Weather-related disruptions—winter storms and flooding—and major infrastructure rebuild projects combined to create a difficult first-quarter 2025 for CSX, impacting network performance, revenue and income.
CSX’s first-quarter 2025 operating income was $1.04 billion, compared to $1.34 billion in the prior-year period. Net income was $646 million, or $0.34 per diluted share, compared to $880 million, or $0.45 per diluted share, in the same period last year. Total volume of 1.52 million units for the quarter was 1% lower compared to 1Q24, though intermodal volumes increased 2%. Revenue totaled $3.42 billion for the quarter, decreasing 7% year-over-year, as declines in coal revenue, fuel surcharge and merchandise volume were only partially offset by the effects of higher merchandise pricing and growth in intermodal volume. Total intermodal volume decreased 1% compared to 2024. Intermodal revenue decreased 3%, despite the 2% volume increase. The operating ration increased 590 basis points to 69.6%, compared to 63.7% in 1Q24. (Download full financial statement below.)
Two major infrastructure rebuilds—the Howard Street Tunnel in Baltimore (now closed for a double-stack clearance project) and Blue Ridge Subdivision flooding repairs expected to continue until fall 2025—impacted network performance and added to rerouting times and distances. Most rerouting has occurred on Western and Southwestern routes, creating congestion.
“CSX faced operational challenges to start the year, which contributed to first quarter results that did not meet our expectations,” said President and CEO Joe Hinrichs. “In response, our talented and dedicated team of railroaders are working together to lift our performance and drive success through an uncertain market outlook. We are taking targeted actions to address the network constraints posed by two major ongoing infrastructure projects, and we remain committed to safely and reliably serving our customers.”
“With two North-South lines impacted, our network has not been as reliable as we need it,” Hinrichs told Railway Age. “For example, our Louisville-Nashville line was out for four days. We’re focusing on what we can control, staying in front of things, and keeping lines of communication open with customers, getting them the cars they need. But in some cases, we’ve had too many cars on line.”
Hinrichs said CSX “still expects Fiscal Year 2025 volume growth, though market uncertainty and trade policy changes increase the range of possible outcomes.” Revenue will be impacted by “lower coal benchmarks, diesel prices and volume mix,” particularly in the first half of the year. On the positive side, “fluidity gains, efficiency initiatives and labor productivity” are expected to support improvement. Capex this year will be “roughly flat year over year, excluding hurricane rebuild spending,” based on a “balanced and opportunistic approach to capital returns.”
Hinrichs and Chief Operating Officer Mike Cory acknowledged operational difficulties, but emphasized their commitment to improving network fluidity, bringing additional locomotives online and working with customers to reduce excess inventory in the system.
In terms of intermodal pricing, Executive Vice President and CFO Kevin Boone noted that CSX has largely gone through bidding season. Probably, we are where we are for the remainder of the year. [There’s] probably not a huge opportunity for an inflection to the back half of the year from a pricing perspective.” For tariffs, and how East Coast ports have been impacted, Boone said that “things will change. I think you can see a lot of benefits from decoupling from China that could benefit the East Coast, potentially. We’re watching that and making sure we’re staying in front of it, both with our investments and working with our customers to position them, so they can capture the markets as they change.”
TD COWEN INSIGHT: “CSX Fights an Uphill Battle”
By Jason Seidl, Elliott Alper and Uday Khanapurkar
CSX missed our forecast and consensus in 1Q as margins underperformed already-lowered estimates. Revenues fell as expenses grew, and the macro outlook appears increasingly uncertain. CSX fights an uphill battle with service as construction, weather and execution challenge network fluidity in the near term.
CSX reported 1Q EPS of $0.34, missing our $0.38 estimate and the Street at $0.37. The top line down 7% y/y missed our estimate despite a beat on volumes driven by robust intermodal carload growth. OR of 69.6% missed our estimate considerably and stood at the worst level since 2016.
A confluence of operational issues drove the revenue and OR miss and gradual recovery out of challenges is anticipated going forward. Flooding in the Southwest and Midwest regions impacted service for freight already rerouted from the Howard Street Tunnel expansion and Blue Ridge Subdivision issues. Recovery efforts under way include reducing cars on line and adding locomotives to congested areas among others. For 2Q25, CSX emphasized that efforts won’t see much incremental cost and a $1MM/day revenue opportunity is expected. Gradual network efficiency recovery should allow CSX to hold headcount roughly flat through the remainder of the year.
Coal RPU down 4% sequentially came in slightly worse than management’s guide. Benchmarks will remain down Y/Y in 2Q25 but decline to narrow over 1Q25. Core demand remains steady, and we remind investors 1Q weakness (export tons down12%) was due to mine outages. CSX sees green shoots in domestic demand with improvements in volumes sequentially through the quarter and an improving summer outlook among customers supported by improved natural gas prices.
Intermodal yields declined 5% Y/Y in 1Q25 on a 2% y/y increase in volumes as strong international volumes contributed to mix pressure. CSX acknowledged a modest pull-forward contribution in 1Q international volumes, which we believe has intensified significantly into April with month-to-date intermodal carloads up 14% Y/Y. We remind investors that a potential sharp decline in international volumes given the rapid decline in ocean bookings seen recently could lead to a mix tailwind for reported intermodal RPU. Domestic RPU, however, will likely remain challenged as the bid season was mixed at best.
CSX still expects to see volume growth in 2025 despite the slow start to the year. intermodal volumes are currently a driving factor quarter to date, though we expect volumes to decelerate in the coming weeks/months as pull-forward/tariff impacts take effect. CSX likely will not hit its EBIT target laid out last quarter as margins move meaningfully lower. Capex is still expected to stay flat y/y, although we would not be surprised to see it come in moderately if the macro worsens.
CSX is a high-quality company with solid fundamentals that appears well positioned to benefit from long-term economic growth. However, we would remain on the sidelines due to less-than-compelling valuation. The shares may become attractive to patient, long-term investors. Forthcoming catalysts: Long-term intermodal growth to be driven by the ongoing shift from the highway as well as the expansion of some of the company’s hubs. Potential longer-term benefits from the ongoing operational turnaround plan.
