CSX at Deutsche Bank Conference: Strategic Growth Focus

On Tuesday, 12 August 2025, CSX Corporation (NASDAQ:CSX) participated in the Deutsche Bank US Transportation Conference 2025. During a fireside chat, Chief Commercial Officer Kevin Boone outlined the company’s strategic focus on growth and operational efficiency. While optimistic about CSX’s competitive stance and service reliability, Boone acknowledged economic uncertainties and market headwinds. The company remains committed to enhancing shareholder value through strategic investments and potential mergers and acquisitions.

Key Takeaways

• CSX is focusing on profitable growth by leveraging its East Coast port advantage and improving network efficiency.
• Investments in infrastructure, such as the Howard Street Tunnel, aim to enhance service and drive growth.
• The company is committed to operational excellence and customer service, with near-record NPS scores.
• CSX reiterated its long-term earnings growth target of high single digits to low double digits for 2024-2027.
• The transloading business is expanding rapidly, providing access to customers beyond the rail network.

Financial Results

• Volumes: Increased by 1% year-over-year in Q3, with strong performance in aggregates and metals. The intermodal team is expected to show strong performance with new service lanes.
• Operating Ratio (OR): Expected to deteriorate by 100 basis points from Q2 to Q3 due to labor agreements and restructuring costs, partially offset by volume growth.
• Pricing/Yields: Slight decrease quarter-over-quarter, with stability in met coal prices and easing export coal price headwinds by Q4.
• Margins: Expected to remain flat in Q4, with historical trends showing a 200 basis point drop.
• Industrial Development: Concentrated in the Southeast and Midwest, expected to drive growth with a margin profile similar to CSX’s merchandise business.

Operational Updates

• Customer Service: NPS scores remain high, with a focus on communication and consistency in service.
• Network Efficiency: Rerouting through the Howard Street Tunnel is expected to save 2 million out-of-route miles monthly in Q4.
• Intermodal: New service lanes and the Howard Street Tunnel project completion in Q4 are anticipated to enhance performance.
• Industrial Development: 50 projects are already in place, with an additional 30 expected, spanning diverse markets.

Future Outlook

• Intermodal: Completion of the Howard Street Tunnel will enable double-stacking, opening new opportunities for shorter-haul freight.
• Coal: Increased utilization rates at Southeastern utilities are expected, with a focus on existing customer base protection.
• Industrial Development: Plans to leverage East Coast ports for growth, countering historical industry departure trends.
• Trucking: Expansion through transloading, reaching non-railroad customers.

Q&A Highlights

• Chemicals Business: Majority of business is transitioning from highway to rail.
• Coal: Volume increase expected to be modest.
• Intermodal Channel Partners: Satisfaction with current relationships.
• CP Partnership: Ongoing improvements with CP partnership.
• Operating Ratio: Targeted improvement.
• M&A: Engagement in potential value-creating acquisitions.
• Competition: Focus on industrial development for market share growth.

For a detailed understanding of CSX’s strategies and insights from the Deutsche Bank US Transportation Conference, refer to the full transcript below.

Full transcript - Deutsche Bank US Transportation Conference 2025:

Richard Harnain, Lead Transportation Analyst, Deutsche Bank: Hello, everyone. Hopefully everyone can hear me okay. I am Richard Harnain and I welcome you to Deutsche Bank’s Annual Transportation Conference. This is DB’s fourth such dedicated transportation event and the second one in this shiny new, relatively new New York headquarters here we have in Columbus Circle. So not breaking any new ground here from that perspective.

That said, this one is especially meaningful for me considering it’s my first time hosting as lead transportation analyst. I hope we can make it just as memorable for you all as I’m sure it’s gonna be for me and my team. In this conference here for sure, we have 10 corporates attending, but 10 that we say are critical to The US transportation landscape. I’m very excited to have a 140 people in the building to discuss the latest trends on the transportation scene. So a special thanks to all of you who came out.

We really appreciate the support and we know how valuable your time is, so thank you. Now, what an interesting time to have us in coverage of transportation. Right? All this tariff drama that could potentially jeopardize trading goods demand may have made it especially challenging to recommend names in a space that thrives on trade and goods demand. Given all the market risk out there, you know, we’ve been really selective in our recommendations.

In this context, we see rails as uniquely attractive subsector among the ones we cover, offering a blend of defensive and offensive characteristics. We’re now biraided in all three class one US royalty cover, and we’re very pleased to be kicking off the fireside chat series today with the one we most recently upgraded on a much improved quarter, CSX with Kevin Boone, chief commercial officer. So warm welcome to you, Kevin.

Kevin Boone, Chief Commercial Officer, CSX: Thank you.

Richard Harnain, Lead Transportation Analyst, Deutsche Bank: Thank you for joining. Thank you for allowing me that probably too long of a preamble. And a big thank you to the head of IOI strategy, Matt Korn, who’s also here, and General Counsel, Casey Luchen for attending as well. Lots of dig into so maybe we can get started.

Kevin Boone, Chief Commercial Officer, CSX: Absolutely. Great to be here. Thank you for having us. Got a lot to talk about.

Richard Harnain, Lead Transportation Analyst, Deutsche Bank: Definitely. And I promise we’ll get to the topic everyone really wants to talk about, but maybe we can start with what you’re making of the demand environment. You talked about how unusual Q2 was in terms of production outages with customers. Those were expected to improve in Q3 and Q4. Are they starting to improve?

It looks like volumes have been running up quite nicely. They’re up 1% off of a flat base. In Q2 flat year over year, now we’re up 1% year over year. But maybe you can color that in for us and what’s driving that? How optimistic are you that such acceleration can continue based on customer activity and feedback?

Kevin Boone, Chief Commercial Officer, CSX: Yes, you touched on it. There’s a lot of things obviously from a tariff perspective and other things that are impacting our customers. We saw some of that in the second quarter and I think it’s fair to say in some of the markets that we anticipated maybe seeing a little bit of improvement, we are seeing it a little start to happen. Think further into the quarter, you’ll hopefully continue to see that. On the chemical side, we mentioned one particular customer that had had some outages that’s slowly coming back a bit, but it’s been a little bit slow there.

And then on the auto side, we have seen some quality holds, other things that have been a little bit slower, would say quarter to date, but we are seeing some signs of life there and are encouraged by what we see in the near term in terms of production. Some of those production headwinds may be a little bit behind us, but it’s been a little bit choppy here and there. I think customers are more or less looking for direction in the market and uncertainty around where the tariffs are going to play out. And then I think you’ll see investments being made. Aggregates still with the industrial development side still remains very, very robust into the Southeast.

And so we’re seeing those volumes very, very strong. The metals team has done a particularly great job of winning business. We’ve seen some great momentum on that side. And then I will point out that you will see some strong performance out our intermodal team. We’ve been working on a number of things, some new service lanes and other things that will start to pick up here in next month and into the fourth quarter, which we’re really excited about.

Richard Harnain, Lead Transportation Analyst, Deutsche Bank: Thanks. Great. So maybe if you tie that into other drivers of near term profitability. You know, on the cost side, there’s some headwinds to QC to Q3, like unique, you know, labor deal that you talked about. There’s some two two good guys that maybe don’t repeat.

I think they were in the purchase services area. On yields, on your last call, you updated us that it was gonna be very dependent on coal prices. Coal prices are running up nicely quarter to date Mhmm. And that gas gas prices are down. So, you know, lots of puts and takes there.

I think consensus has modeled in something like a 100 basis points of sequential OR deterioration q two to q three. Is that a reasonable expectation, or do you think, you know, you could do better than that again? Good volumes, service, export coal pricing offset by maybe some cost headwinds and nat gas trends?

Kevin Boone, Chief Commercial Officer, CSX: Yeah, I think first on the export coal side or just pricing and generally said it would be slightly down quarter over quarter. We’ll see where things trend through the quarter. You did mention we’ve seen a little bit of stability in the met coal prices, which is you got to start somewhere. So we’re starting there. We still see very, very strong demand into the Southeastern Utilities and that continues to be a really good story for us that hopefully will continue through the remainder of the year and into next year.

That’s helpful. On the cost side, and I’ll have Matthew correct me if I miss anything here is, we’ve talked about a labor agreement, the step up and the labor agreement that happens in July 1. That’s roughly $20,000,000 I think we We said, also highlighted some P and O purchase services headwind or benefits that we received in the second quarter that won’t repeat. And the third, and then finally, we did have a restructuring, management restructuring, that will be a one time item in the quarter that would I think be quantified around 15,000,000 to $20,000,000 in the third quarter. Obviously, that has benefits on an ongoing basis beyond the third quarter that we’ll benefit from.

But those are the things distinct items I think that we pointed out.

Richard Harnain, Lead Transportation Analyst, Deutsche Bank: And so are those the only items you would maybe take together and then bridge off of Q2 and then maybe like some volume helps and help offset them and

Kevin Boone, Chief Commercial Officer, CSX: Yeah. I think, you know, we’re blessed with a great, railroad that has a lot of, operating leverage as we put volume, you know, good volume on it. Not all volume is made the same. We’re really looking at profitable growth as a focus of our team. As you see that volume come through, think the incremental margins should be very powerful.

Richard Harnain, Lead Transportation Analyst, Deutsche Bank: Okay. Any early thoughts on Q4? I think the Street has been flat sequential margins. Your margins have fallen 200 basis points on average in the past ten years. Of course, this is not a normal year though for CSS and coming off of some of The

Kevin Boone, Chief Commercial Officer, CSX: good news is we’re going to be finally lapping the export coal prices by fourth quarter. That headwind on a year over year basis will be not what it has been this year. And so that’s the good news. As we turn the corner to ’26, I think we’ll see where interest rates and other things trend. Those those are are things, we obviously have the industrial development story, which I’m sure we’ll dig into more that will continue to, ramp up and benefit us.

And then I talked about, some of the intermodal momentum that we have that will really, start to show up in the fourth quarter, which we’re excited about.

Richard Harnain, Lead Transportation Analyst, Deutsche Bank: Okay. But that Howard Street intermodal, can’t sell until 2026. Right?

Kevin Boone, Chief Commercial Officer, CSX: So we can start actually taking all the outer route miles by fourth quarter. So some of those costs related to the rerouting, we talked about millions of miles that out of route. We’ll be able to run trains through the Howard Street Tunnel in the fourth quarter. We just won’t be able to double stack it until second quarter of next year.

Richard Harnain, Lead Transportation Analyst, Deutsche Bank: Got it. Okay.

Kevin Boone, Chief Commercial Officer, CSX: Yeah. With both projects finishing the fourth quarter, you’re gonna see about that roughly 2,000,000 a month start to fall off in that fourth quarter.

Richard Harnain, Lead Transportation Analyst, Deutsche Bank: Alright. And a point that really resonated with us from the last few earnings calls and it was one that you made was around your NPS scores remaining near record highs despite all of this disruption that’s happening that you face to start the year. So as Chief Commercial Officer, I guess there’s probably no one better suited to address this topic than you. Just with such high customer satisfaction, do you think you’re in a better position to win more customers’ wallet share as your network becomes more efficient? And have you quantified that?

Kevin Boone, Chief Commercial Officer, CSX: Yeah, think a 100%. I do wanna point out that Shannon who runs our customer service group has done an amazing job staying up in front of customers and things will happen day to day. Storms There’s happen. There’s other things you have to adjust to. It’s about communicating with the customers and it’s really about mitigating the big cases where you’re really missing the service on a consecutive level.

So there’s been a lot of focus with our operating team and Shannon’s group around consecutive missed switches. Like if you’re gonna have an issue, make sure you’re delivering the service next day. And those are what really customers remember is that really prolonged service outage that they experienced. And that’s what really impacts their decisions on a long term basis of whether they wanna get more volume to the railroad. So we’re running really, really well.

Mike and I and the team have never been more aligned in terms of how we deliver that service to the customer. And it’s also aligned around how do we take cost out? That’s still a real focus of the team is how do we create a really efficient service at the same time and deliver what our customers want so we can grow our volumes. But at the same time, we’re constantly looking at the network, how we could speed up the network and how we can make it more consistent. So I think with improving trucking market at some point, this trucking cycle, which has been, we’re almost three years down down trucking cycle will start to improve and I think we’ll really capitalize on that.

I will say despite a trucking market that’s not really helpful right now, we are every week we go through opportunities and new wins and we are seeing truck conversions come in every week. I think that only accelerates as we get in the next year and really capitalize on the service that we’re delivering today.

Richard Harnain, Lead Transportation Analyst, Deutsche Bank: And what about versus other railroads? Your competitive position relative to maybe NS?

Kevin Boone, Chief Commercial Officer, CSX: I think we have the best service out there in the East and I think that’s something that we hear from our customers and it’s consistency. We had a little bit of hiccup into that first quarter, but our ability to react to it, adjust, make sure we didn’t shut down plants, that we are proactive in our communication, I think really went a long way. And so I think this time around was very different than maybe going back to 2017 or ’18 where you saw some of that customer disruption and that’s why you saw the scores continue to outperform in terms of the feedback that we’re getting from our customers.

Richard Harnain, Lead Transportation Analyst, Deutsche Bank: Okay. Great. Well, finally, you probably figured it would be impossible to have a conversation with the sell side analysts without at least an attempt to talk real m and a. I know Stacy is here to help keep the guardrails on, but maybe I’ll open the floor up to you first to speak very generally about what we can and can’t say on the topic.

Kevin Boone, Chief Commercial Officer, CSX: Yeah, certainly following the news by Union Pacific and Norfolk Southern, I know there’s, it’s a hot topic, right? But people wanna discuss what are the implications of a transcon and those things. Will say I’m very limited in what I can share today. And I would like to reiterate what Joe said on the second quarter call, which was very clear in terms of, we’re open, we’re engaging in ways to create shareholder value. We reiterated that we’re focused on driving profitable growth, to the CSX franchise.

And then finally, how can we improve service? Those are three really tenants of what we’re trying to deliver and it’s all gonna drive shareholder value. So I can tell you the board is highly engaged and is well advised. And beyond that, I’m sure there’ll be a time to share more, but at this moment, that’s probably all I’m gonna talk to.

Richard Harnain, Lead Transportation Analyst, Deutsche Bank: Okay. So maybe we can talk in broad strokes then just on your competitive stance, you talked about, you’re getting real conversion opportunities every week. How do you assess your competitive stance versus over the road trucking today, especially on TransCon? And do you think there is significant opportunity for enhancement either by way of, you know, more rail collaboration or otherwise?

Kevin Boone, Chief Commercial Officer, CSX: Yeah, I won’t comment specifically on the TransCon, but we’re always collaborating as a team looking at our network and how can we deliver a faster service, more reliable service with Mike. And those opportunities are still pretty, pretty vast when we look at it. You know, we’ve gotten through this first quarter period where obviously we had some service disruption and now the team’s really leaning in and you’ve seen, you’re going to continue to see us tweak different areas where we were driving out cost and speed and increasing speed on our network, which ultimately translates into greater volume. One specific areas in our model, we’re seeing algorithms right now is we can deliver a certain time and a certain cost. The algorithms continue to give us more and more volume.

So we’re really trying to understand that with some of our customers that use those things and that some of the opportunity that we’re seeing in the near term to really drive that. But that’s the fun part of where we are right now. We’re really leaning in and I would say playing offense around that and really understanding what are the lanes that really offer valuable profitable growth and targeting those in a different way.

Richard Harnain, Lead Transportation Analyst, Deutsche Bank: Okay, great. And then, when you do, I guess, lose to trucking, what are, like, some of the issues that customers cite? Is it mainly speed that’s the primary factor or, you know, are there other inefficiencies that you think you can work on to really woo, like, more customers?

Kevin Boone, Chief Commercial Officer, CSX: Yeah. I think it’s first and foremost is reliability. That’s what customers want to understand. You’re not going to disrupt my customers that I’m serving. You’re not going to disrupt my plants that I’m trying to run.

That’s first and foremost. And I think we’ve done a good job of continuing to build that trust with our customers over the last few years. And customers can have a long memory and they remember in 2012, that time where something happened and they weren’t in that plant shut down. Time and time is on our side. And as we continue to consistently deliver month over month, quarter over quarter and year over year, those opportunities are more and more.

We’ve got to lean into it as well and explain what we do and why we’re different and how we’re prepared when their business comes back or when they see a lot of demand come that we can serve it, right? And that’s been the challenge for the industry is when you’ve seen an upcycle, typically the railroads have struggled with that a bit. And so I think we’re creating a lot of resilience in their network. That’s why we’re making these investments in Howard Street Tunnel. That’s why we’re reinvesting in the Blue Ridge.

It creates a lot of resiliency in our network and that quite frankly makes our network more unique than most because we have alternative routes where other railroads are more reliant on single routes. Can adjust and if there’s storms or other things, we have a lot of flexibility within there. So that’s exciting as we look out. We know some of these markets like housing and auto will eventually be tailwinds. I think during my whole time in this role, haven’t been wind at my back necessarily, but some point that will change.

And we talk a lot about how our network is gonna be ready to handle all that growth when we see it.

Richard Harnain, Lead Transportation Analyst, Deutsche Bank: Okay. And just thinking about your competitive position, I know you talked about some of the unique positive characteristics of the network, just your ability to compete. Do you think it will be negatively impacted if there was this other merger? Or do you think do you think there’s like, I guess when customers look at your your network, do they evaluate it differently on TransCon versus your East Coast, North South service? Or do you think they look at it as one complete package, I.

E, that your competitive positioning might be undermined if, you know, one of your competitors has a better TransCon product?

Kevin Boone, Chief Commercial Officer, CSX: Yeah. You know, I’m gonna go back I’m gonna go back to the original statement, but I am gonna reconfigure your question here. We have a lot of things on our network that we’re working on, whether it’s the industrial development side, which we talked about gonna provide a lot of growth opportunities and it’s only, we’re at the beginning stages of that accelerating. There’s a lot of things that we think we can do on our network today and investments in some of our yards that are gonna create a lot of outer route miles or eliminate a lot of outer route miles for our network. And that, you know, that translates to a better service for our customers and allows us to go out and, when when share, convert model share from mainly trucks.

So we’re we’re excited about those opportunities. And, you know, I think that’s, you know, that’s the framework. I think we’re gonna keep it in the day in in terms of that discussion.

Richard Harnain, Lead Transportation Analyst, Deutsche Bank: No. I appreciate you Yeah. Attempting the question. I know Matt was shaking his head. It got me nervous, but thanks for trying.

Alright. So pivoting back to your CSX standalone, I guess. If m and a doesn’t happen or it doesn’t happen soon for you or your competitors, you know, it sounds like you feel very confident in some of the operating momentum and ability to drive volume at CSX. Maybe you could just double tap on that. You know, with merchandise from attractive industrial project pipeline you’ve spoken about being a good source of growth, the enhanced intermodal franchise once, you know, Howard Street’s done, coal demand potentially sustainable, especially with recent administration support.

Just talk about the leverage you have to win over the medium term, long term ex M and A.

Kevin Boone, Chief Commercial Officer, CSX: Yeah. When I when I take a step back at the whole industry, I wouldn’t trade our footprint for anybody else’s footprint. When you look at where goods wanna go, two thirds of The US population today are on our network, the most valuable consumers in the world are on our network. And we have a lot of visibility to it and we track this on a daily basis. The industrial development activity or industrial activity that we’re seeing is concentrated on our network, in our geographic footprint, whether it’s the Southeast or the Midwest.

And that’s gonna create a lot of value over time and we’re really leveraging into that. You know, we don’t talk about the ports probably enough. The East Coast ports, given the dynamics around tariffs and and other things are probably advantage or will be advantage. We believe they will be, versus the West Coast ports. As you see trade volumes shift, from China to other parts of the world, we’ll really benefit from that.

And you can see the investments that are happening, whether it’s in Savannah or other ports along the East Coast. They they see a a bright future, and that’s a big benefit from our network perspective of how can we push more of that West into the network and benefit from that. So there are a lot of things going on. You touched on the coal side, the domestic side, what was a headwind for our business. We’re seeing a lot of opportunities, data centers, a huge draw on power demand over the next few years makes these assets more valuable.

And I touched on it, I think on the last earnings call, utilization rates on these utility plants are very low. And if you can go from 40% to 60% utilization on, it’s significant opportunity for us. Those are the things that we’re working with our customers that really drive. And so utilities, maybe two years ago, was headwind. We’re seeing a very different market.

The pressure to idle those plants or even the ratchet down utilization is not there. We’re feeling that given some of the demand that we’re seeing here that we think is going to continue for the years ahead.

Richard Harnain, Lead Transportation Analyst, Deutsche Bank: We can talk about poll first. You talked about year over year that headwind kind of goes away in the fourth quarter. Do you think that opportunity for utilization advancement could be something that we see in the next, in the near term, the next few quarters?

Kevin Boone, Chief Commercial Officer, CSX: We’re highly focused on it. I think there is an opportunity. I just think the overarching obviously regulatory dynamics, I think are helpful and don’t put that, you know, implied pressure on these utilities that maybe ratchet down their utilization. So that’s that’s helpful. Obviously a very hot summer and we’re living through it in Florida.

It’s not unhelpful. And so that’s been a positive for us. And the weather is a factor. So I hope for a cold winter as well. That’s helpful for our network as well.

Richard Harnain, Lead Transportation Analyst, Deutsche Bank: All right. Maybe we can talk about the industrial development pipeline that you referenced. Sure. That, you know, unique to your franchise. A lot of these projects are on your network.

You talked about, like, hundreds of projects being, you know, a reason for the optimism for CSX despite the economic uncertainty out there. More specifically, I think Sean added there are 50 projects that are already in place this year and then another 30 coming online in the back half

Kevin Boone, Chief Commercial Officer, CSX: of Can

Richard Harnain, Lead Transportation Analyst, Deutsche Bank: you provide just some color around the margin profile and market exposures attached to that pipeline maybe more near term?

Kevin Boone, Chief Commercial Officer, CSX: Yeah, maybe if I could just take a step back and why this is an interesting dynamic, over the long term, I think is very different trend. First of all, over the last several decades, we’ve had a lot of industry leave our network And quite frankly, every everybody’s network in The US from a rail perspective. And we believe that dynamic is shifting where we’ll net up activity. When you think about the goods that come into The US today, if they’re coming into the Eastern Ports, about 15 to 20% of those goods actually hit the rail railroad today. Most of them are being trucks to the dense population centers that are along the coast.

If these goods are now being manufactured, we’ll say in the Midwest or the Southeast, not only do we essentially move the input products that go into manufacturing those goods, we also get to have the outbound into the East Coast population centers from the Midwest and Southeast. So you go from maybe zero move for a product to two moves. And that’s pretty powerful when we think about those dynamics there. And so when we take a step back on the overall portfolio, it’s really around a lot of different, it’s basically touches every market we touch today. And so the diverse portfolio is not concentrated in one area.

We put up charts in the past that show, you know, it’s not about just automotive. It’s not about just steel. It’s really across every one of the markets that we serve. So we’re excited about it. When you think about the margin profile, it’s similar to our current business today.

Merchandise is a very good profitable business for us. So we should have similar dynamics. The incremental part of that is most of this volume will move on trains that exist today. So we’ll go on our manifest business that on trains that are moving through our network today, is very powerful from an incremental margin perspective.

Richard Harnain, Lead Transportation Analyst, Deutsche Bank: What should we think about in terms of, like, the modeling and what’s a good incremental margin profile to, like, put in to the for, like, the out years, I guess, on that?

Kevin Boone, Chief Commercial Officer, CSX: Yeah. I think it’s similar to the rest of our merchandise business. You know, it’s We look at pricing levels that we’re providing a great service and we get value for that service. So that’s, there’s, and typically the transportation costs aren’t the driver of whether that project is going to come to life or not. It’s the ability to identify a great site that has great access to our network.

Those are the really and power, power is a big factor in terms of decision making on those sides. I do have to give the team a lot of credit. We have a lot of sites available to customers that are shovel ready, which has put us in the market and allowed us to capitalize on it very quickly.

Unidentified speaker: Okay.

Richard Harnain, Lead Transportation Analyst, Deutsche Bank: He talked about autos and housing market Mhmm. Remaining constrained. You know, investors remain particularly concerned, I I think, especially about the housing market getting worse in the near to medium term. Can you hit on your long term earnings growth target of you know, can you hit that long term earnings growth target of high single digits, low double digits for 2024 to 2027 with those markets remaining under pressure, or do you embed some sort of recovery in your long term outlook?

Kevin Boone, Chief Commercial Officer, CSX: Yeah. Look, we have a diverse portfolio. That’s what’s great about what we do. So when one market is not doing well, we’ve got to lean into other markets that have opportunities and that’s what the team’s working hard on. And I talked about some of the things we’re doing on the intermodal side and maybe a backdrop that where we’re seeing industrial production not positive.

And so you got to look for ways to grow and we’ve got a very engaged team that engages with our operating team to create more opportunities for us. So we reiterated our guidance on the last earnings call. We see a path to delivering that. Obviously having a little wind at our back is always, I would prefer that not, but we’ve got to find ways as a team to really find our own opportunities. We can’t just rely on the economy to help us.

We’ve got to gain share, modal share and some of these things will eventually come. We can’t predict if they’re going to happen next year or in ’twenty seven or ’twenty eight. So in the absence of not knowing what’s going happen, we’ve got to drive our own opportunities.

Richard Harnain, Lead Transportation Analyst, Deutsche Bank: All right. Maybe shifting gears a bit, talk about the strategic value of your trucking business. Do you think it makes sense? Is it synergies for core business?

Kevin Boone, Chief Commercial Officer, CSX: Chemicals is our largest segment of our business today as everybody is aware and quality gives us a unique opportunity to go to market and understand that market at a really intimate level in terms of how volumes are moving throughout The US and then identifying opportunities whether it’s transloading, whether it’s an ISO tank product to really target business that hasn’t traditionally moved on the railroad. We are seeing a lot of momentum around that this year in a very challenged trucking market. We’re seeing pretty extraordinary, pretty great growth, maybe not in triple digits, but close to that on a year over year basis, which is exciting. We’re starting off on pretty low numbers, so I wouldn’t But Randy and the team have really found some momentum with some of the largest customers. The great thing about the chemical industry, it’s very sticky once you win it.

That’s the challenge too as you, introduce a new product into the market. But we’ve seen two very, very large customers start to adopt this product at a high level and then you’ll see others, follow their lead, which we’re encouraged by. The other thing that it really identifies is or helps us is in our general discussions with our chemical customers, there’s many discussions we’ve been able to bundle the product together and really offered us an opportunity, not only side, on the but also on the truck side to have a different discussion with our customers. Randy, who leads our quality carriers and I are going to go to Houston next week and we’re going to see eight customers and the unique thing about that experience is we’re not only bringing the rail folks that work with us, but also the trucking side of their businesses coming into the room and getting those two groups together at our on the companies that we serve is usually a a pretty tough task to do. But having that knowledge on both sides and being creative and coming up with solutions is really the opportunity that we’re seeing.

We probably need to do a better job. That’s why we’ll be in Houston to see you to capitalize on that. But a lot of momentum around that and a lot of opportunities that it drives on the rail side, not just only on the truck side as well.

Richard Harnain, Lead Transportation Analyst, Deutsche Bank: I should mention if anyone in the audience has questions, feel free to raise your hand and jump in.

Unidentified speaker: I just asked one on the chemicals.

Kevin Boone, Chief Commercial Officer, CSX: Is it all coming off the highway or is

Unidentified speaker: there some coming off barge or are there more?

Kevin Boone, Chief Commercial Officer, CSX: It’s typically mostly off the highway. The barge is more difficult to compete with. We’ll see opportunities. Obviously, there can be disruption on the Mississippi and other areas where we’ll see opportunities here and there. But typically barges on water, obviously the economics, you can move a lot of volume on water pretty cheaply.

Unidentified speaker: Yeah. And then on the call, you made the comments about customers maybe thinking about their business differently with the data centers backdrop. What I

Kevin Boone, Chief Commercial Officer, CSX: think the regulatory side, right? Regulatory pressure from an environmental perspective might not quite be as robust as it was. I And think at the margin, we’re seeing that a bit and just the coal burn. But they need

Unidentified speaker: a commitment to take the stockpiles. Like if they needed to take the stockpiles higher, but they’re not running at 40% anymore, like how much would that mean to you at this point?

Kevin Boone, Chief Commercial Officer, CSX: Well, if you think, if we’re in that 40% range and you could take it to fifty, fifty five, 60, that’s fairly significant growth over time, if we get to that point and, you know, those conversations are happening and those are opportunities and something that team is working on all the time. We’ve got a, you know, in that case, which is a good problem, you know, we’re gonna have to look at and make sure the mine capacity is there. And that’s, know, we’ve had a lot of mines obviously over the years shut down. So I think there is mining capacity, but there’ll have to be some investments there as well.

Unidentified speaker: What do you think on the timing for any of these coal plants announcing this type of famine? You’ve seen small

Kevin Boone, Chief Commercial Officer, CSX: I don’t think they’ll announce it. I don’t think it’s going be an announcement. No, no. I don’t think, I think you’ll just see it show up in the carloads an opportunity for us.

Richard Harnain, Lead Transportation Analyst, Deutsche Bank: Any more opportunity to add customers in your portfolio that you call or are you pretty full on?

Kevin Boone, Chief Commercial Officer, CSX: You know, you can’t move a coal plant around or utility plant around. So, you know, I would say it’s really protecting our base, making sure they’re competitive in the market, which they are today. Obviously with $3, you know, ish nat gas prices that makes coal burn economical, which we like. And, know, we can all debate on, you know, obviously with the export of, continue to export of this product, whether that will tighten the market further. I think there’s some optimism there that natural gas prices could trend higher.

Not going make a prediction today, but there’s some thought out there and that only helps our economics.

Richard Harnain, Lead Transportation Analyst, Deutsche Bank: Maybe you can talk about your your intermodal channel partners. Are you pleased with the relationship as you lean into more growth on your intermodal side? Like, is are you happy with that arrangement, or do you think that there’s more opportunity for you to do things on your own? I think UMP is you know, does a little bit on the margin on that front. Yeah.

Kevin Boone, Chief Commercial Officer, CSX: I mean, try to, we work with all our customers and obviously I think you’re alluding to obviously the industry, some of the things that are going on there, but we’re here to deliver really good service. We have the best intermodal service in the East. We’re taking time out of our, the transit times, which translate to additional opportunities for us. Mike and team are very focused on running these trains on time and we have the best on time performance that we’ve had in my time here and that allows you to capitalize on any opportunity. We’re here to continue to grow that business.

We’ll make the investments and profitable growth. And then, obviously this Howard Street tunnel from network perspective is going be a big deal. We outlined the opportunity at our investor conference and having that access, basically all the last major corridor on our railroad open to double stack capability. Think about Southeast and the Northeast is a huge opportunity that we’re going to capitalize on that all our customers, all our partners in that area can benefit from.

Richard Harnain, Lead Transportation Analyst, Deutsche Bank: Maybe talk about that Howard Street opportunity a bit more. What is double stacking really mean for you? Like, what type of opportunities is it gonna open up that you don’t have today?

Kevin Boone, Chief Commercial Officer, CSX: Yeah. There’s you know, today we have the I 95 Corridor, which, you know, largely is underutilized in our opinion. And, a big part of that reason is the intermodal volume is not economical when you can’t double stack. And so it was one of the things that surprised me when I came in to CSX in 2017 and was eventually in the CFO role is the economics really change when you can double stack that container. And so having that opportunity to reach markets that we haven’t before and compete with perhaps the shortest haul from Atlanta and Atlanta up into the Northeast is pretty powerful from that side.

And so we’re going to allow our customers that are aligned with us to compete for that volume. And I think it’ll also translate in additional opportunities to grow that market, which we’re really focused on, take more trucks off the highway. We’re unique, we have a unique franchise in Florida. Like how do we look at that and continue to drive more volume that is today on the truck that can move rail going forward.

Unidentified speaker: Just wondering if you can share your observation about your partnership with CP, which extends your reach much beyond East Coast into Mexico and so on. How’s that doing? And, you know, what’s the kind of any kind of challenging point in terms of this, you know, logistically and, you know, smoothness of fluidity of the network.

Kevin Boone, Chief Commercial Officer, CSX: Yeah, I think, when we made the announcement and we had a lot of capital that we had to put in that line. And so you’re gonna continue to see that service continue to improve, which allows us to go after a different market there. So we have monthly, if not biweekly touch points with the CPKC on identifying additional volume, mainly concentrated in Mexico that we can go after. But there’s a lot of opportunities with that line and that access. It’s pretty unique for us.

It creates a more efficient path and then our network into the Southeast. And we’re really, we’re excited about it. I know the CPKC would say similar things, but it’s not just in the intermodal market. We’re seeing auto, other areas with opportunity to grow that business. And the vast, vast majority of this is just truck conversion today.

And so that’s what we’re excited about. We’re highly focused on growing the pie and this is really an avenue to do that.

Richard Harnain, Lead Transportation Analyst, Deutsche Bank: Then CSX is the railroad that’s probably furthest away from its margin high, for arguably, you know, temporary factors and reasons. But, you know, if you think about your ability to get back to an OR with a five handle on it, you know, how do you feel? And could it even be, you know, better than what you had before considering all these positive things that you spoke about respect to driving greater efficiencies, improving your network, all these industrial projects, No,

Kevin Boone, Chief Commercial Officer, CSX: what I do know is the business we’re targeting today has a very powerful incremental margin profile. We have a network with a lot of fixed costs and as we identify more volume that the right volume to put on our network that we’re very excited about and I mentioned all the opportunities, I think we’re, we think that drops through at a very meaningful incremental margin. And Sean’s talked a little bit about that. At the same time, I can tell you Mike is out there every day looking for ways to take costs out of the network. And so those two things in combination are very powerful and allow us to deliver, I think on our expectations to continue to improve our margin profile over time.

Unidentified speaker: What

Richard Harnain, Lead Transportation Analyst, Deutsche Bank: worries you the most, I guess?

Kevin Boone, Chief Commercial Officer, CSX: There’s always noise out there with obviously the political dynamics and those things. Think what the market is looking for is certainty. When I’m thinking as a corporate and I want to make an investment, you want to know what the rules of engagement are. And I think having that certainty, the sooner we can get to that, where are the tariffs ultimately gonna land, where are these decisions ultimately gonna land, the tax profile, all those things are important. I think these policies, there’s a real optimistic case for our business that could be made, but I think we’ve got to settle in and customers have to have the confidence to make the investments and they’re already making the investments to be clear.

You see the tax policy around 100% depreciation on the structures is huge. It’s huge and it’s a game changer. And I think you’re gonna really see that unleash hopefully in the next year and that really benefits our network over time. But political uncertainty is up there in terms of worries. I think if we can settle down a bit and customers can get more clarity on where things are going, obviously, and we talk about interest rates.

Some of our most important markets are sensitive to the interest rate environment. There is a case being made that we’ll start to see rates come down a bit here. I think that would be really healthy as we move into next year for our business. We’ll see. We know there’s a deficit both on the auto side and on housing in general, there’s deficits, right?

We’re running below what long term demand would suggest in both of those areas. So eventually we think we should get to a point where that would represent underlying growth in the markets. But in the absence of that, this team’s got to work hard to go and find and capture share in the market. And I think we’re doing a good job. We can always do better, but we’re highly, highly focused on that.

Richard Harnain, Lead Transportation Analyst, Deutsche Bank: I guess in light of that, just from, you know, last week’s updates and just last night’s updates, any we we kinda touched on this, but just customer conversations more near term, like, do they feel better, worse? I know there’s still a cloud of uncertainty out there, but any changes in the customer conversation?

Kevin Boone, Chief Commercial Officer, CSX: I don’t know. I think it’s still the uncertainty is prevails right now. And I think there’s hope, right? I think there’s hope that, you know, as we turn into next year and maybe we can build a little momentum into the fourth quarter that we can see it, I’m not breaking any news. The industrial economy is pretty anemic right now.

And we’re seeing it across our business. And so that’s why we’re so focused on driving opportunities that we can control and we’ll continue to do that. And then when those markets come back, we’re gonna be here to serve and we’ll benefit from those opportunities and the network will be ready to handle it, especially after all these investments that we’ve made.

Richard Harnain, Lead Transportation Analyst, Deutsche Bank: Any other questions? Yeah, go ahead.

Unidentified speaker: Perfect. I know you’re limited in terms of the mergers, but we know that the SPD guideline is to enhance competition. Maybe I wanted to share some observation in terms of in your interfacing with other railroads and so on. There are kind of areas that competition can be enhanced. For example, reciprocal switching and and access to network, those kind of things.

Are there kind of areas that can improve, you know, with maybe some concession?

Kevin Boone, Chief Commercial Officer, CSX: Yeah, I won’t, I’m not going to speak specifically to that or we’re going to have opportunities and Joe probably will be the charge on that to discuss any part around specifically TransCon and those things. But I will say, this hasn’t changed for me since I’ve been in this position or for us quite frankly, all the management team, we see a lot of things that we can do, right? From an efficiency standpoint, not only within our network, but interchanges, all those things that hasn’t changed, right? That continues to be an opportunity to drive model share for the industry as we get better, more consistent and over half our volume touches another railroad. And so that the customer experience doesn’t end up at CSX network, it extends through their total experience with, know, and then on the intermodal side, it doesn’t end with just the rail service.

It ends with how do we integrate with the truck better? You know, those things are things we need to continue to solve for and they are opportunities for us. How do we use technology to create more visibility for the customers so they can manage their supply chain and their inventories better, right? We’re behind the truck in that area. Those are things that we talk a lot about internally.

So, all of these things remain opportunities to get better and over time they represent more opportunity to gain share in the market. And I’m very, very optimistic on that. Technology, have Steve is leading those efforts for us. There’s a lot of things that we can do to really make that customer experience better where they’re more willing to give some of their most valuable freight to the railroad and trust us with that freight because they can have confidence it’s to be delivered to their customers that need it on time.

Richard Harnain, Lead Transportation Analyst, Deutsche Bank: Kevin, could you just give some more tangible examples of like what type of initiatives you’re targeting and how maybe a more supportive regulatory backdrop is helping you implement some of those changes?

Kevin Boone, Chief Commercial Officer, CSX: I don’t think the regulatory backdrop has really anything to do with us growth. I think they’ve always been supportive of us going after modal share and if there’s so many beneficiaries in that, the communities that we obviously serve taking trucks off the highway, all those things. Transloading is something that we’ve highlighted that I would point out again. We’ve had a lot of success in our transloading business this year. It’s far outgrowing our core business today and you’re going to continue to see us make those investments.

It’s a way to reach those merchandise customers that aren’t traditionally on the railroads today. It’s spreading our footprint out beyond just the physical infrastructure of the railroad where if we don’t touch them with our rail infrastructure, this is a way where we can combine a truck and transloading to reach them. And it’s something that’s created a lot of valuable growth for us in a market that’s pretty challenged this year. And so you’ll continue to see us make those investments in that area. That’s, you know, we’re really looking at ways where we can grow the pie because that’s the best way we can create value over time is growing the pie.

We’re gonna compete every day with the railroad and we have the best service out there to compete and we have the best relationships. And so I expect us to win. But beyond that, if we really wanna change the growth algorithm for what we’ve been able to achieve historically, it’s really capitalizing on industrial development and finding new ways to win share with our existing customers. And I think we’re doing, we’re on that, we’re along that path. And what I think you’ll see is truck market tightens a bit, think you’ll really see that start to accelerate even more than what we’re seeing today.

Richard Harnain, Lead Transportation Analyst, Deutsche Bank: Last but not least, maybe you can just touch on capital allocation real quick.

Kevin Boone, Chief Commercial Officer, CSX: Sure.

Richard Harnain, Lead Transportation Analyst, Deutsche Bank: Priorities, how you feel about where your stock’s trading, buybacks?

Kevin Boone, Chief Commercial Officer, CSX: Yeah, I’ll say the first priority is always to reinvest in the network. We have this valuable asset. We have to continue to maintain the best service in the East. And so that’s the first use of capital. And I will tell you, Mike is always looking for efficiencies on the maintenance capital side of things and there’s probably opportunities to do better.

I know Sean looks at that all the time. So, you know, being more efficient with our capital spend to maintain our railroad is something that we’re highly focused on. And then growth opportunities, right, and profitable growth. That’s gonna be the first use of our capital. And then beyond that, we generate we’re fortunate to generate a lot of free cash flow and we’ve had a history of returning that to shareholders over time.

And I think I don’t see anything changing with that philosophy going forward.

Richard Harnain, Lead Transportation Analyst, Deutsche Bank: Anything else, Neen? Okay. So we’ll wrap it there. Thanks again,

Kevin Boone, Chief Commercial Officer, CSX: I appreciate you having us.

Unidentified speaker: Thank you. Thanks so

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.