CSX Corporation

remained positive in the fourth quarter and we delivered modest total volume growth. However, reported operating income, operating margin and earnings per share were all lower year over year. As noted in our press release, these results included approximately $50 million in expenses related to important actions we've taken to adjust our cost structure, deliver better financial results and position the railroad to succeed. We are committed to delivering stronger performance into 2026 as we build on our key accomplishments. We've renewed the leadership team, putting the best people into the best positions to drive value. And we're aligned in driving greater physical responsibility and discipline execution across the company. We've stabilized service on our network at high levels. delivering consistency and reliability for our customers while realizing clear productivity gains. We've capitalized on the strength of our service to win business, and we will be ready and able to respond when demand increases. As we move forward, you will continue to see us take thoughtful actions to drive greater profitability and cash flow and build momentum into the year ahead. And now I'll turn it over to Mike.

Thank you, Steve. So, let's take a quick look at our safety and operational metrics on slide five. Our operations team is improving safety performance through focused execution of our safety plan. The left portion of this slide highlights meaningful full-year declines in both FRA injury and accident rates, with the fourth quarter posting the year's best metrics. We know that an outstanding safety record is a clear indicator of effective management at every level. and we're taking solid steps towards our goal of reaching best-in-class performance for the industry. The right portion of the slide shows strong year-end fluidity and customer service performance. Velocity, Cars Online, Dwell, and Tripline Compliance all showed substantial improvement from Q1 to Q4. These are encouraging trends as we enter 2026. Running a cost-effective, efficient network while delivering consistent, reliable service is essential to our success. We'll maintain this balance and preserve our operational momentum while ensuring CSX has the capacity available when the industrial cycle turns. Kevin will now review our quarterly results in more detail.

Thank you, Mike, and good afternoon. I'm excited to be back in the CFO role and have an opportunity to work with this team. As Steve mentioned, over the last couple months, we have taken steps to align our cost structure to the current business environment. The team is fully engaged and encouraged by the momentum we are building with opportunities to drive efficiencies in nearly every part of our business as we enter 2026. Now let's move to the fourth quarter results. Volume increased 1% with revenue down 1% driven by business mix headwinds and coal pricing. Fourth quarter operating income and earnings per share fell by 9% and 7% respectively against suggested prior year figures. These results included approximately $50 million, or two cents, of charges for actions taken during the fourth quarter to optimize our workforce and technology portfolio. Now let's turn to the next slide for a closer look at the expense line. Fourth quarter expenses increased by $73 million, or 3%, excluding the 2024 goodwill impairment. As mentioned, the quarter included approximately $50 million of charges comprised of $31 million of separation costs in the labor line and $21 million of technology impairments in PS&O. We continue to see opportunities to drive efficiency in our labor costs as we prioritize safety, customer service, and profitable growth. Ending real headcount finished the quarter down over 3% as we continue to align to the current business environment. Additionally, overtime remains a focus for Mike's team as we look for ways to provide better visibility and tools to manage these costs. We have identified meaningful opportunities to reduce non-labor spending with well over 100 diverse savings initiatives across the company, including cutting outside and professional service spend, improving asset utilization and maintenance efficiencies, as well as enhancing controls around all sources of discretionary spend. 2026 expenses will also see year-over-year benefit from cycling network disruption costs, third and fourth quarter separation costs, and fourth quarter technology impairments. Depreciation expense will be relatively stable year-over-year as normal increases to the asset base are offset by favorable results from an equipment life study, asset retirements, and targeted reductions to technology and aviation assets. We are encouraged by the cost improvements identified as we move through the quarter. Similar to our focus on cost, capital spend and driving free cash flow remains a significant area of opportunity. Working with Mike and his team, we are developing improved oversight to ensure every dollar of capital is spent efficiently and aligns to our strategic priorities, including safety, customer service, and driving profitable growth. With that, I'll turn it over to Mary Claire to review our revenue results.

Thank you, Kevin. I'm happy to be here and excited to have the opportunity to lead the professionals in our commercial organization. The railroad is running well, and we have many opportunities ahead. That said, as you've heard from Steve, we continue to navigate the challenges of a mixed industrial demand environment. The strength of our relationships is critical when uncertainty is elevated. And our voice of the customer surveys show that our team has been doing an excellent job at staying close to our customers and being responsive as conditions change. Turning to slide 10, let's cover fourth quarter volume and revenue performance. Overall, total volume was up 1% in the quarter, but revenue was down 1% as negative mix and weaker export coal prices led to a 2% decline in total revenue per unit. Our merchandise franchise, where volume and revenue were both down 2%, continues to face market-driven headwinds. Revenue per unit was modestly higher and was also affected by mix, as growth was strongest in low-RPU areas, such as minerals and fertilizers. We continue to see softness in chemicals and forest products, where volume was down 6% and 11%, respectively. The industrial chemicals market remains weak, and many of our customers are carefully controlling freight spend as they manage through inflation and tariff pressures. In forest products, we continue to see the effects of plant closures, particularly with pulp and container board, that occurred up until the start of the fourth quarter. Despite these headwinds, our team has had success at winning incremental business, and we anticipate benefits from new facilities ramping up in 2026. Automotive volume was down 5% year over year. While we saw some manufacturers gain momentum through the quarter, supply constraints with chips and metals, limited output at other facilities. That said, we've been encouraged by the continued strength in fertilizers and mineral shipment. Fertilizer volume was up 7% on improved phosphate rock production and business wins in the nitrogen market. Minerals volume remains supported by demand for aggregates and cement for infrastructure projects. Our intermodal franchise really drove our growth this quarter. with revenue up 7% year over year on a 5% increase in volume. We've been winning new domestic and international business as we've brought faster transit times and more connectivity to our customers. Finally, our coal business grew modestly in the quarter, with volume up 1% year over year. Domestic tonnage increased by 6%, driven by a substantial increase in domestic utility volume, supported by growing power demand and higher natural gas prices. Export tonnage declined 3% in the quarter, with a derailment in late October impacting shipments for a short time. Revenue was down 5% on a 6% decline in RPU, primarily due to a decline in met coal benchmark pricing. Notably, the discount for East Coast met coal indices widened versus Australian pricing this quarter, which impacted our yield. Now let's turn to slide 11 and talk about the key components of our market expectations in 2026. Starting with merchandise, we are positioned to benefit from consistent strength in infrastructure project activity in key regions served by CSX that's driving demand for materials such as cement, aggregates, plate, and scrap metal. More uncertain are conditions in the housing and automotive markets, which affect many commodity markets. Consensus forecasts call for modest decline in housing starts this next year, and affordability and overall demand levels continue to impact the prospects for North American light vehicle production. Our merchandise volumes will also reflect cycling of facility closures, largely in the forest products and metals areas that occurred through 2025. We've been encouraged by the success we've had in intermodal where the team won new business in 2025 as we expanded our network reach through new operational agreements and our strong service has allowed us to provide a faster service product. At Howard Street, the first of two bridges being raised to support double-stack capability is now complete, and our customers are excited about the opportunities coming later this spring. They're bidding on business now for volume to start moving double-stack through the tunnel in Q2. Still, the markets reflect the reality of a still-soft trucking market, where we're watching the supply-driven increase in truck rates carefully. We also need to be aware of the risk of a slowdown in imports after the pull-forward of activity that occurred through 2025. For coal, we're pleased to have two important mines on our network back open after extended outages. These mines provide good quality met coal for the export market, though global steel markets and benchmark prices remain subdued. Domestically, many utilities continue to buy more thermal coal given increasing power demand. We do have coal plants on our network scheduled to retire this year, but we have seen some closures get delayed. Overall, we see good potential in 2026. but we expect the best results will come from our own specific initiative. Our visibility is limited, but from what we can see and hear from our customers today, there's no short-term catalyst on the horizon to lift the major industrial markets. Our team will work hard to make the most of every profitable opportunity, and we will be ready to respond when macro conditions improve. Now I'll hand it back to Steve to talk through our outlook.

Thank you, Mary. Thank you, Mary Claire. Now we'll review our guidance for 2026 on slide 13. We have a well-running railroad and a good pipeline of growth initiatives. However, as Mary Claire discussed, the near-term outlook across many key markets remains soft. As we plan for 2026, we do not anticipate any meaningful improvement in macroeconomic conditions. So we are assuming low single-digit revenue growth for the year based on flat industrial production, modest GDP growth, and fuel and benchmark coal prices consistent with current levels. We expect to deliver year-over-year operating margin expansion in the range of 200 to 300 basis points. This is from a combination of workforce optimization, a tighter management of discretionary expenses, our drive for efficiency and the benefits of a more stable fluid railroad. With our Blue Ridge project complete and focused efforts on capital discipline in place, we plan for a 2026 CapEx below 2.4 billion, a substantial reduction from last year. Our CapEx priorities are unchanged, invest in our infrastructure for safety and reliability, and invest in growth and productivity projects that pass our financial criteria. For free cash flow, higher earnings, a more normalized cash tax rate, and lower capital outlays should drive growth of at least 50% compared to 2025. Finally, let me address the multi-year targets that were offered at the company's 2024 Investor Day. The opportunities ahead for CSX are strong. When we execute on the core fundamentals of service, cost discipline, operating efficiency, and prudent capital deployment, we will create shareholder value over the long term. That said, the macroeconomic environment and the industry dynamics were meaningfully different than compared to today. I am replacing our 2025-2027 targets with the guidance we've given for 2026 only. I will continue to evaluate our outlook as we make progress toward our goal to be the best performing railroad in North America. With that, Matthew, we will open it up for questions.

Thank you, Steve. We will now proceed to the question and answer session. Now, to ensure that we maximize everyone's opportunity to participate, we ask that you please limit yourselves to one and only one question. Sarah, with that, we're ready to begin.

Thank you. If you would like to ask a question, please press star 1 on your telephone keypad. If you would like to withdraw your question, simply press star 1 again. Please ensure that your phone is not on mute when called upon. Thank you. Your first question comes from Tom Wadowitz with UBS. Your line is open.

Great. Good afternoon. Just I guess one fine point on the OR improvement, if you could tell us what the base OR is in 25, kind of just like what's included. But I guess the real question, if you will, how do you think about pricing and price-cost spread You know, I think, Steve, you know, focus on price and productivity are kind of two hallmarks of your approach. How do you think about the opportunity to have some traction on the price initiatives and see pricing above cost inflation in 2026? Thank you.

Yeah, Tom, on the base, the starting point for 2025 is obviously X, the charge that we took on Goodwill. So that's the starting point that we have in the adjusted number that we disclosed.

And on your questions on price and productivity, so as we think about price, I mean, certainly you would like to be able to cover – you know, the cost of inflation in any given year and actually do better than that. In terms of kind of where we are in the pricing initiatives, Mary Claire has, you know, taken the ball on that and has already put some new structures in place that I think are definitely going to help in terms of our price yield. As we look at, you know, what we have in the plan for 2026 versus 2025, price yield will be higher in 2026. um, over 2025 than it was in 2025 over 2024. So we're making progress. I think on the pricing front, um, it'll be a bit slow going, but I think we'll continue to make progress as we work harder on the whole price management equation. And in terms of, you know, these contracts have a roll off in certain timeframes that would probably take, uh, until about this time next year before we had a chance to touch every contract. And, um, and stress test, if you will, in terms of what the right price is versus the value we're bringing to that customer.

The next question comes from Brian Ostenbeck with J.P. Morgan. Your line is open.

Hey, good afternoon. Thanks for taking the question. So maybe one for Kevin. In the 200-300 basis point guidance for improvement, can you give us some qualification, how much of that you think is already baked in based on some of the one-time items or the things you know are rolling off? And sort of what are you expecting for inflation within that guide? Because if you look at the ALIF index, for example, that's starting to pick up a bit here. So maybe give us a little bit more color in terms of the building blocks there and sort of what's already spoken for and what are the assumptions underlying the rest of it?

Thanks. Yeah, no, when you look at some of the unique charges that occurred in 2025 between the severance, the technology write-off that we disclosed, as well as some of the costs related to the Blue Ridge and the Howard Street Tunnel, you could roughly assume those are about $150 million. What we're doing, what our guidance implies is is a much greater initiative around productivity and a big focus across the organization to drive that. And so you'll see our productivity numbers, if you do the math, have a fairly significant increase and step up. When we think about what's happening on the inflation side, on our labor side, that's pretty significant. self-explanatory on the union side. The industry has obviously embedded labor inflation. Next year, you'll see another wage increase in the 3.75% range. We're also experiencing a little bit of more healthcare inflation going into 26 versus 25. So I would say on the labor side, that's pretty consistent with what we saw last year, maybe a little bit higher than last year. And then on the non-labor side, a lot of efforts by the procurement team and others to drive that a little bit lower. So expect a little bit lower inflation on the non-labor side. So overall, you know, I would look at inflation probably being in that three to three and a half percent range.

The next question comes from Scott Group with Wolf Research. Your line is open.

Hey, thanks. Afternoon. The low single-digit revenue growth for the year, any just sort of rough thoughts on volume versus yield in that? And then maybe, Steve, just bigger picture, like the guide this year, I guess, implies like a 64 to 65 OR. Now that you've been here a few months, do you have a feel for like what you think the longer-term operating ratio should be? Should this be a sub-60 OR railroad in the next few years? Or is that a, I don't know, how should we think about it?

Thank you. Hi, Scott. This is Mary Claire. I'll take the first part. So I think as we think about next year, we're looking at modest volume growth going into the year. I covered some of the macro environment that we're seeing out there. And while we're optimistic about certain areas and we see growth opportunities in places like intermodal, places where you see infrastructure investment like our minerals markets, And I think, you know, there's some potential on the domestic utility side when you think about the need for power generation as well as natural gas prices are. Those are kind of more positives for us. But then as I talked about, you know, when you look at more of the industrial economy, we still see a lot of headwinds out there. So at this point, we'd say really modest volume growth next year.

Yeah, and on the – I'll just talk in terms of operating margin percent. You know, look, we want to expand it every year. And if we're doing the right things on price management and productivity, we will be able to do that. And, you know, I have confidence in this team. I have confidence in our ability to build solid productivity programs, to be able to grow operating margin a certain percent every year. And I could give you a number now, but I think I'll wait and talk about that later. But, you know, the objective is best-in-class performance. You know what that is with respect to operating margin. I know what that is. I have confidence we can get there. The question is, you know, over what time frame? We'll make progress every year. What I would like to do, I mean, we have a very solid plan, as Kevin described, and we put a ton of time into building this plan for the environment that we're facing and to make sure we could deliver an outcome that we would be proud of. So that's where we are. But what I would like to see over the course of time is how well we can execute to those plans. I have confidence we can, but I'd like to experience that a few quarters, if you will, just so I can get grounded and confident in our ability to build, I'll call it sustainable productivity over time. And I think we can do that, but give me a little time to get more confident in our ability to do that.

The next question comes from Ari Rosa with Citigroup. Your line is open.

Hi, thanks for taking the question and good afternoon. So we're looking at, I apologize because this is a little bit short term, but we're looking at potentially a pretty nasty storm coming up. You know, not too long ago we saw CSX's network uh face a pretty big setback given given some storms uh i'm curious maybe mike is the best one to answer this question just how are you preparing for the storm and how do we get confidence you know maybe it's an opportunity to talk about kind of how you're running the network differently now versus say 12 to 18 months ago but what are the risks that these types of events could present setbacks and how do we get comfortable that you know this isn't going to be a big obstacle in q1 thanks sure thanks for the question all right

As we've said, the network is going into this in much better condition than last year when we started facing storms. So just to give you just a view of what we see, we're going to see ice on our southern portion of our network basically going from Nashville right across through Alabama, through Georgia. And then in the middle section of our network, we're going to experience or we see right now from the weather reports, we're going to experience heavy snow right from Indiana through Kentucky, right across PA, Western Maryland, Virginia, all the way up the I-95. So in terms of precautions, you know, here's some real detail. I mean, we're going to have senior coverage right around the clock in all of our key areas, including our network center. We've gone over from snow clearing to tree clearing, generators, everything that we need in each location, each facility that we see the storm coming through. We've modified our operating plan, working with our customers, notifying them because they're going to have the same conditions that really assets for us right now are going to be the most crucial thing that we protect. At the same time, we expect to see power outages, highway closures. We, you know, we're going to see cold right after that. So I do not see us coming out of this probably for a few days. If we get it Sunday, you know, we're looking at midweek to recover. But I'm very confident, especially with the condition that we're going in. that we will come through this with no issues. This is not going to lead us into four months of trouble like it did the year before. Even if there is some consecutiveness to it, we have everything in place. And what we learned last year, we're putting into effect throughout the beginning and right through this storm.

The next question comes from Brandon Ogulenski with Barclays. Your line is open.

Hey, everyone. Thanks for taking the question. And I guess, Mike, it's not shocking that it snows in January. So I'd ask maybe more importantly, like, how are you approaching operations differently this year, especially, you know, with like new leadership concepts at the company? How do you get back to those best in class metrics that the railroad had, you know, three or four years ago?

Thanks for the question. I think you can see by the metrics we have now, we're running as good as we have three or four years ago. It's a focus on asset utilization. It's a focus on oversight and to the key measures that we look at every day. Really, that's what we've done. What we learned through that exercise was to make sure that we take action as soon as we can on the issues that are preventing us from being fluid. And that's from making sure that we don't bring equipment in when we shouldn't. It's making sure we have our excess equipment in places to be able to respond to issues we have. And that's generally what we did to come out of the second quarter issue, first and second quarter issues we've had. But I don't see us really failing on this storm coming up. I appreciate your concern, but we're ready for it. And again, I see us coming through it very well.

The next question comes from Ken Hexter with Bank of America. Your line is open.

Hey, great. Good afternoon. So, Kevin, sounds like a lot of programs. I think you mentioned 100 different ones. But just so we don't get lost in kind of minutiae, can you maybe talk dollar amounts for buckets so we can, I don't know, track something? Is there workforce optimization or a headcount target? Anything from Mike Corey on the op savings? And, Kevin, you mentioned non-labor spending programs. maybe you could just maybe parse that out a little bit. So, you know, cause if we've got very low volume growth, very low pricing growth, you know, how do we get that two to 300 margin basis points? I guess you take out maybe a hundred basis points or so from the, the, the a hundred million that you spent this year, but if you can bucketize some of that stuff to help us walk through and what to expect.

Yeah. You know, when you look at the majority of, you know, the productivity, um, that you obviously can solve for after the $150 million that I pointed out, that naturally just comes out, that won't repeat in 2026. It's very, very highly focused on the labor line and the PS&O line. And so a lot of activity in those two areas, I would say, largely equally divided. You'll probably see on an absolute basis, an absolute dollar basis, more come out of the PS&O line because you're going to have less inflation, core inflation in that line versus the labor, which I talked about a little bit earlier, given obviously our union labor contracts and we're seeing on the medical side uh on that on that area but those are the areas um we're certainly focused on driving cost improvement across the line items depreciation more or less it will be in the flat range as we um as we pointed out and then you know certainly some some areas of improvement i you know mike will always tell you on the fuel side we're looking for every opportunity to continue to get more fuel efficient And then on the rent side, there's some opportunity as we run better, certainly from a car hire and other areas that we expect to drive improvement there too. So the good news is a diversified portfolio of opportunities. I guess the bad news on that side is we've got to stay very, very focused across all these areas to make sure that we're capitalizing on those. And My full expectation as we move into later into this month in February and March, we're going to come up with an additional list that will obviously hopefully drive further improvement in the back half of the year and then create some opportunities as we move into 2027.

The next question comes from Stephanie Moore with Jefferies. Your line is open. Great.

Good afternoon. Thank you. You know, I think I would be a bit remiss not to ask, at least about the major merger that is underway for this industry. If you could maybe talk about how you are positioning the company in the wake of what could be a pretty transformational deal. So, you know, in the near term, while it's under review, what are the opportunities that you all can take advantage of? And then, of course, I'm sure you're also having to somewhat scenario analyze what would be like if the deal is approved. And in that way, you know, what is the strategy for CSX as kind of a full East Coast merger, East Coast rail? Thanks.

and, and made a call, uh, it took three years before the final restriction was lifted. So for three years, we were kind of in deal purgatory. And, uh, what do you have to do is make sure that, you know, you're running the business to best your ability every day. And that that's kind of the key in this process. Um, you know, I don't know what conditions are going to be required for approval that remains to be seen. I think this is a long process and we'll find out what that is. And then when you get to the end of that, if a merger is approved, you still have to execute. So I think it's a long process. As I said, there are going to be opportunities we can take advantage of. We see some today that we're taking advantage of. Whatever risks are out there, we'll certainly manage those. We'll mitigate those. We'll have plans for those as the time goes. comes forward for us to, you know, make our case to the appropriate authorities. We'll certainly be prepared to do that. And then the focus is just making sure that we can be as competitive as we can be. You know, but at the end of the day, you know, we can create value by running CSX better every day. So you can set the merger aside. We're going to manage that. We're going to work through that. We're going to have many, many quarters to talk about that probably. But what we know we can do now is run this company better every day, and we feel really good about our ability to do that.

The next question comes from Jonathan Chappelle with Evercore ISI. Your line is open.

Thank you. Good afternoon. Kevin, maybe Mary Claire, can you just help us a little bit with Coal RPU? It feels like the way that we're calculating it now is a little bit different than The last several years and, you know, what are you thinking about is baked into that revenue growth? Do we see, and this is from both a 1Q and a full year perspective, is it kind of stabilized from this 4Q exit rate or is there some improvement baked into what's a very important yield line item?

Yeah, so, Mary Claire, I'd say if we think about RPU going forward, you know, there's always a mix element that comes into our business. And so, as I think about going into 2026, talked about some of the markets that we feel a little bit better about, as well as ones that, you know, we see more risk. And so, Intermodal, we feel good about. When you think about some of our merchandise side of the business, we see some impacts there of probably stronger growth in some of our lower RPU business, like minerals and fertilizers, and more softness in some of our higher RPU business, when you think about our forest products business or our chemicals business. You know, talk a little bit more about next year. We've got overlaps that we saw closures over the course of 2025, quite a few of that in our forest products line of business. We see auto down next year from a North American-like vehicle production perspective, and we also have a large plant on our network that will be down over the course of next year. So that will certainly impact, you know, where we see volume growth versus decline, and that comes into play. I would tell you, Steve spoke earlier about, you know, how we're thinking about pricing. We've had a lot of conversations there. We've looked at our processes and controls and, you know, Mike's delivering a really good service product right now and customers value that. And so we're going to take that into account as we think about going forward. And you also know there's, you know, there's a portion of our business that we can touch every year. So that'll impact from a timing perspective.

Yeah, I'll just add on the coal, on the coal RPU, just as a headline, we went through a year where we're lapping some pretty difficult comps and that'll be largely, we'll be through that by the first quarter on that side. So, you know, we'll see a lot more stable, maybe slightly down, but again, that to Mary Claire's point, it's a lot about mix and obviously with a stronger Southern utility demand, that is helpful as well, given the length of haul.

The next question comes from Chris Weatherby with Wells Fargo. Your line is open.

Hey, thanks. Good afternoon, guys. Maybe I wanted to come back to a question I was asked earlier in the call and maybe think about it a little bit differently. I guess, Steve, you know, you talked about best in class, and when you think about it from a margin perspective, we kind of know where the benchmarks are. CSX was there probably five or six years ago for a few years. And I know things are different, mix is different. You know, there are some other dynamics in the market relative to then. But I guess as you've been there for three plus months now and had a chance to kind of think about the business, is there anything meaningful that you see that would sort of prevent the ability to get back to those levels? Whether you think about sort of the different customer mix, how things are changing, if there's anything from a network perspective we should be thinking about. I get the productivity and you have to kind of get...

some reps in before you feel comfortable with how that can be sustainable but anything sort of you know maybe insurmountable that you see right off the get off the bat i mean in an answer no i don't see anything insurmountable and it's not like i'm sitting here you know thinking that uh we're going to go back to the heydays of coal and that's how we're going to accomplish it that's not what i'm thinking i'm thinking about you know basically take the mix we got and um you know uh through Some of the strong initiatives that Mary Claire talked about earlier, you know, finding some growth through our own actions. Obviously, anytime you get a little help from the economy, that would certainly help a great deal towards, you know, moving those operating margins up faster. But I really don't sit here and think, you know, I need to have a lot of help from the economy. I think our own growth initiatives do a better job on price management. and working the productivity equation very hard. And both Mike and Kevin have talked about certain actions that they've taken. But, you know, I can lay out something that says, you know, we should be able to get there. But, again, I want to see the kind of proof in the pudding. And I think that will happen. But, you know, that's kind of how I think about it.

The next question comes from Jason Seidel with TD Cowan. Your line is open.

Thank you, Arpit, or Stephen, hello. Mary Claire, I guess this is going to be one for you. We're going to go back to the coal side, but I want a clarification first. I think you said it was, you know, you were calling for muted growth, and then you said next year. I'm assuming you were talking 26 and not 27? Yes, 26, sorry. Okay, not a problem. I've done that a bunch of times already this year. I wanted to just ask a question, you know, given, you know, this storm and some of the impacts that we've seen at least over the last two days with natural gas futures, just how long do natural gas prices have to stay elevated until we see a flow through on the volume side? And what's sort of the best way to monitor that?

Yeah, thanks, Jason. I would say, as I think about the coal side, both with greater power demand that we're seeing here and the increase in the natural gas prices, certainly supported recently about this upcoming storm. We feel good about the volume demand on the domestic utility side. I would say, you know, one of the things that we're watching here, though, is there were some planned closures that were supposed to start happening this year. We expect those will get delayed, but for how long, that's a little bit uncertain. I think there's going to be more demand and more opportunity for us. I think the piece we'll have to watch is, you know, how much can actually be supported by the producers going forward.

The next question comes from Ravi Shankar with Morgan Stanley. Your line is open.

Great. Thank you. Steve, it's understandable that you pulled the long-term guidance given our macros during the last couple of years, but is that still the right template to think about earnings growth in the long term when macro is normal, or do you think something's changed with the business where it could be better or worse than that initial guidance?

No, I don't think anything's changed in the business where we can't come back and lay out a longer-term guidance or a longer-term algorithm. I don't see anything that's fundamentally changed the business that would prevent us from doing that. It's just caution on my part that I want to make sure that we can – you know, that we can execute the plans in front of us before we start talking about a longer-term picture. But I'm not sitting here thinking that, you know, we need to get away from that, any kind of longer-term guidance, because there's something fundamentally wrong in the business. I don't see that.

The next question comes from Jordan Alliger with Goldman Sachs. Your line is open.

Yeah, hi. Just sort of curious, can you maybe talk a little bit more about the double-stack opportunity? You know, perhaps... sort of update, if anything, on the sizing. And I know you said people are putting bids out for the second quarter. Any additional sense for how we should think about the timing of how that could ramp into your business in order of magnitude? Thanks.

Yeah, thank you. So I tell you, we're really excited about Howard Street Tunnel. I've been here 14 years and excited to see it come to fruition. And, you know, there's a couple opportunities there. One, we're adding new connectivity from the southeast up into the northeast, and so we've announced new lanes of service. But it's also going to improve our service product from Chicago to and from Baltimore. It's also enabled us to allow efficient double-stack service from the West Coast all the way through to Baltimore versus having to do a rubber tire crosstown in Chicago. So we're excited about the opportunities that are out there. We're talking to our customers today, both channel partners and shippers. But what I would tell you is based on past experience, it typically takes a couple of big cycles to really for customers to kind of see the opportunity and convert more business. So we expect to see growth this year and going into the future. I would say both on our domestic and in the future on the international side of the business as well.

The next question comes from Walter Spracklin with RBC Capital. Your line is open.

Thanks very much, operator. Good afternoon, everyone. I wanted to come back to the revenue growth profile of low single-digit. I know whenever I think about pricing in the rail industry, I consider it in the 3.5% area, and then you do assume some volume growth, it would seem. Just curious, is there a mix effect at play here where we should build in some negative mix? Or are we seeing that core pricing number that's typically north of three, somewhere below three? I know, Mary Claire, you flagged truck pricing. I don't know if that's – I mean, truck pricing is catching a bit here. So I'm just curious as to how the – you decompose the revenue growth versus – what you would have seen typically in the past?

Yeah, what I would say is, you know, mix is always going to play a role, right? And so as I talked about this year and what we're seeing, we expect some of the stronger growth to be in our lower RPU segments. And so that is going to absolutely have an impact on us. You know, on the intermodal side, that's lower RPU. Minerals and fertilizers, a little bit lower RPU for us. We are, when you think about chemicals, when you think about forest products, when you think about automotive, there's headwinds out there. I mean, we're going to go after opportunities that we see and make sure they're creative to the business. But mix is certainly going to impact where we see the growth come in 2026, and that will have an overall impact on the business. You know, Kevin touched a little bit on the coal side earlier. I just, you know, mentioned on that. I do think that not only is there, you know, domestic utility opportunity this year provided, you know, these closures that are scheduled get pushed back. But I would also say on the export side, you know, last year we saw the numbers, the benchmarks come down pretty significantly over the course of the year. I think what we've seen is some pretty recent stabilization there. I guess I would call out that, you know, PLV has jumped up a bit. But I think it's important to note that when you think about our business, we're more heavily indexed to high vol. And I would say that's been more stable as opposed to seeing any significant increase at this point.

The next question comes from Baskin Majors with Susquehanna. Your line is open.

Steve, last quarter you gave us some thoughts early on in your tenure about your compensation philosophy and how it kind of applied to the rail model. You know, now that you've gotten through a few more months, you're in planning. Can you talk a little bit more tactically about how you and the board have talked about changing the incentives for senior management both on an annual basis and a go-forward long-term basis? How are they different today than they were the last few years? Thank you.

Well, we're basically in the process of rolling out the new metrics kind of as we speak. But to your point about what I discussed last time about most important, and it's really inherent in our guidance, right? I talked about operating margins. as being very important in terms of, you know, demonstrating that we can continue to improve the quality of the business. And so that's an obvious metric, uh, you know, operating income dollars, that's what translates into, you know, net income and earnings per share. So that's obvious that will always be an important metric. Safety will always be part of the mix. And, uh, if I had to pick three metrics that are most important to us sitting here at this time, it'd be those three, including safety. that's really on a year to year basis. And as you look into, uh, you know, the longer term, you know, which we call, you know, kind of three years and you've heard me say, and those of you have heard me say this for many years, some of you, you know, return on capital, I think is the truth serum, you know, for any capital intensive business. So return on capital is very important. And, um, you know, it's total shareholder return. You know, how well are we doing compared to the S and P 500 industrials? I think that's, you know, important to all of us. So, you know, kind of in a nutshell, those are the metrics that are most important, you know, and I've, you know, I've always liked to focus the organization on a handful of really important metrics as opposed to having, you know, 8, 10, 12, as I've seen other companies do over time. And I think that's, you know, if you want to, if you want to motivate the organization, if you want to incent the organization, you need to have metrics that are that are very meaningful and reinforce that every day.

The next question comes from David Vernon with Bernstein. Your line is open.

Hey, good afternoon, and thanks for fitting me in here. So, Steve, if you could maybe kind of address the cadence of OR improvement we're expected as we get through this year. Should we be expecting kind of year-over-year across the board, or is it going to be a little more back or front-end weighted? And then if you could put a hard number around what the benefit, the run rate benefit you're expecting from the class actions you've taken to date, I think that would help us kind of better understand the bridge for kind of what's organic or volume-dependent and what's already kind of in the bag. Thank you.

Yeah. When you, you know, certainly there are comparisons, uh, when you think about what occurred in 2025 and, you know, I would, I would, uh, obviously highlight first quarter, given some of the storm activity and other things that occurred to us as a quarter where we should have good year of year performance, probably above, uh, the, the average for the year. Um, this is the continual process. As we move through the year, we continue to expect to get better and drive more costs out of the business and, We'll see what the revenue story is. We're obviously not assuming a whole lot, but there's a lot of activity around that as well. The framework that I would use from a margin perspective is the $150 million that I certainly highlighted as not going to reoccur. Next year, I highlighted 3% to 3.5% inflation in our business, and you'll see that more pronounced on the labor side versus the non-labor side. And I think you can effectively back into, you know, what we're assuming from a productivity standpoint from there.

The next question comes from Diane McKinney with Deutsche Bank. Your line is open.

Hi there. This is Megan. Thanks for taking my question. Kind of sticking with the OR progression, I think it was really encouraging to hear about the over 100 diverse savings initiatives that the team identified, but it also sounds like there's potential for more. But as it relates to the full year outlook of the 200 to 300 basis points of OR improvement, can you help us bridge from 2025? Like are these cost savings considered? How much is dependent on the market versus what's within CSX's control? Any part of there would be really helpful.

We're not depending on the market. This is a plan that is based on the things that we can control, which is encouraging for us and this team. We're going to focus on those items. And we haven't talked about the potential for some of these markets to improve, but what we're really focused on is creating the operating leverage when the markets improve to, quite frankly, deliver higher incremental margins than what we've done in the past. And I'm fully confident given all of the things that we're doing that every incremental dollar of revenue that Mary Claire and her team are able to deliver that will come in at a very, very high, um, incremental margin, um, given all the costs, uh, things that we're focused on, you know, going back to the a hundred, you know, different opportunities, that's really across everything, um, from vehicle spend to overtime, you know, focused on rental equipment, travel, Mike and his team, um, Doug, Casey, um, Terry, all of them have brought ideas to the table. And now it's building the process on a monthly basis to hold our teams accountable to delivering it. I'm very confident that we can do that and providing better tools, quite frankly, to the operating team and every team across this organization so they have visibility to where the costs are. And I'm feeling better and better about that every day. I know Mike and I collaborate on that every day. I'm sure there's things that we don't know about today that we'll continue to identify. And so Our goal is to build the momentum through the year, and when that volume comes back, we're going to have a network that can handle the volume, most importantly, and really deliver the incremental margins.

This concludes the question and answer session, and we'll conclude today's conference call. We thank you for joining. You may now disconnect.