CSX CORP Q4 FY2024 earnings call

• Faced challenges in 2024 like weaker commodity prices, bridge collapse, hurricanes, and labor disruptions. - Operationally, FRA injuries declined sequentially in Q4 but full-year rate was elevated; work days lost in 2024 were lowest in company history. - Dealt with hurricane effects on customer service metrics, improved fuel efficiency and operating efficiency. - Commenced rerouting traffic for Howard Street Tunnel ahead of schedule, with the project now expected to take 6 - 8 months instead of 3 years. - Made progress on Cumberland site reconfiguration, with 90% completion and doubled cars processed per day. - At Investor Day, initiatives were discussed and are proceeding.

Merchandise business: Fourth quarter revenue and volume flat vs last year; full-year revenue 3% higher with 1% volume increase. Chemicals volume up 6%, minerals supported by cement/aggregates, forest products up 3%; fertilizers and metals impacted. Coal business: Fourth quarter revenue declined 20% on 7% lower volume; export coal volume grew 9% for full year. Intermodal business: Fourth quarter revenue declined 5% on 4% volume increase, lower diesel prices significantly impacted revenue per unit.

• Anticipates low to mid-single-digit volume growth in 2025 driven by merchandise and intermodal business. - Coal volumes expected to be lower year-over-year. - Revenue impacted by lower global benchmark pricing for coal and reduced fuel surcharge, especially in the first half of 2025. - Blue Ridge rebuild and Howard Street Tunnel project will add expense, but team is working on productivity gains. - Headcount expected to be effectively flat; capital allocation priorities remain to invest in network safety and fluidity, execute high return growth projects, and distribute excess capital to shareholders.

• Export coal benchmarks and fuel prices working against the company. - Potential net unfavorable impacts from cycling unique events like hurricanes and Key Bridge collapse. - Costs associated with major construction projects on Howard Street Tunnel and Hurricane-impacted Blue Ridge Subdivision.

Q: Tom Wadewitz asked about full year margin performance and growth in the second half.

A: Sean Pelkey responded that headwinds are concentrated in the first half, worse in Q1, and the second half could see margin improvement if the environment stabilizes Q: Scott Group asked about operating income growth.

A: Sean Pelkey said that without discrete headwinds, there would be low to mid-single-digit operating income growth, but discrete headwinds make this year lower Q: Stephanie Moore's representative asked about the industrial development pipeline.

A: Kevin Boone said new projects stay healthy and are busy Q: Chris Wetherbee asked about the pricing outlook.

A: Sean Pelkey and Kevin Boone discussed merchandise pricing and intermodal pricing stabilization Q: Ari Rosa asked about the impact of tightening truck capacity.

A: Kevin Boone talked about intermodal and merchandise truck conversion Q: Brandon Oglenski asked about the tunnel project impact.

A: Joseph Hinrichs discussed the benefits of the Howard Street Tunnel project for future growth Q: Brian Ossenbeck asked about network health and staffing.

A: Mike Cory said the network is on track and headcount is stable Q: Jon Chappell asked about the cost per employee.

A: Sean Pelkey explained the modeling of the cost per employee Q: Ken Hoexter asked about the coal price and mine outages.

A: Kevin Boone and Sean Pelkey answered on the coal price and mine outages Q: David Vernon asked about the $300 million headwinds and volume pressure.

A: Kevin Boone and Sean Pelkey discussed the headwinds and volume impact Q: Bascome Majors asked about the regulatory opportunity.

A: Joseph Hinrichs talked about a supportive regulatory environment Q: Ravi Shanker asked about customer conversations on bottlenecks.

A: Kevin Boone and Joseph Hinrichs said customers are understanding and excited Q: Jordan Alliger asked about EBIT growth range.

A: Sean Pelkey discussed efficiency and volume factors Q: Walter Spracklin asked about the Investor Day EPS targets.

A: Sean Pelkey said they are sticking to the guidance, with discrete costs reversing in the future Q: Daniel Imbro asked about the auto segment outlook.

A: Kevin Boone and Joseph Hinrichs talked about the auto segment's slow start and potential Q: Jeff Kauffman asked about savings from project completion.

A: Sean Pelkey said projects will turn into positive with cost savings and growth opportunity