conference:

Dan Moore, Senior Transportation Analyst, Baird: My name is Dan Moore. I'm the Senior Transportation Analyst here at Baird. I have the privilege of having Kevin Boone and company here with CSX today. Thank you for being here. Fortunately, they made it in. No problems, clearly, last night. That's good. I know travel's been difficult for everyone for a variety of reasons. Look, Kevin, it's been a heck of a year, right? A lot to process as an analyst, a lot to process as a management team. CSX has certainly seen some change with respect to management. There's a lot going on in the U.S. rail complex from the standpoint of proposed mergers. Can you talk a little bit about what all that means for CSX, given the change in management and some of the strategic considerations that accompany M&A and ultimately what you may think that could mean for 2026?

Kevin Boone, CFO, CSX: Yeah. First of all, thanks for having me. I remember being at this conference in Trump's first term when he won that election. I was on the investor side. I go way back with this conference. There has been a lot of change. It's been an interesting year, not only in the industry, but just with our customers and the tariffs, no tariffs, more tariffs. All those things have been pretty dynamic. Coming from the commercial side now back to the CFO role, I certainly have a lot of perspective from that end. What Steve has been clear in what he's told the teams internally, and we just had a leadership meeting last week, is we're going to run the best company we can. He has clear targets around that.

We have talked a lot about that internally, of how can we drive efficiency, how can we grow the business profitably, and focus on the things that are most important. He has a phrase that he says a lot, is make the most important things the most important things. I think that is pretty refreshing to the team. When I talk to Mike and others, I think there is a lot of energy around that. We want to be at the top of our game, no matter what happens in the industry. We will wait to see how all these things play out. We want to be in a position of strength. That is, I think, what you will see us really focus on over the next year as all these things evolve, as we get the filing that is coming soon from the UPNS.

We will be in a position of strength to be able to react in whatever way we need to, but highly focused on shareholder value, creating as much shareholder value, whether it's on a standalone or other options.

Dan Moore, Senior Transportation Analyst, Baird: Right. Maybe to dovetail on that, and spend another minute just talking about Steve and his areas of focus out of that leadership meeting. What do you see as his areas of focus, the opportunities really specifically that he's prioritizing, so maybe taking a step further into that, how CSX might operate differently under his leadership compared to the last couple of years? Leadership changes inevitably bring shifts in perspective. Anyway, what have you observed so far? I know it's still early days, but what should investors expect going forward?

Kevin Boone, CFO, CSX: Yeah. He is laser-focused. His work ethic is pretty incredible. We're all trying to keep up with him. He's got a lot of curiosity about learning the business. He's met with dozens and dozens of people to understand the business, a lot of questions, a lot of listening. He is very financially focused. He wants to understand operationally what are the drivers of our cost. Certainly, he is spending time with our new CCO, Mary Claire, on pricing dynamics. He understands it from his previous industry, how important that is. He wants to understand that a lot more. Really looking across the business, understanding the talent that we have and meeting with the talent and understanding what our key objectives are and really setting the targets from a financial standpoint. We're doing a lot of discussion there.

Obviously, in the middle of our 2026 planning period right now, we have a board meeting in December where we present our initial look at what that plan looks like. A lot of work is being done on that right now. A lot of questions. He comes from an industry that was very focused on safety. That remains a priority for him. He comes from an industry that, quite frankly, served a lot of the customers that we serve. He understands our customers and their businesses. He is asking all of the right questions, which is very, very helpful.

Dan Moore, Senior Transportation Analyst, Baird: Right. Right. Infrastructure. The infrastructure narrative, I think, has been a very prescient one for CSX. You've completed two major projects recently. Completed may be a strong word, but very close to complete. Still got the double stack in front of us. Howard Street Tunnel, Blue Ridge Subdivision, I think that's expected to result in meaningful growth, not only in the fourth quarter, but certainly in 2026 and beyond. There's also the cost-out component. You've been carrying more costs with you because of some of these investments. Can you talk about what that means in terms of operating performance and the opportunities you see now that these projects are beginning to find their way to completion?

Kevin Boone, CFO, CSX: Yeah. I think two unique projects. One was planned for a while, right, the Howard Street Tunnel. And then one, obviously, was a result of a once-in-a-100-year storm. Starting with Howard Street Tunnel, we've obviously completed the tunnel portion, the bridges, which are being done by the city. Those will be done late in the first quarter. Hopefully, by second quarter, we'll be running double stack through that whole corridor. When you think about the cost, we had about $10 million a month this year in cost. We're complete with that. Think about $100 million in savings or cost going away as we get into 2026, which would be helpful. A lot of that was just out-of-route miles. When you think about we had to reroute a lot of our freight, creates congestion on other lines that aren't used to that much capacity.

There's a lot of efficiency, fluidity benefits that we'll see coming out of that, and a lot of resiliency in our railroad having another corridor open. When we think about the opportunity for growth, Mary Claire will tell you it takes time. I will tell you, coming from that role, it's going to take time to, as bids come out for the intermodal, as we start in second quarter, we're going to go after new lanes and new opportunities. We're going to have a very, very efficient route from east to west and then north to south, which is going to create a lot of opportunities for us to work with some partners of ours to really unlock some truck volume that we see moving today. We're really excited about that. We've probably been talking about Howard Street Tunnel for 40 years.

have been people around for 50 years that have been talking about that. Very, very happy to get that done. Blue Ridge, really, obviously, that line was wiped out by the hurricane impact. We made a decision to rebuild that line because it creates a lot of resiliency in our network. When you have storms, you have other things you want to reroute, it really, really is helpful to have an alternative. I think that's the strength of our network. Mike would tell you that. Coming from the Canadian side, where they had a single line, if that line got taken out, there were not a lot of alternatives. When you look at our network, we have a lot of alternatives when things go, when weather happens, other things.

We do see a couple of growth opportunities there, but not nearly as large as Howard Street Tunnel. Working with a couple of customers that are interested in operating on that line, one intermodal opportunity that I'm pretty excited about that will come hopefully and start in the next year.

Dan Moore, Senior Transportation Analyst, Baird: The double stack, when does double stack, when will you be double stack complete?

Kevin Boone, CFO, CSX: Cleared. By the second quarter of next year.

Dan Moore, Senior Transportation Analyst, Baird: Yeah. Okay. Service improvements. I think the service improvements that CSX has realized over the last year have been nothing short of best in class. The opportunity to parlay that into growth opportunities, getting deeper with customers. Can you talk about the level of service that Mike's helped the network achieve and ultimately what that does for your organization as investors think about the growth opportunity that exists apart from the infrastructure projects going forward?

Kevin Boone, CFO, CSX: Yeah. I mean, we had our bumps. Obviously, with two lines out with storms earlier in the year, had a few issues there. What we've done from a recovery standpoint is nothing short of phenomenal.

Dan Moore, Senior Transportation Analyst, Baird: It's amazing.

Kevin Boone, CFO, CSX: I mean, to come out of that, I think Mike beats himself up a little bit too much of that short brief period that we had. He's a competitor, and he likes to be best in the industry. He's done a phenomenal job. That team between. Serve the customers when this hopefully cycle turns. When you think about where we are today, we have a lot of our key segments that are arguably at cyclical lows. We're thinking a lot about when that growth returns that we're prepared. I have more confidence today than I ever have in the eight years I've been at CSX that we're going to be prepared to handle it. The other thing that gives me confidence is Mike has created stability among the leadership out in the field.

When you think about the MTOs and the superintendents out in the field and they're getting to know the customers and there's a lot of stability, that really helps from a service perspective. The customers really see that disruption when people are leaving or there's not continuity out there. We're only continuing to grow on that. If Mike was sitting up here today, he would say he expects things to get even better from a train speed, dwell, and all those things.

Dan Moore, Senior Transportation Analyst, Baird: Yeah. It strikes me that improved service is also a proxy for better pricing, even if that's an intermediate-term type outcome. Price cost has been something the industry has struggled with. I think everybody has struggled with inflation through the COVID period. Could you talk about just the price cost narrative, how you're thinking about price cost going forward, particularly in light of the service improvements that you guys have realized?

Kevin Boone, CFO, CSX: Look, we want to, and Steve has reiterated this, we're not, he mentions industries where they're solely focused on market share. Those aren't necessarily the most successful industries. We're focused on driving business that has a good return that allows us to reinvest in our business. That's something that he's reiterated. Price is important. Price in terms of capturing our inflation, which has been extraordinary, to your point, over the last few years. It's a competitive environment where everybody's talking about growth. Everybody wants volume. We're not going to move volume at the sake of below our cost or go aggressively there. We're going to earn our customers' confidence and continue to deliver that. There's a lot of dynamics there. It hasn't been a good trucking market, as we've all known.

We've faced that for a while now, the longest kind of down cycle, I think, that anybody in this room can remember. We are prepared to capitalize on that when it comes. With that said, Matthew and I were going through a list of the truck conversions we've had this year. The list is pretty healthy despite the challenging market where you're getting down truck rates still. To go and convert to rail says something about your service and says something about the value you can provide there. We are optimistic that that's a lever that will really turn on once we see maybe a healthier trucking environment with supply starting to come out. I know there's a little bit of noise on a court ruling that occurred here recently. Supply does seem to be coming out. A lot of our customers are saying that.

We just need the demand to come back a little bit here.

Dan Moore, Senior Transportation Analyst, Baird: Yeah. Yeah. Partnership announcements. There have been a number of joint service and partnership announcements, collaboration announcements recently involving CSX. I suspect you're not waiting to execute on those. Talk to us a little bit about the opportunities embedded in these collaborations and what investors may or may not fully appreciate about the increased level of cooperation across your partners as you think about opportunities for growth.

Kevin Boone, CFO, CSX: Yeah. I mean, from day one when I was in that commercial role, I thought there was always an opportunity to work better with our Class I peers. I think a bit of an issue when I first started the job is nobody was operating very well. There wasn't a lot of initiatives or a lot of reception from our peers to go out and start new service or think about that. This isn't anything new. People like to associate, obviously, some of the industry change with things are different. I would say this is things that we've contemplated for the last four years, and now we're able to execute on it. For example, the recent intermodal win in the Southeast, that was something we worked on for 12 months. It wasn't something new.

The timing happened to be around an announcement that came out from our competitor and the UP, but those were coincidental, if anything. The most significant thing that I can think of from a, and I wouldn't even call it partnerships, just general working together better as class ones was the Meridian Speedway connection with the CPKC. New interchanges aren't created every day. That has been significant for us to connect Mexico and other parts of the southwest into our network. That is a significant one. You will see us continue to push with all the other class one railroads. UP remains a very important partner with us, and we will continue to work with them. If there is business to be had, we are going to go after it.

I think what's changed and what's more of a driver today maybe than perhaps all these announcements going around industry consolidation is we're all operating well as an industry. I think you're allowing the commercial teams to lean into new opportunities and not being constrained by operational difficulties or things that are going on. I think that's what you've seen from us.

Dan Moore, Senior Transportation Analyst, Baird: There's, it strikes me, there's also been a lot of discussion around increased competition in the east, I think, to some extent, maybe a function of these collaborations and just some of the shifts that are occurring with respect to domestic intermodal. Norfolk Southern has certainly discussed this on their call. They may look to defend those markets ahead of a potential merger. One could also argue that there's business that could shift between CSX and NS as the partnerships force realignment with respect to domestic intermodal partners. Can you talk a little bit about the competitive environment in the east with respect to domestic intermodal? What's occurring right now and what the implications of that are for CSX and domestic intermodal as a whole?

Kevin Boone, CFO, CSX: Yeah. I mean, a lot of moving parts right now. There's a lot of alignment, obviously, with our partners and other things. I think going back to first Steve's focus and our focus as a team is running the best intermodal operations we can. I think when you go back the last six, seven years, the consistency of our intermodal network is second to none. I think our customers appreciate that, and I've seen that. When you look at some of the recent ones that we have announced, that was business that we enjoyed before. There's speculation that that's business that's not naturally moving on our network. It's unnatural. There's an advantage on the other railroad. We would strongly disagree with that. The customers that have moved over with that business recently would tell you the service has been phenomenal.

They have not seen a deterioration in that service level. We are actually offering them new markets like Florida, which we have a unique offering into. Very, very efficient service offering. If you are not aware, BNSF has a haulage agreement into Atlanta. That creates a lot of efficiency that has existed for a long time. It is really capitalizing on that relationship and helping our customers find really efficient ways to deliver value to their customers. That is where we are. We are going to continue to contemplate. We are working with partners, whether it is BNSF, CPKC, CN, on ways to speed up the network. I think you will see opportunities for us to do that, to be more truck competitive, take time out of how long it takes to get from Los Angeles into our network. Those things are a big focus of ours today.

We think we're making a lot of strides. Mike and his team are very, very close to their counterparts over there. That helps, right? The ability to collaborate on the operating side. I think it's been a challenge in our industry for a long, long time. We're always worried about what the other, if the other person or the other railroads may be making a little bit more than I am. That can get in our way sometimes. I think you're seeing a lot more collaboration around that.

Dan Moore, Senior Transportation Analyst, Baird: Yeah. Makes sense. Another question I wanted to focus on was just the general notion of strategic optionality. It's no secret that Steve has a reputation for getting deals done that few thought possible. I'd say there's still some who believe that CSX and BNSF could be ultimately best served by pursuing a merger. I recognize that any transaction requires two parties. When investors ask about the potential for future consolidation, how would you like to frame that discussion?

Kevin Boone, CFO, CSX: Yeah. I think going back to some of my initial comments, Steve's been very clear in the direction for our company is focus on all the things that we can do well, right, and put us in a position of strength no matter what the environment looks like in a year or two from now. That is going to be the best. That is going to serve our investors the best. It is going to serve our employees the best, our customers the best, and align around that. We obviously have to be open to all options. Whatever that looks like, that creates the most value for shareholders and all stakeholders for that matter. We want to be able to compete, right?

We have to continue to obviously communicate with our customers, make sure that we're making the investments and being able to reinvest in our network to create options for our customers. Those are the things, quite frankly, that we continue to focus on. That's what Steve's reiterated over and over again internally.

Dan Moore, Senior Transportation Analyst, Baird: Right. We've got a few minutes left here. Quite a few people in the gallery would like to give everyone an opportunity to ask questions to the extent anyone has any they'd like to present to Kevin.

Anything on the buyback front? Has Angora pushed for any change there?

Question was, anything on the buyback front, has Angora pushed for anything there?

Kevin Boone, CFO, CSX: I don't think you'll see our strategy change there. We've been very opportunistic when we've seen opportunities. We certainly believe in the long-term story for CSX. We generate healthy free cash flow. I think you'll continue to see us be in the market.

Dan Moore, Senior Transportation Analyst, Baird: Any other questions? Quiet group.

Kevin Boone, CFO, CSX: Quiet group.

Dan Moore, Senior Transportation Analyst, Baird: Capital budgeting. It's that time of year. You find yourself back in a role of thinking about those really important investment decisions that need to be made in the upcoming year. How are you thinking about this capital budgeting cycle, particularly in light of a tax bill, whether or not there are any implications associated with that? More importantly, I guess, maybe just from a strategic standpoint, new leadership. Where are you guys planning on focusing capital investment in 2026?

Kevin Boone, CFO, CSX: First, we got through a very large capital, two very large capital projects, right, which are going away.

Dan Moore, Senior Transportation Analyst, Baird: Yes, you did.

Kevin Boone, CFO, CSX: That's helpful. I do think there's a lot of focus on, obviously, operating expenses at every company. I do think coming back into this role that you'll see a lot of focus on capital discipline. It's really one area where I think we can be a lot more efficient in how we replace rail, how we spend our capital. It's something that I've, in my first week and a half, two weeks, really spent a lot of time focusing on. I think there's an opportunity to become a lot more efficient there. Cash is cash at the end of the day. I think you'll see Steve very focused on returns on invested capital. That's an area that he's really focused on from his previous life. Obviously, capital plays into that in a way that really is important, right, to the calculations. It's in the denominator.

That's an area where I think there's opportunity. When you look at the last five, six years, I think we can do better. You'll see a lot of focus from me and Steve in that area going forward. When you look at our opportunities for investment, we'll continue to invest in the business for growth where it makes sense. We don't see anything on the horizon that's large or necessarily significant. If those opportunities to invest come up, we'll certainly look at them. Nothing on the horizon like a Blue Ridge or a Howard Street Tunnel that we see.

Dan Moore, Senior Transportation Analyst, Baird: Automation. It's a subject that's garnering a lot of attention, a lot of focus from investors and companies. You talk about efficiency and productivity. I'm just curious, at a high level, where do you see opportunities for cost out? I don't necessarily think of AI as being a prescient narrative for the rail industry. Clearly, there are aspects of your business that are high touch and that can be automated. There are areas of the business that technology can probably effectuate improvements in productivity. Could you spend a couple of minutes just talking about the opportunities you see for enhanced productivity and reduced cost in back office and other areas to the extent that it's relevant?

Kevin Boone, CFO, CSX: Yeah. We're going through a digital transformation at CSX and a cloud transformation and putting all of our data in a place where we can access it easily. We've lived on the mainframe for a long time. These systems do not really talk to each other, right? It's really hard to aggregate data in a way where you can have decisions being made in real time. Mike, I think, was surprised of our lack of systems and the lack of real-time visibility. We've come a long way under his direction to have some of those tools that are helpful going forward.

When I think about all the things that in where network and having all this data together and then those decisions now becoming a network decision rather than individuals in each of their regions or each of their terminals making decisions that might be good for their terminal but not good for the network, I think that's a huge opportunity for us going forward. When I think about automation, if you go out to your rail yard today, we're doing the same things we were doing 100 years ago in terms of how we switch cars and other things. You look at that over the long term. All these technologies, to a large extent, exist today in other industries that you could apply here. You obviously have to have a willing regulator that will allow you to do those things.

I think we're optimistic that some of the technologies, particularly around the safety and inspection and other areas, are going to be hopefully more receptive to those going forward because it is good for safety. Accidents cost us a lot of money too, right? It's not only good for our employees, which Steve has reemphasized over and over again, his goal is to get everybody home safe at night. Those things go hand in hand. It creates a much more efficient network when you have fewer accidents, fewer incidents on the railroad. It's across a broad range. The GNA side is the easy one. Everybody sees it. There are opportunities there that we'll look at over the next couple of years. I do think technology is an opportunity to drive costs down. We're at the very, very early innings of that.

We haven't really had an opportunity to execute on that yet. It is my expectation. I know it is going to be Steve's expectation that the technology efforts and what we spend on technology so far will start to drive cost out of our business.

Dan Moore, Senior Transportation Analyst, Baird: Right. I've got one more question to ask, but we've only got two minutes left. To the extent anybody has a question they want to ask, I'll give you one more opportunity to do that. In the back of the room, got a couple?

Yeah. Just as a general question.

If you don't mind speaking up a little bit. I'm sorry.

Sure. I'm just a little, Beth, you mentioned there's still mainframes and that it's taking this long. Would there have been a better sense of urgency to replace systems, upgrade more quickly? It's just kind of shocking to me.

Kevin Boone, CFO, CSX: Yeah. I think you'd be surprised at how many companies are still on mainframes. I agree. It's a very complicated endeavor. It's not just a lift and shift if you're going to do it right. It's been a multi-year kind of endeavor for us. You have to first, we're running a network, right? You want to have zero failures. You have to make sure that the networks are reliable that you're going to. We've run into those issues as we've tested it. Fiber can be cut, all those things. You got to make sure that those aren't going to stop your railroad from running. It's been maybe slower than we all had hoped. You got to make sure that it doesn't impair the business operations.

Appreciate it.

Yeah.

On the share wins and increases in non-state materials, how do you plan on defending those if the UPNS merger goes through? Just thinking about how you compete on those contracts.

Yeah. The question was basically how are we going to compete in intermodal with the potential UPNS merger? I think it's working with the partners and creating a seamless customer experience. We've come a long way with that. When you think about the haulage agreement that BNSF has on us all the way into Atlanta, that's a pretty seamless experience. We're thinking differently. When you think about another haulage agreement into northwest Ohio, similar experience. When you think about cross towns in Chicago, density actually helps our networks. When you're building a whole train, you can just hand the train off and run seamlessly. There shouldn't be a lot of difference between that and what the UPNS could offer. There are some advantages in our network. We're going to really play up to those.

are advantages in some of the other Western railroads' networks. How do we take advantage of those collectively together to work together to win share in the market? Those are the things that we are discussing not only with, obviously, the other Western carrier, but the Canadians as well. We all want to be in a position to compete. I think we are doing a really good job. I think you will see a lot of key lanes where we are going to be faster or the most competitive.

Dan Moore, Senior Transportation Analyst, Baird: We are out of time.

Kevin Boone, CFO, CSX: All right.

Dan Moore, Senior Transportation Analyst, Baird: Kevin, thank you for being here.

Kevin Boone, CFO, CSX: Appreciate that. Yeah. Yeah. Thank you.

Dan Moore, Senior Transportation Analyst, Baird: It's our pleasure.

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