Freight rail services provider CSX (NASDAQ: CSX) met Wall Street’s revenue expectations in Q3 CY2025, but sales were flat year on year at $3.59 billion. Its non-GAAP profit of $0.44 per share was 3.8% above analysts’ consensus estimates.

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StockStory’s Take

CSX’s third quarter results were shaped by significant operational improvements and the completion of major infrastructure projects. Management credited the railroad’s fastest train velocity since 2021 and improved asset utilization as key contributors to the quarter’s positive momentum. CEO Steve Angel highlighted, “The railroad is running well, and we have a strong foundation to drive further improvements.” The completion of the Howard Street Tunnel and Blue Ridge Subdivision projects enabled greater capacity and fluidity across the network, despite ongoing challenges from mixed business conditions and market uncertainty.

Looking ahead, CSX expects to capitalize on expanded network capacity and new intermodal service offerings, particularly as double-stack clearance through Baltimore comes online in 2026. Management signaled that cost efficiencies gained from recent projects, along with continued focus on safety and customer service, will support volume growth and improved margins. CFO Sean Pelkey said, “Year-over-year headwinds eased into the fourth quarter and strong operational execution and cost control provide a positive setup for improved results.” The company’s forward strategy also includes pursuing strategic opportunities and partnerships to drive long-term shareholder value.

Key Insights from Management’s Remarks

Management attributed the quarter’s performance to operational gains, strategic project completions, and network efficiency improvements, while also navigating external market pressures and shifting industry dynamics.

• Network efficiency gains: CSX achieved its fastest train velocity in several years and reduced average daily cars online to the lowest level since 2020, reflecting disciplined operations and improved asset utilization. COO Mike Cory noted, “Trip plan compliance continued to improve, Intermodal TPC rose to 93% and carload TPC climbed to 83%.”
• Major project completions: The Howard Street Tunnel and Blue Ridge Subdivision projects finished ahead of schedule, providing increased network capacity and resiliency. These upgrades position CSX to offer double-stack intermodal service to the Northeast, a longstanding goal for the company.
• Mixed market conditions: Management described customer demand as variable, with headwinds from weak global commodity prices, trade policy uncertainty, and a persistently soft trucking market weighing on certain segments like chemicals and forest products. However, strong demand in aggregates, cement, and fertilizer offset some of these pressures.
• Coal and intermodal trends: Utility coal volumes were up, supported by higher natural gas prices and increased power demand, while intermodal revenue grew on the back of stronger Eastbound volumes and new service offerings. Export coal faced headwinds from mine disruptions, but recent reopening of key mines offered some relief.
• Cost management focus: The team delivered efficiency savings across labor and other expenses, offsetting inflation and restructuring costs. Pelkey emphasized a $100 million cost benefit expected as network disruption costs roll off into next year, supporting margin improvement initiatives.

Drivers of Future Performance

CSX’s outlook is anchored in leveraging new network capacity, driving cost efficiencies, and adapting to evolving market dynamics that influence both revenue and margin expectations.

• Expanded intermodal capacity: The completion of the Howard Street Tunnel will allow double-stack service through Baltimore in 2026, broadening intermodal offerings and providing access to new Northeast markets. Management believes this will gradually drive volume growth as customers adjust their supply chains.
• Efficiency-driven margin improvement: As one-time project and disruption costs subside, management expects strong cost momentum and asset utilization to contribute to higher operating margins. Pelkey projected $100 million of non-recurring costs dropping out as a key margin lever for 2026.
• Industry consolidation and partnerships: Ongoing rail industry consolidation and new partnership opportunities are expected to provide both risks and avenues for growth. CEO Steve Angel stated the company will pursue strategic opportunities that create shareholder value while maintaining a stable, high-performance culture.

Catalysts in Upcoming Quarters

In upcoming quarters, StockStory analysts will be tracking (1) the pace of volume growth as CSX rolls out double-stack service through Baltimore and leverages its expanded Northeast footprint, (2) the realized margin improvement as one-time project and disruption costs drop off, and (3) the impact of broader rail industry consolidation and new partnerships on CSX’s market positioning. Progress on cost initiatives and stability in key end markets will also be central to evaluating performance.

CSX currently trades at $37.00, up from $35.96 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 for active Edge members).

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