CSX (NASDAQ:CSX) executives told investors the company is planning for a soft demand environment in 2026, but expects meaningful margin and free cash flow improvement as cost actions and productivity initiatives take hold across the railroad.
On the company’s fourth-quarter earnings call, President and CEO Steve Angel described 2025 as “a challenging year” for CSX and the broader rail industry, citing subdued demand and limited growth opportunities in key markets. While CSX posted modest volume growth in the fourth quarter and maintained “positive” service levels, Angel said operating income, operating margin, and earnings per share declined year over year. Results also included about $50 million in expenses tied to actions to adjust the cost structure and “position the railroad to succeed.”
Operational and safety performance
Cory emphasized the company’s goal of maintaining an efficient, cost-effective network while preserving service consistency and keeping capacity available for an eventual industrial recovery.
Quarterly financial results and cost actions
Chief Financial Officer Kevin Boone said fourth-quarter volume rose 1% while revenue fell 1%, driven by business mix headwinds and coal pricing. He added that operating income and earnings per share declined 9% and 7%, respectively, versus adjusted prior-year figures.
Boone said the quarter included approximately $50 million, or $0.02 per share, of charges related to workforce and technology actions. He broke those charges out as $31 million of labor separation costs and $21 million of technology impairments in PS&O.
Excluding the 2024 goodwill impairment, Boone said fourth-quarter expenses increased $73 million, or 3%. He noted CSX ended the quarter with headcount down more than 3% as the company aligned staffing to the current environment, and said overtime management remains a focus. Boone also said CSX has identified “well over 100” initiatives to reduce non-labor spending, including cutting outside and professional services, improving asset utilization and maintenance efficiencies, and tightening controls around discretionary spending.
Looking to 2026, Boone said expenses should benefit year over year from cycling network disruption costs, separation costs from the third and fourth quarters, and the fourth-quarter technology impairments. He said depreciation is expected to be relatively stable year over year, citing an equipment life study, asset retirements, and targeted reductions to technology and aviation assets.
Segment performance: intermodal strength offsets merchandise softness
Chief Commercial Officer Maryclare Kenney said total fourth-quarter volume increased 1% but revenue fell 1% due to negative mix and weaker export coal prices, resulting in a 2% decline in total revenue per unit.
Kenney said merchandise volume and revenue both declined 2%, with headwinds in several markets. She cited softness in chemicals and forest products, where volumes fell 6% and 11%, respectively. Kenney said the industrial chemicals market remains weak and customers are controlling freight spend amid inflation and tariff pressures. In forest products, she pointed to plant closures—particularly in pulp and container board—occurring up until the start of the fourth quarter.
Automotive volume declined 5% year over year, which Kenney attributed to supply constraints in chips and metals limiting output at certain facilities, despite improved momentum at some manufacturers during the quarter.
By contrast, Kenney highlighted strength in fertilizers and minerals. Fertilizer volume rose 7% on improved phosphate rock production and nitrogen market business wins, while minerals remained supported by aggregates and cement demand tied to infrastructure projects.
Intermodal led growth in the quarter, with revenue up 7% and volume up 5%. Kenney said CSX has been winning domestic and international business as it delivers faster transit times and improved connectivity. She also provided an update on the Howard Street Tunnel project, saying the first of two bridges being raised to support double-stack capability is complete, and customers are bidding now for volume expected to begin moving double-stack through the tunnel in the second quarter.
Coal volume increased 1% year over year, with domestic tonnage up 6% driven by higher utility volume amid rising power demand and higher natural gas prices. Export tonnage fell 3%, which Kenney said was partly due to an October derailment that temporarily impacted shipments. Coal revenue declined 5% on a 6% drop in revenue per unit, primarily due to lower met coal benchmark pricing and a wider discount for East Coast met coal indices versus Australian pricing.
2026 guidance: low single-digit revenue growth, margin expansion, lower capex
Angel said CSX is not assuming a meaningful near-term macro improvement in 2026 and is planning for low single-digit revenue growth based on flat industrial production, modest GDP growth, and fuel and benchmark coal prices consistent with current levels. Despite that backdrop, the company expects operating margin expansion of 200 to 300 basis points, driven by workforce optimization, tighter discretionary spending management, efficiency efforts, and benefits of a “more stable, fluid railroad.”
Boone added detail during Q&A, stating that non-recurring items from 2025—including severance, technology write-offs, and costs related to Blue Ridge and the Howard Street Tunnel—totaled roughly $150 million. He said the 2026 plan implies “a much greater initiative around productivity,” with a heavy focus on labor and PS&O. Boone also said CSX expects overall inflation of about 3% to 3.5%, including another union wage increase “in the 3.75% range” and higher healthcare inflation, while the company aims for lower inflation on the non-labor side through procurement efforts.
On capital allocation, Angel said CSX plans 2026 capital expenditures below $2.4 billion following completion of the Blue Ridge project, calling it a “substantial reduction” from the prior year. He reiterated that capex priorities remain focused on safety and reliability, along with growth and productivity projects that meet financial criteria. Angel also said free cash flow is expected to rise at least 50% versus 2025, driven by higher earnings, a more normalized cash tax rate, and lower capital outlays.
Angel also said CSX is replacing the multi-year targets presented at its 2024 investor day with 2026-only guidance, citing the changed macroeconomic and industry environment. In response to analyst questions, he said he does not see anything “insurmountable” that would prevent the company from returning to best-in-class performance, but he wants time to demonstrate consistent execution before providing longer-term targets again.
During the call, management also discussed storm preparedness ahead of an expected weather event affecting multiple regions of CSX’s network, outlining staffing coverage, equipment readiness, and modifications to operating plans. Cory said the network is entering the storm in “much better condition than last year” and expressed confidence the event would not lead to prolonged disruption.
About CSX (NASDAQ:CSX)
CSX Corporation is a leading North American transportation company that provides rail-based freight services and supply-chain solutions. Its operating subsidiary, CSX Transportation, moves a wide range of goods for customers across multiple industries, using a combination of long-haul rail service, intermodal operations and terminal and yard services. The company focuses on delivering efficient, reliable freight transportation between major production centers, consumption markets and port gateways.
CSX’s freight portfolio includes intermodal containers and trailers, bulk commodities, industrial products and specialized unit trains.
