Freight rail services provider CSX (NASDAQ: CSX) missed Wall Street’s revenue expectations in Q4 CY2025, with sales flat year on year at $3.51 billion. Its non-GAAP profit of $0.39 per share was 5.3% below analysts’ consensus estimates.

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StockStory’s Take

CSX’s fourth quarter results came in below Wall Street’s revenue and profit expectations, yet the market responded positively, reflecting confidence in the company’s operational and cost management strategies. Management highlighted that modest volume growth was achieved despite headwinds in key markets such as chemicals and forest products. CEO Steve Angel attributed performance to improved service reliability, continued safety gains, and ongoing efforts to optimize costs and productivity. The quarter included $50 million in expenses tied to workforce and technology restructuring—actions aimed at aligning the business with current market conditions and supporting future profitability.

Looking ahead, CSX’s guidance is shaped by the expectation of persistent softness across key industrial sectors, with management focusing on internal initiatives to drive performance. CEO Steve Angel emphasized, "We expect to deliver year-over-year operating margin expansion" by prioritizing workforce optimization, tighter expense controls, and capital discipline. Commercial chief Mary Claire Kenny pointed to opportunities in intermodal, infrastructure-driven minerals, and delayed coal plant closures, but cautioned that overall market visibility remains limited. Management’s strategy centers on executing controllable initiatives, positioning CSX to benefit quickly when broader demand improves.

Key Insights from Management’s Remarks

Management attributed quarterly trends to operational improvements, cost restructuring, and business wins in intermodal, while highlighting ongoing headwinds in traditional merchandise freight.

• Service and safety improvements: The operations team reported significant year-over-year declines in both FRA injury and accident rates, supporting improved network fluidity and customer reliability. EVP Mike Cory noted that velocity and trip compliance metrics reached their strongest levels of the year, positioning CSX to respond effectively to demand fluctuations.
• Expense realignment and headcount reduction: CFO Kevin Boone detailed over 100 cost-saving initiatives across the business, including $50 million in restructuring charges during the quarter. Real headcount declined by over 3%, and management is targeting further reductions in overtime and discretionary spending to enhance profitability.
• Intermodal and infrastructure project momentum: SVP Mary Claire Kenny cited intermodal as the principal growth area, with new operational agreements and improved transit times winning additional domestic and international business. Infrastructure-driven demand for minerals and fertilizers also provided support, offsetting weakness in chemicals and forest products.
• Coal business dynamics: While coal volumes saw modest year-over-year growth, revenue per unit declined due to weaker export pricing and negative mix. Management expects domestic utility demand to remain robust as some coal plant retirements are delayed, though export market conditions are still subdued.
• Leadership renewal and productivity focus: CEO Angel emphasized a refreshed leadership team and a renewed focus on execution, fiscal responsibility, and capital discipline. Management believes these measures are vital for achieving operating margin expansion and positioning the railroad for improved returns as industrial demand recovers.

Drivers of Future Performance

CSX’s outlook for 2026 is based on disciplined cost management, modest volume gains in select segments, and internal productivity improvements amid ongoing macro uncertainty.

• Cost discipline and operating leverage: Management expects most margin gains in 2026 to come from workforce optimization, tighter controls around discretionary spending, and over 100 cost-saving initiatives across labor and non-labor expenses. CFO Boone stated these actions are designed to deliver margin improvement regardless of market conditions, with additional productivity gains anticipated as new programs are rolled out.
• Intermodal and infrastructure-driven growth: SVP Kenny identified intermodal and minerals tied to infrastructure projects as key sources of volume growth. The completion of the Howard Street Tunnel project enables double-stack service, which should incrementally boost both domestic and international intermodal business in the coming quarters.
• Risks from business mix and industrial softness: Management cautioned that negative mix effects—such as growth in lower-revenue-per-unit segments like minerals and fertilizers—could limit yield gains despite higher volumes. Prolonged weakness in chemicals, forest products, and automotive, as well as continued uncertainty in the industrial economy, remain significant headwinds.

Catalysts in Upcoming Quarters

In the quarters ahead, the StockStory team will closely monitor (1) the pace and scale of cost savings from ongoing restructuring and productivity initiatives, (2) the impact of Howard Street Tunnel double-stack capabilities on intermodal volumes, and (3) trends in business mix as infrastructure projects and coal demand offset softness in chemicals and automotive. Progress on these fronts will be critical for CSX’s ability to deliver on its targeted margin expansion.

CSX currently trades at $36.91, up from $35.91 just before the earnings. Is the company at an inflection point that warrants a buy or sell? The answer lies in our full research report (it’s free).

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