1. Company Overview & Business Model

CSX Corporation (CSX), headquartered in Jacksonville, Florida, is a premier transportation company and a pivotal component of the North American supply chain.¹ Established in its modern form in 1980 through the merger of the Chessie System and Seaboard Coast Line Industries, the company’s origins trace back to the earliest days of American railroading.² CSX operates as one of the seven Class I railroads in North America, providing essential rail-based freight transportation services across a vast and strategically significant network.²

Core Operations and Revenue Streams

CSX’s business model is centered on rail-based freight transportation and logistics services. The company generates revenue by charging customers for the movement of goods, with pricing determined by factors such as cargo type, weight, distance, and specific service requirements.² Its operations are organized into three primary lines of business: Merchandise, Coal, and Intermodal.

1. Merchandise: This is the company’s most diverse segment, responsible for shipping a wide array of goods across various markets. Key customer industries include chemicals, automotive, agricultural and food products, minerals, fertilizers, forest products, and metals and equipment.³ This segment’s breadth provides a degree of resilience against downturns in any single sector of the industrial economy. In 2023, the Merchandise segment demonstrated volume growth of 2%, driven by notable strength in automotive shipments (+15%), minerals (+6%), and metals and equipment (+6%).⁶
2. Coal: The coal segment involves the transportation of domestic coal, coke, and iron ore to electricity-generating power plants, steel manufacturers, and industrial facilities. A significant portion of this business also includes transporting export coal to deep-water port facilities for shipment to global markets.³ In 2023, the Coal segment experienced an 8% increase in volume, largely due to higher export demand.⁶
3. Intermodal: This segment combines the long-haul economic advantages of rail with the short-haul flexibility of trucks. CSX transports intermodal containers and trailers, primarily containing manufactured consumer goods, through a network of terminals across its system.³ This service is a direct competitor to long-haul trucking and is critical for connecting global supply chains to domestic consumption centers.

Beyond these core segments, CSX generates ancillary revenue through its trucking subsidiary, Quality Carriers, a leader in bulk liquid chemical transportation, and through CSX Real Property, Inc., which manages real estate sales, leasing, and development activities.³ Other revenue is derived from services such as demurrage (charges for holding rail cars), switching, and other incidental charges.³

Network Footprint and Strategic Geographic Positioning

The foundation of CSX’s business and its primary competitive advantage is its extensive and strategically located rail network. The network spans approximately 20,000 route miles, primarily concentrated in the Eastern United States and parts of Canada (Ontario and Quebec).⁴ This geographic footprint is a significant asset, as it connects every major metropolitan area in the eastern U.S., a region where nearly two-thirds of the nation’s population resides.⁹

This dense network provides unparalleled access to key economic hubs, linking more than 70 ocean, river, and lake ports with major population centers and industrial facilities.⁹ Furthermore, CSX’s network connects with over 240 short-line and regional railroads, extending its reach and solidifying its role as an indispensable link in the broader North American logistics infrastructure.¹¹

Key Operational Metrics and Performance Indicators

To measure operational efficiency and service quality, CSX and the rail industry rely on several key performance indicators (KPIs). The primary metrics, which have become central to the company’s operating philosophy, are:

• Train Velocity: Measured in miles per hour (mph), this metric tracks the average speed of a train from its origin to its destination, including time spent at intermediate stops for crew changes or adding/removing cars.¹² As of late July 2025, CSX’s system-wide average train velocity was 18.7 mph.¹⁴
• Terminal Dwell: Measured in hours, this KPI tracks the average time a rail car spends stationary at a terminal.¹² Lower dwell times indicate greater asset efficiency and network fluidity. As of late July 2025, CSX’s terminal dwell was 9.7 hours.¹⁴
• Cars Online: This metric represents the total number of active freight cars on the CSX network at a given time, providing a measure of the assets required to service current demand.¹²

These metrics are critical for assessing the effectiveness of the company’s operating model and its ability to provide reliable, competitive service. In 2023, CSX reported significant year-over-year improvements, with train velocity increasing by 12% and terminal dwell improving (decreasing) by 17%, reflecting enhanced network performance.⁶

Customer and Commodity Mix Analysis

CSX’s revenue mix reflects its exposure to both the cyclical trends of the industrial economy and the secular trends affecting specific commodity groups. The company’s reliance on a diverse portfolio of merchandise provides a partial hedge against weakness in any single end market. The strong performance in automotive and minerals in 2023, for instance, was directly linked to a recovery in North American vehicle production and increased demand for aggregates and cement for infrastructure projects.⁶ This highlights the company’s leverage to manufacturing and construction activity.

However, the company’s business model faces a structural tension between its growth segments and its declining ones. While the merchandise and intermodal segments are tied to the broader economy’s health, the domestic coal business faces a long-term, secular decline driven by the transition of U.S. power generation away from coal toward natural gas and renewable energy sources.⁸ Although export coal can provide periods of strength, as seen in 2023, the domestic utility coal franchise is in a state of managed decline.

This dynamic places a strategic imperative on the company to grow its merchandise and intermodal volumes at a rate that can more than offset the eventual decline of its domestic coal revenues. The success of this transition is fundamental to the long-term sustainability of CSX’s revenue and earnings growth. The company’s ability to convert freight from highways to its intermodal network and to attract new manufacturing and industrial facilities to its rail lines will be the primary determinants of its long-term growth trajectory.

2. Industry Analysis & Dynamics

The North American freight rail industry is a mature, capital-intensive sector that serves as the backbone of the continent’s economy. It is characterized by high barriers to entry, a consolidated market structure, and significant sensitivity to macroeconomic conditions.

Market Structure of the North American Freight Rail Industry

The industry operates as a classic oligopoly, dominated by a small number of large players. There are seven Class I railroads, which are defined by the Surface Transportation Board (STB) based on annual operating revenue thresholds ($490 million or more).¹⁵ The six major freight-focused Class I carriers are BNSF Railway and Union Pacific Corporation in the West; CSX and Norfolk Southern Corporation in the East; and two Canadian-based transcontinental railroads, Canadian National Railway and Canadian Pacific Kansas City (CPKC).⁴

This consolidated structure is the result of decades of mergers.² A defining characteristic of the U.S. freight rail system is that it is almost entirely privately owned and operated. These private entities are responsible for maintaining and upgrading their own infrastructure, which comprises a network of nearly 140,000 route miles.¹⁵ This requires immense and continuous capital investment, with the industry collectively spending nearly $25 billion annually—approximately 19% of its revenues—on capital expenditures to maintain and enhance capacity.¹⁵ This high capital requirement, combined with the sheer scale and complexity of the existing networks, creates formidable barriers to entry for new competitors.

Economic Sensitivity, Cyclicality, and Key Demand Drivers

The freight rail industry is highly cyclical and serves as a reliable barometer of the broader industrial economy. Rail freight volumes, particularly for merchandise and intermodal traffic, are closely correlated with levels of manufacturing activity, consumer spending, and construction.¹⁶

Recent economic data underscores this sensitivity. As of July 2025, the Association of American Railroads (AAR) reported that while total carloads have shown modest growth, intermodal volumes have begun to decline, reflecting softer consumer demand and persistent weakness in the manufacturing sector.¹⁶ The Institute for Supply Management’s (ISM) Manufacturing Purchasing Managers’ Index (PMI®) has remained in contraction territory (below 50) for 30 of the past 32 months, signaling little forward momentum for the industrial economy that constitutes a core customer base for railroads.¹⁶ This creates a challenging and uncertain near-term demand environment. Despite these headwinds, some industry forecasts project long-term growth. One report estimated the North American rail freight market could grow by $37.53 billion between 2025 and 2029, representing a compound annual growth rate (CAGR) of 7.3%.¹⁷ However, such forecasts should be viewed with caution, as they appear optimistic given the current economic climate and are highly dependent on a robust economic recovery.

The Regulatory and Competitive Environment

The industry is subject to economic regulation by the STB in the United States, which has oversight over freight rates, service, and, most critically, railroad mergers.¹⁸ The STB’s historical reluctance to approve major Class I mergers has been a key factor in maintaining the current market structure for over two decades.

This long-standing equilibrium is now facing its most significant potential disruption in a generation. In July 2025, Union Pacific and Norfolk Southern confirmed they were in discussions for a merger valued at approximately $85 billion, a deal that would create the first truly transcontinental railroad in the U.S..¹⁸ Such a transaction, if proposed and approved, would fundamentally reshape the competitive landscape. It would create a network of immense scale and scope, directly challenging the other transcontinental carrier, CPKC, which was formed through its own merger in 2023.

This development places intense strategic pressure on the remaining major players, CSX and BNSF. Industry analysts widely expect that a UP-NS combination would compel BNSF and CSX to pursue their own merger to create a competing transcontinental network and avoid being at a significant competitive disadvantage in terms of network reach and single-line service offerings.¹⁸ While any such mega-merger would face intense scrutiny from the STB, shippers, and labor unions, the mere possibility has introduced a new and powerful dynamic into the industry’s long-term outlook. For CSX, the strategic landscape has shifted from one of managing cyclical demand within a stable duopoly to potentially facing a strategic imperative to consolidate.

Intermodal Competition and Technological Trends

On a day-to-day basis, rail’s primary competitor is the trucking industry. Trucks offer greater flexibility, last-mile delivery, and often faster service over shorter distances.¹⁷ However, rail possesses a significant structural advantage in cost and fuel efficiency for moving heavy freight over long distances.¹⁵ A freight train is approximately four times more fuel-efficient than a truck, capable of moving one ton of freight about 470 miles on a single gallon of diesel fuel.¹⁵ This efficiency also translates into a smaller carbon footprint, a factor of growing importance for many shippers.

The competitive balance between rail and truck is dynamic and influenced by factors such as fuel prices, labor availability, and freight rates in the trucking market. Recent reports indicate that trucking rates have stabilized and capacity is tightening, which could shift some freight back to rail and improve the competitive positioning of railroads like CSX.²²

Technology is also playing an increasingly important role in the industry. Railroads are investing in digital technologies, automation, and predictive maintenance to optimize traffic planning, improve asset utilization, and enhance safety.¹⁷ The adoption of technologies like automated inspection portals and advanced wayside detectors is crucial for improving efficiency and service reliability.

3. Competitive Position Analysis

CSX holds a strong competitive position as one of the two dominant Class I railroads in the Eastern United States, a region vital to the nation’s economy. Its standing is built upon an extensive, irreplaceable network and has been significantly reshaped over the past decade by a fundamental shift in its operating philosophy.

Market Share and Competitive Moats

CSX’s primary competitive moat is its physical network of approximately 20,000 route miles.⁴ The immense capital cost, regulatory hurdles, and land acquisition challenges associated with replicating such a network create nearly insurmountable barriers to entry, effectively insulating CSX from new rail competitors in its territory. This infrastructure, combined with its access to over 70 ports, creates a powerful network effect: the value of being connected to the CSX network increases as more customers and locations are served.⁹

Within the Eastern U.S., the market structure is a duopoly, with CSX’s main competitor being Norfolk Southern. This structure limits direct rail-to-rail price competition in many corridors, allowing both carriers to focus on service and efficiency as key differentiators.

Evolution of Competitive Standing Over the Past Five Years

CSX’s competitive position has undergone a dramatic evolution since 2017. This transformation can be segmented into two distinct phases.

The first phase was the implementation of Precision Scheduled Railroading (PSR) beginning in 2017. The initial rollout under then-CEO E. Hunter Harrison was rapid and disruptive. While the goal was to improve efficiency, the abrupt changes led to significant service issues, network congestion, and damaged customer relationships.²⁴

The second phase, particularly from 2019 onward and accelerating under the leadership of CEO Joe Hinrichs since 2022, has been focused on leveraging the efficiency gains of PSR to deliver a more consistent and reliable service product. This shift is evident in the company’s performance metrics. By 2019, CSX had achieved a U.S. Class I record operating ratio of 58.4%, a testament to the model’s cost-cutting power.¹¹ More recently, the focus on service has yielded tangible results. In 2023, carload trip plan performance—a key measure of reliability for customers—jumped to 84% from 64% in 2022, while intermodal trip plan performance improved to 95% from 90%.⁶ This improved service has allowed CSX to regain customer trust and market share. Notably, in 2024, a year marked by significant external disruptions, CSX was the only Class I railroad to see its freight volumes return to pre-pandemic levels, indicating that its service improvements are translating into commercial success.²⁶

Quantitative Benchmarking Against Class I Peers

When benchmarked against its peers, CSX demonstrates a solid financial and operational standing, particularly relative to its direct competitor, Norfolk Southern.

• Scale: With a market capitalization of approximately $65.3 billion as of mid-2025, CSX is similar in size to Norfolk Southern ($61.7 billion) but is considerably smaller than the western giant, Union Pacific ($130.1 billion).⁹ In terms of revenue, CSX’s 2023 total of $14.7 billion was greater than Norfolk Southern’s $12.2 billion.⁴
• Profitability: CSX has maintained a profitability advantage over its eastern peer. For the last twelve months, CSX’s operating margin was 37.1%, compared to 34.4% for Norfolk Southern, indicating superior cost control and efficiency.²⁹

Service Quality and Operational Efficiency Metrics

A granular look at operational metrics reveals a significant competitive advantage for CSX in network fluidity.

• Train Velocity: For the week ending July 25, 2025, CSX reported a system average train velocity of 18.7 mph.¹² During the same period, Norfolk Southern reported an average train speed of 22.2 mph.³⁰ It is critical to note that railroads may use different methodologies to calculate this metric, making direct comparisons challenging.¹³
• Terminal Dwell: This metric highlights a stark difference in operational efficiency. For the same week in July 2025, CSX reported an average terminal dwell time of just 9.7 hours.¹⁴ In contrast, Norfolk Southern reported a terminal dwell of 22.1 hours.³² This suggests that CSX is processing and moving rail cars through its terminals more than twice as fast as its primary competitor.

The substantial advantage in terminal dwell is a direct outcome of the PSR model, which emphasizes minimizing the time assets spend idle in yards. This efficiency translates directly into a more reliable and faster service product for customers. The ability to move cars more quickly through the network underpins the dramatic improvements CSX has shown in its trip plan performance metrics. This operational superiority is not merely an internal achievement; it is a tangible competitive advantage that allows CSX to compete more effectively against both Norfolk Southern and, crucially, the trucking industry. This enhanced service reliability is a cornerstone of its strategy to attract new industrial development and convert more freight from highways.

4. Financial Performance & Growth Analysis

CSX’s financial performance over the last decade tells a story of profound operational transformation, followed by a period of navigating significant macroeconomic volatility. The implementation of Precision Scheduled Railroading (PSR) marks a clear inflection point in the company’s profitability and efficiency, the benefits of which are now being tested by cyclical headwinds.

Historical Financial Review (2015-2024): A Decade of Transformation

An examination of CSX’s key financial metrics over the past ten years reveals three distinct operational and economic periods.

Table 1: Historical Financial Summary (CSX, 2015-2024)

Year	Revenue ($M)	Operating Income ($M)	Net Income ($M)	Diluted EPS ($)	Operating Ratio (%)
2024	$14,540	$5,250	$3,470	$1.79	63.9%
2023	$14,657	$5,560	$3,670	$1.82	62.1%
2022	$14,853	$6,000	$4,170	$1.95	59.6%
2021	$12,522	$4,997	$3,781	$1.68	60.1%
2020	$10,583	$4,103	$2,389	$1.20	61.2%
2019	$11,937	$4,965	$3,331	$4.17	58.4%
2018	$12,250	$4,869	$3,309	$3.84	60.3%
2017	$11,408	$3,667	$5,471 (a)	$5.99 (a)	67.9%
2016	$11,069	$3,389	$1,714	$1.81	69.4%
2015	$11,811	$3,584	$1,968	$2.00	69.7%

(Note: Data compiled from company 10-K filings and financial reports. 2019 and prior EPS are not split-adjusted for the 3-for-1 stock split in 2021. The Operating Ratio is calculated as Operating Expenses divided by Revenue.)

(a) Includes a one-time $3.6 billion net tax benefit from the Tax Cuts and Jobs Act of 2017.

Sources: 3

• Pre-PSR Era (2015-2016): This period was characterized by a high and stable cost structure. Revenues fluctuated with the industrial economy, but the operating ratio remained stubbornly high, hovering around 70%.³ This indicated a mature business with limited operating leverage.
• PSR Implementation (2017-2019): The adoption of PSR in 2017 marked a structural break. While revenues remained relatively flat, the operating ratio began a steep descent, falling from 69.4% in 2016 to a U.S. Class I record of 58.4% in 2019.²⁵ This dramatic improvement of over 1,100 basis points demonstrated the powerful impact of the new operating model on the company’s cost structure and profitability, fundamentally enhancing its earnings power.
• Post-PSR & Macroeconomic Volatility (2020-2024): This period saw the benefits of the new cost structure tested by the COVID-19 pandemic, a subsequent sharp economic recovery, and then significant inflationary pressures and operational disruptions. Revenue surged to a peak of $14.85 billion in 2022, driven by strong volumes, pricing gains, and high fuel surcharges.³³ However, the operating ratio has since risen from its 2019 low, settling at 63.9% in 2024 as the company contended with higher costs for labor and materials, as well as significant network disruptions.⁸

Recent Performance Analysis (2022-2024): Navigating Macroeconomic Headwinds

The period from 2022 to mid-2025 has been challenging, with CSX’s financial results reflecting a softer macroeconomic environment, volatile commodity prices, and specific operational hurdles.

Table 2: Revenue by Segment (CSX, 2023-Q2 2025)

Period	Merchandise ($M)	Coal ($M)	Intermodal ($M)	Other ($M)	Total Revenue ($M)
Q2 2025	$2,250	$477	$491	$152 (b)	$3,570
Q1 2025	$2,166	$461	$501	$292 (b)	$3,420
FY 2024	$8,993	$2,122	$1,985	$1,440 (b)	$14,540
FY 2023	$8,804	$2,176	$2,056	$1,621 (b)	$14,657

(Note: Data compiled from company earnings releases and financial reports. “Other” includes Trucking and other ancillary revenues.)

(b) “Other” revenue for Q1/Q2 2025 calculated as Total Revenue minus the sum of Merchandise, Coal, and Intermodal. “Other” for FY23/FY24 includes Trucking and Other revenues as reported in segment data.)

Sources: 8

• Full Year 2023: Revenue edged down 1% to $14.7 billion. The decline was driven by lower intermodal storage revenue, reduced fuel surcharges, and weaker global coal prices, which more than offset the positive contributions from 2% volume growth in Merchandise and 8% volume growth in Coal.⁶ Operating income fell 8% to $5.6 billion, reflecting the impact of lower revenue and cost inflation.⁶
• Full Year 2024: The top-line pressure continued, with revenue again declining 1% to $14.5 billion and operating income falling 5% to $5.3 billion (adjusted).⁸ This performance was heavily impacted by external shocks, including major hurricanes and the Baltimore bridge collapse, which disrupted key network routes.²⁶
• Second Quarter 2025: The trend persisted into mid-2025. Q2 revenue decreased 3% year-over-year to $3.57 billion, while operating income fell a more significant 11% to $1.28 billion.³⁸ This resulted in a 320 basis point year-over-year contraction in the operating margin to 35.9%.³⁸ The primary drivers were continued weakness in export coal prices, lower fuel surcharges, and a 2% decline in merchandise volume, which were only partially offset by pricing gains.³⁸

The financial results from 2022 through mid-2025 clearly illustrate the concept of operating leverage. While the structurally lower cost base achieved through PSR enhances profitability during periods of revenue growth, it also amplifies the impact of revenue declines. A significant portion of a railroad’s costs are fixed (e.g., track maintenance, signal systems, property taxes). When revenue falls due to factors like lower fuel surcharges or weak volumes, these fixed costs remain, causing profits to fall at a faster rate than revenue. The 11% drop in operating income on a 3% revenue decline in Q2 2025 is a clear example of this negative operating leverage at work.³⁸ Consequently, while CSX’s margins are sustainably higher than in the pre-PSR era, their stability through an economic cycle is not guaranteed. The company’s ability to maintain pricing discipline and rigorously control variable costs during a downturn is paramount to defending its profitability.

5. Growth Opportunities & Strategy

CSX’s corporate strategy has evolved significantly since 2017. The initial, intense focus on operational efficiency through Precision Scheduled Railroading has matured into a more balanced approach that seeks to leverage that efficiency as a platform for sustainable, service-driven growth.

The Impact and Evolution of Precision Scheduled Railroading (PSR)

The adoption of PSR, beginning in 2017 under the leadership of the late E. Hunter Harrison, was the most significant strategic shift in the company’s recent history.⁷ PSR is an operating philosophy that aims to maximize asset utilization and network efficiency. Its core tenets include shifting the focus from the train to the individual rail car, adhering to a fixed transportation plan, minimizing time spent in rail yards, and running fewer, longer trains.⁴³

The quantifiable results of this implementation were profound and rapid:

• Profitability Transformation: The most significant outcome was the dramatic improvement in the operating ratio (OR), a key measure of railroad efficiency where a lower number is better. CSX’s OR fell from 69.4% in 2016 to a U.S. Class I record of 58.4% in 2019, a structural improvement of over 1,100 basis points.¹¹ This demonstrated a fundamental reset of the company’s cost base.
• Asset Utilization: PSR enabled CSX to handle a similar amount of freight with significantly fewer assets. In the first three years of implementation, the company reduced its active locomotive fleet by over 30% and shed thousands of rail cars, leading to lower capital expenditures and maintenance costs.⁴⁵
• Service Metric Improvement: While the initial transition was disruptive, the long-term effect on key service metrics has been positive. By year-end 2023, train velocity had improved by 12% and terminal dwell had improved by 17% compared to the prior year, indicating a more fluid and efficient network.⁶

Management’s “ONE CSX” Strategy: From Efficiency to Growth

The current leadership team, led by CEO Joe Hinrichs, has built upon the PSR foundation with a strategy termed “ONE CSX.” This initiative represents a cultural and operational evolution, shifting the focus from pure cost reduction to leveraging operational excellence to win in the marketplace.⁴⁶ The core of the ONE CSX strategy is fostering a culture of teamwork and employee engagement. Management’s stated belief is that a more engaged workforce will deliver a more reliable and consistent service product for customers.⁶

This focus on service is not an end in itself but is the central pillar of the company’s growth plan. By providing a dependable, truck-competitive service, CSX aims to achieve two primary growth objectives:

1. Modal Conversion: Win market share by converting freight that currently moves via long-haul trucks onto its intermodal network.⁸
2. Industrial Development: Attract new manufacturing, distribution, and other industrial facilities to locate along its rail lines.⁴⁸

Strategic Investments in Infrastructure and Technology

To support this growth strategy, CSX is making targeted investments in its network and technology. The company’s capital budget for 2023 was $2.3 billion, with the majority ($1.7 billion) dedicated to maintaining the safety and reliability of its core infrastructure, including track, bridges, and signals.⁶

Key strategic growth projects include:

• Howard Street Tunnel: A major project in Baltimore to increase the clearance of a key tunnel, which will allow for double-stacked intermodal containers to move to and from the Port of Baltimore. This is a critical investment to enhance the competitiveness of its intermodal franchise on the East Coast.⁸
• Network Expansion: The acquisition of the Meridian & Bigbee Railroad (MNBR) expands CSX’s reach in the Southeast, a key growth region for industrial development.²⁶
• Technology: CSX is deploying technology to enhance both safety and efficiency. This includes second-generation hot bearing detectors to prevent accidents, autonomous track inspection cars that allow for more frequent inspections, and automated train inspection portals that use high-resolution imaging to detect defects on moving trains.⁶

Pricing Power and Industrial Development

CSX has consistently demonstrated pricing power, with recent financial results showing that positive pricing has helped to partially offset volume declines and lower fuel surcharges.³⁸ This ability to raise prices reflects the value of its service and the oligopolistic nature of the industry.

A cornerstone of the long-term growth strategy is industrial development. CSX maintains a dedicated program, “Select Sites,” to identify and certify properties along its network that are ready for industrial development.⁴⁸ The company works directly with customers from site selection through construction to bring new rail-served facilities online. As of its November 2024 Investor Day, CSX had a pipeline of over 500 projects in various stages, which it estimates could add between 150,000 and 300,000 annual carloads by 2027, representing a potential net annual volume addition of 1-2%.⁴⁸

6. Capital Allocation & Shareholder Returns

CSX has maintained a disciplined and shareholder-friendly capital allocation framework, leveraging the significant free cash flow generated by its efficient operating model to provide substantial returns to investors through both dividends and share repurchases.

Capital Allocation Framework and Priorities

As detailed by CFO Sean Pelkey at the company’s November 2024 Investor Day, CSX’s capital allocation strategy is built on a clear hierarchy of priorities ⁵¹:

1. Invest in the Business for Safety and Reliability: The first call on capital is to maintain the integrity and safety of the network. This includes core maintenance capital expenditures on track, bridges, signals, and rolling stock.
2. Invest for High-Return Growth: The second priority is to fund strategic projects that expand capacity, enhance service, and drive profitable growth. This includes investments in terminals, technology, and network acquisitions.
3. Return Excess Cash to Shareholders: After funding maintenance and growth initiatives, the company is committed to returning the remaining free cash flow to shareholders through a combination of dividends and opportunistic share repurchases.

The company projects a 3-year capital investment plan of $7.5 billion to $8.0 billion, demonstrating its commitment to reinvesting in the network’s health and capacity.⁵¹

Dividend Policy and Share Repurchase Program Effectiveness

CSX’s execution on its capital return policy has been a significant driver of shareholder value.

• Dividends: The company has a long and consistent history of rewarding shareholders with a growing dividend. As of 2024, CSX had achieved 20 consecutive years of dividend increases, a strong signal of management’s confidence in the long-term cash-generating capability of the business.⁵¹
• Share Repurchases: The share buyback program has been particularly impactful. Since the beginning of the PSR transformation in 2017 through the third quarter of 2024, CSX has spent a cumulative $23.2 billion on share repurchases. This aggressive program has retired approximately 33% of the company’s shares outstanding from year-end 2016 levels.⁵¹

The effectiveness of this capital allocation strategy is clear. By systematically reducing its share count, CSX has provided a powerful, non-operational tailwind to its earnings per share (EPS) growth. This means that even in periods of flat net income, EPS can still grow, directly benefiting shareholders. In the first half of 2025 alone, despite weaker earnings, the company returned nearly $1.7 billion to shareholders, underscoring its unwavering commitment to this framework.⁵³

Table 3: Capital Allocation Summary (CSX, 2022-H1 2025)

Period	Cash from Operations ($M)	Capital Expenditures ($M)	Free Cash Flow ($M) (a)	Dividends Paid ($M)	Share Repurchases ($M)
H1 2025	N/A	$1,441 (b)	$444	$1,172 (c)	N/A
FY 2023	$4,800	$2,300	$2,500	$844	$2,500
FY 2022	$5,600	$2,000	$3,600	$880	$3,800

(Note: Data compiled from company presentations and earnings calls. (a) Free Cash Flow is a non-GAAP measure, typically defined as Cash from Operations less Capital Expenditures. (b) Includes spending on the Blue Ridge rebuild project. (c) Represents total shareholder distributions.)

Sources: 51

Balance Sheet and Debt Management Strategy

CSX maintains a strong, investment-grade balance sheet, which provides the financial flexibility to execute its strategy through economic cycles. As of the end of the second quarter of 2025, the company reported long-term debt of $18.5 billion.³⁹ The company’s strong and consistent cash flow generation allows it to comfortably service its debt obligations while simultaneously funding its capital expenditures and shareholder return programs. The disciplined approach to capital allocation ensures that investments and shareholder returns are funded primarily through internally generated cash flow, maintaining a healthy and sustainable capital structure.

7. Recent Challenges & Industry Headwinds (2022-2024)

The period from 2022 through mid-2025 has presented CSX and the broader rail industry with a confluence of operational, macroeconomic, and commodity-specific challenges that have pressured financial results and tested the resilience of its operating model.

Operational Disruptions and Supply Chain Pressures

CSX’s network has been impacted by several significant, unforeseen events. In 2024, operations were severely disrupted by the collapse of the Francis Scott Key Bridge in Baltimore, which shut down access to a major East Coast port and the second-largest export coal facility on the coast, forcing extensive and costly traffic reroutes.²⁶ Later in the year, Hurricanes Helene and Milton inflicted substantial damage, most notably on the Blue Ridge Subdivision in North Carolina. The damage was estimated at $400 million and has required ongoing rerouting of traffic at an additional cost of approximately $10 million per month while repairs are completed.⁸

These major events compounded other operational issues. The first quarter of 2025 was particularly difficult, with management acknowledging that results did not meet expectations due to network congestion stemming from construction projects and adverse weather conditions.²² While the company reported significant sequential improvements in network fluidity in the second quarter of 2025, these disruptions highlight the network’s vulnerability to external shocks.³⁸

Labor Relations and Macroeconomic Impacts

On the labor front, CSX has taken a proactive approach to improving relations with its workforce. In 2023, it became the first Class I railroad to reach agreements providing paid sick leave for its unionized employees, a key point of contention in prior industry-wide negotiations.⁶ This move, part of the “ONE CSX” initiative, aims to foster a more collaborative and engaged workforce.

Macroeconomically, the company has faced significant headwinds. Persistent inflation has driven up costs for essential inputs like labor, materials, and services.⁸ Simultaneously, a general economic slowdown, particularly in the industrial and manufacturing sectors, has dampened freight demand.⁵⁶ This softness has been a key factor in the volume declines seen in the merchandise and intermodal segments in recent quarters.¹⁶

Commodity-Specific Headwinds

Specific markets have presented unique challenges:

• Coal: While coal volumes have been relatively resilient, driven by export demand, CSX’s coal revenue has been severely impacted by a sharp decline in global benchmark coal prices. This price drop, along with lower fuel surcharge revenue, was the primary cause of the 15% year-over-year decline in the coal segment’s revenue in Q2 2025, despite a 1% increase in volume.³⁹ Mine production outages have also created challenges for export volumes.⁸
• Intermodal: The intermodal segment has faced intense competitive pressure from a weak trucking market. An oversupply of trucking capacity has led to lower spot rates, making it more difficult for rail to compete for freight on price, which has constrained intermodal volume growth.⁵³

Despite these numerous headwinds, CSX’s management has emphasized its focus on controlling costs and improving service. The sequential recovery in operational metrics during the second quarter of 2025 after a difficult first quarter suggests an ability to adapt and restore network performance.⁵⁴

8. Risk Factors

An investment in CSX Corporation is subject to a variety of risks and uncertainties that could materially impact its business, financial condition, and results of operations. These risks, as detailed in the company’s 2023 Form 10-K filing, can be categorized into several key areas, with the most significant near-term risk being economic cyclicality and the most significant long-term risks relating to regulation, competition, and secular commodity trends.⁵⁸

Economic Cyclicality and Recession Sensitivity

CSX’s financial performance is intrinsically linked to the health of the U.S. and global economies. A significant portion of its freight volume consists of industrial and consumer goods, making the company highly sensitive to business cycles.²² A recession or a prolonged period of slow economic growth would likely lead to reduced shipping volumes, underutilization of the rail network, and significant pressure on revenue and profit margins. This remains the most prominent near-term risk to the investment thesis.⁵⁸

Regulatory and Political Risks

The freight rail industry is heavily regulated, and changes in the legislative or regulatory landscape could have a material adverse effect on CSX. The Surface Transportation Board (STB) has broad authority over rates, service standards, and industry structure. Potential new regulations aimed at increasing competition or imposing price constraints could negatively impact profitability.⁵⁸ Furthermore, the recent merger discussions between Union Pacific and Norfolk Southern have brought the issue of industry consolidation to the forefront. The STB’s ultimate stance on such a transaction—and any subsequent deals—is a major long-term uncertainty that could fundamentally alter the competitive environment.¹⁸

Safety Incidents and Operational Disruptions

The safe and fluid operation of CSX’s network is paramount. A major train derailment, particularly one involving hazardous materials, could result in substantial costs from cleanup, litigation, fines, and reputational damage that could exceed insurance coverage.⁵⁸ As demonstrated by the events of 2024, the network is also vulnerable to disruptions from severe weather events like hurricanes, which can damage infrastructure and cause prolonged service interruptions and significant repair costs.⁸

Competition from Alternative Transportation Modes

CSX faces intense competition from other modes of transportation, primarily the trucking industry. While rail enjoys a cost and fuel-efficiency advantage in long-haul freight, trucking offers greater flexibility and door-to-door service.¹⁷ Long-term technological advancements in trucking, such as automation or electrification, could erode rail’s competitive advantages. The company’s ability to provide a reliable, cost-effective service is critical to defending and growing its market share against this competition.⁵⁸

Climate Change and Environmental Regulations

CSX faces risks related to both the physical impacts of climate change and the transition to a lower-carbon economy. Physically, changing weather patterns and rising sea levels could pose long-term threats to its extensive rail infrastructure.⁵⁸ Transitionally, the most significant risk is the secular decline of domestic coal consumption as the U.S. power sector shifts away from coal-fired generation. This represents a permanent headwind for a historically important revenue stream.⁸ Additionally, new environmental regulations on emissions could increase operating costs for both CSX and its customers.⁵⁸

Cybersecurity and Technology Risks

CSX relies heavily on complex technology and information systems to manage its operations, from train dispatching to customer service. As part of the nation’s critical infrastructure, the company is a target for cyber-attacks. A successful breach could cause significant operational disruptions, compromise sensitive data, and result in substantial financial and reputational harm.⁵⁸

Labor Relations and Potential Strikes

The majority of CSX’s workforce is unionized. While the company has recently made progress in labor relations, the failure to negotiate acceptable collective bargaining agreements in the future could lead to labor disputes, work stoppages, or strikes. A prolonged strike would halt operations, resulting in significant revenue loss and potentially causing long-term damage to customer relationships.⁵⁸

9. Valuation Analysis

CSX’s current valuation reflects a market that is pricing in a recovery from recent operational and economic headwinds, with key multiples trading at or slightly above their historical averages. The valuation appears to be based on the company’s normalized earnings power and the expectation that the strategic focus on service reliability will translate into future growth, rather than on its recently pressured financial results.

Multiple-Based Valuation

A comparison of CSX’s valuation multiples against its direct peers and its own historical ranges provides context for its current market standing.

Table 4: Valuation Multiples (CSX vs. Peers)

Metric	CSX	Norfolk Southern (NSC)	Union Pacific (UNP)	Historical CSX Avg. (Approx.)
P/E Ratio (TTM)	21.1x	18.6x – 24.2x	19.5x – 20.1x	18x (10-Year)
Forward P/E Ratio	17.0x	21.0x	17.9x	N/A
EV/EBITDA (TTM)	12.6x – 13.0x	11.9x – 12.9x	13.2x – 13.6x	12.5x (5-Year)
P/B Ratio (TTM)	5.4x	4.2x	8.0x	N/A

(Note: Data as of early August 2025. Ranges reflect data from multiple sources. Historical averages are approximate.)

Sources: 9

• Price-to-Earnings (P/E) Ratio: As of August 2025, CSX’s trailing twelve-month (TTM) P/E ratio stands at approximately 21x.⁶⁰ This represents a premium to its 10-year historical average of roughly 18x.⁶² It trades at a slight premium to its western peer Union Pacific but is valued more closely to its direct eastern competitor, Norfolk Southern. The forward P/E ratio of approximately 17x, based on analyst earnings estimates, suggests expectations of earnings growth in the coming year.²⁹
• Enterprise Value-to-EBITDA (EV/EBITDA) Ratio: CSX’s EV/EBITDA multiple of approximately 12.6x to 13.0x is in line with its 5-year average of 12.5x and is very similar to the multiples of its Class I peers.⁶³ This metric, which is independent of capital structure, indicates that CSX is valued consistently with the broader rail sector.

Fundamental Valuation Considerations

Beyond relative multiples, several fundamental factors are crucial to assessing CSX’s value.

• Earnings Quality and Sustainability: The implementation of PSR has structurally improved the quality and baseline level of CSX’s earnings. However, the period from 2022 to mid-2025 has demonstrated that these earnings are not immune to cyclical pressures. Negative operating leverage can cause margins to contract during periods of flat or declining revenue. Therefore, an assessment of sustainable earnings power requires normalizing for the economic cycle and volatile factors like fuel surcharges and global commodity prices.
• Free Cash Flow Yield: Free cash flow (FCF) generation was significantly weaker in the first half of 2025 compared to the prior year. This was a result of both lower net earnings and elevated capital expenditures, particularly the one-time costs associated with the Blue Ridge subdivision rebuild.⁵³ To accurately assess the underlying FCF yield, investors must adjust for these non-recurring capital outlays. Management has guided for an improvement in FCF in the second half of 2025.⁵⁴
• Asset Base and Replacement Cost: As an established railroad, CSX possesses a vast and irreplaceable portfolio of physical assets, including thousands of miles of track, terminals, locomotives, and rail cars. The replacement cost of this network is immense, providing a substantial tangible book value that underpins the company’s valuation.

Valuation Drivers

The market’s current valuation of CSX, at a premium to its historical P/E average despite recent earnings weakness, suggests that investors are looking beyond the temporary disruptions of 2024 and early 2025. The valuation appears to be driven by the belief that the company’s operational improvements are durable and that earnings will recover and resume their growth trajectory as macroeconomic conditions stabilize and major capital projects are completed.

This forward-looking stance makes the stock highly sensitive to the execution of its strategy. Key drivers that could lead to multiple expansion include sustained market share gains in merchandise and intermodal, evidence of strong returns from strategic growth investments, and continued discipline in capital allocation. Conversely, a failure to maintain service reliability, a deeper-than-expected economic downturn, or any indication that recent margin pressures are more structural than cyclical could lead to a significant contraction in its valuation multiple.

10. Management Quality & Governance

The quality of CSX’s leadership team and its governance practices are critical factors in the company’s ability to execute its strategy and create long-term shareholder value. The current management team has overseen a strategic pivot from pure operational efficiency to a more balanced focus on service-led growth.

Leadership Team Experience and Track Record

• Joseph R. Hinrichs, President and Chief Executive Officer: Appointed in September 2022, Mr. Hinrichs brought a fresh perspective to CSX from outside the rail industry. With over 30 years of experience in global manufacturing and logistics, primarily at Ford Motor Company, his background is rooted in complex supply chains and large-scale operations.⁷² His tenure has been defined by the “ONE CSX” cultural initiative, which prioritizes employee engagement, collaboration with labor unions, and a renewed focus on customer service as the primary drivers of growth.²⁷ This marks a distinct shift from the more internally-focused, cost-centric approach of the initial PSR implementation.
• Sean Pelkey, Executive Vice President and Chief Financial Officer: Mr. Pelkey is a long-tenured CSX executive, having joined the company in 2005. He rose through various leadership roles within the finance department, including Treasurer, before being appointed CFO in 2022.⁷³ His deep institutional knowledge provides financial continuity and expertise in the company’s capital markets activities, financial planning, and investor relations.
• Mike Cory, Executive Vice President and Chief Operating Officer: As the head of operations, Mr. Cory is responsible for the performance of the railroad.⁷² The significant improvements in key service metrics such as terminal dwell and trip plan performance during 2023 occurred under his operational leadership, demonstrating an ability to translate the company’s strategic vision into tangible results on the network.⁶

Strategic Communication and Execution Consistency

The current management team has demonstrated a commitment to clear and consistent strategic communication. The “ONE CSX” message has been a constant theme in annual reports, press releases, and investor presentations since Mr. Hinrichs’s appointment.⁴⁶ The company has been transparent about the operational challenges faced in 2024 and early 2025, acknowledging disappointing results while simultaneously highlighting the sequential improvements and recovery efforts underway.³⁸

The November 2024 Investor Day provided a comprehensive and detailed roadmap for the company’s growth and capital allocation plans through 2027, setting clear expectations for the investment community.⁴⁸ This level of strategic clarity and consistent messaging helps build credibility and allows investors to track the company’s progress against its own stated goals.

Corporate Governance Practices and Shareholder Alignment

CSX’s governance framework emphasizes its role in safeguarding shareholder interests.⁷⁴ The most direct evidence of alignment with shareholders is the company’s capital allocation policy. The consistent return of substantial capital through a growing dividend and a large-scale share repurchase program demonstrates a clear focus on creating shareholder value.⁵¹ The repurchase of one-third of the company’s outstanding shares since 2017 is a testament to this commitment and has been a primary driver of EPS growth and shareholder returns. The leadership team’s ability to generate significant free cash flow and its discipline in returning that cash to its owners are hallmarks of a management team and board aligned with the interests of its shareholders.

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