2025 THIRD QUARTER CONFERENCE CALL 10.16.2025 Forward Looking Disclosure This information and other statements by the company may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act with respect to, among other items: projections and estimates of earnings, revenues, margins, volumes, rates, cost-savings, expenses, taxes, liquidity, capital expenditures, dividends, share repurchases or other financial items, statements of management's plans, strategies and ob ...

The railroad operator says lower export coal prices and a decline in merchandise volume partially offset increases in other revenue. ...

CSX Corporation (NASDAQ:CSX) traded higher in postmarket action after it led off the earnings season for the rails sector. Revenue fell 0.8% year-over-year to $3.59 billion, topping the consensus estimate by $20 million. The effects of lower export coal prices and a decline in merchandise ...

Core Insights - CSX Corp. reported third quarter operating income of $1.09 billion and net earnings of $694 million, or $0.37 per share, with adjusted operating income of $1.25 billion and adjusted net earnings of $818 million, or $0.44 per share after excluding a non-cash goodwill impairment of $164 million [1][4] - The company's operational performance reflects workforce dedication and a commitment to operational excellence, with a focus on leveraging strengths for long-term growth [4] Financial Performance - Adjusted operating income included $35 million in corporate restructuring, severance, and advisory expenses, impacting earnings per share by $0.01 [2] - Volume totaled 1.61 million units for the quarter, representing a 1% increase year-over-year and a 2% increase sequentially [4] - Revenue for the quarter was $3.59 billion, a decrease of 1% year-over-year, influenced by lower export coal prices and a decline in merchandise volume, partially offset by higher pricing in merchandise and intermodal volume growth [4] Company Overview - CSX is a premier transportation company providing rail, intermodal, and rail-to-truck transload services across various markets, including energy, industrial, construction, agricultural, and consumer products [8] - The company has a significant role in the economic expansion and industrial development of the United States, connecting major metropolitan areas and numerous short-line railroads and ports [8]

Core Points - Union Pacific and Norfolk Southern are seeking shareholder approval for an $85 billion merger, with votes scheduled for November 14 [1][2] - Both companies' boards have unanimously approved the merger agreement announced on July 29 and are encouraging investor support [2] - The merger will result in former Norfolk Southern shareholders owning 27% of Union Pacific's outstanding shares, with the remainder held by Union Pacific shareholders [4] Company Details - The implied value of the merger consideration is $320 per Norfolk Southern share, representing a 25% premium over its 30-day average closing price as of July 16 [3] - The merger application will be filed by a deadline of January 29, 2026, and is subject to regulatory review by the Surface Transportation Board [4] Shareholder Engagement - Union Pacific and Norfolk Southern executives emphasized the importance of shareholder votes, stating that the merger cannot proceed without approval from both companies' shareholders [3]

Core Insights - CSX Corporation is highlighted as a stock in Jim Cramer's game plan, particularly due to the recent firing of Joe Hinrichs, who was previously recognized as Railroader of the Year [1] - The company is involved in rail-based freight transportation, intermodal container movement, and trucking services, handling various commodities including chemicals, coal, and agricultural goods [1] - Cramer suggests that CSX is a trendy pick, especially with the current merger-friendly environment under the Trump administration, which may favor transcontinental railroad deals [1] Company Overview - CSX Corporation (NASDAQ:CSX) provides rail-based freight transportation, intermodal container movement, and trucking services [1] - The company manages a diverse range of commodities such as chemicals, coal, agricultural goods, and industrial materials [1] Market Context - The current political climate, particularly the Trump administration's stance, is seen as favorable for CSX, potentially leading to approvals for significant railroad mergers [1] - There is a comparison made with AI stocks, suggesting that while CSX has potential, certain AI stocks may offer greater upside with less risk [2]

Market Overview - The infrastructure sector delivered positive returns in Q3, although it lagged behind global equities due to a risk-on market environment driven by animal spirits [3] - U.S. utilities, renewables, and North American natural gas and pipelines performed well, supported by high demand for power from AI-focused data centers [4][12] - European utilities faced challenges, particularly U.K. water utilities, which were negatively impacted by rising interest rates [4] Sector Performance - North American rails showed strong performance following news of a proposed merger, which could unlock significant value [5] - French toll roads declined due to political uncertainty and rising sovereign risk linked to the French budget fallout [6] - Communication towers were the weakest performers, experiencing slower growth in carrier capital expenditures during the current 5G cycle [6] Regional Highlights - The U.S. and Canada were the top contributors for the quarter, with Entergy and TC Energy leading the performance [7] - Entergy, a regulated electric utility, saw its share price increase due to ongoing data center deals [7] - TC Energy manages extensive natural gas pipelines and power assets, benefiting from stable cash flows and favorable project origination conditions [8] Detractors - Severn Trent and Vinci were the largest detractors, with Severn Trent facing concerns over U.K. fiscal policy [9] - Vinci operates a significant portion of France's toll road network and was affected by political uncertainty, although its operations remained stable [10] Future Outlook - Strong opportunities are anticipated in the infrastructure sector driven by decarbonization and energy transition, particularly in electric utilities across the U.S., EU, and U.K. [11] - Investments in electric and water utilities are expected to enhance grid resiliency and accommodate increased load growth due to reshoring and AI-focused data centers [12] Portfolio Highlights - The infrastructure strategy saw positive contributions from four out of seven sectors, with electric and gas utilities and airports being the top contributors [15] - The strategy underperformed relative to the FTSE Global Core Infrastructure 50/50 Index, primarily due to stock selection issues in the electric and water utility sectors [16] - Top contributors to absolute returns included Entergy, TC Energy, and WEC Energy, while Vinci and Severn Trent were the main detractors [17] Investment Actions - A new position was initiated in Spanish electric utility Iberdrola, while positions in Eletrobras, United Utilities, and Pembina Pipeline were exited [18]

Core Points - Union Pacific Railroad has distributed over $4 million in local grants to 430 nonprofit organizations through its Community Ties Giving Program [1] - The grants, ranging from $5,000 to $30,000, support initiatives focused on safety, workforce development, and community vitality [1] Summary by Categories Financial Impact - The total amount of grants distributed is over $4 million [1] - The number of nonprofit organizations receiving grants is 430 [1] Community Engagement - The grants are part of Union Pacific's commitment to building strong, safe, and sustainable communities across its 23-state network [1] - The funding supports initiatives aligned with the company's giving priorities, which include safety, workforce development, and community vitality [1]

Core Insights - Wall Street is entering earnings season with reports from major financial institutions such as Wells Fargo, Goldman Sachs, Citigroup, Bank of America, Morgan Stanley, and JPMorgan expected [1] - Despite a significant sell-off on Friday, there is an expectation that the market's multi-year rally is not over [1] Earnings Reports - Earnings season begins on Tuesday with Blackrock, Wells Fargo, and Goldman Sachs reporting; all three have performed well this year and are not heavily impacted by the trade war [3] - Johnson & Johnson and Domino's Pizza will also report on Tuesday, with expectations for Johnson & Johnson to have the best quarter in its sector, while Domino's may miss estimates [4] - On Wednesday, Bank of America, Morgan Stanley, and Abbott Laboratories will report; Morgan Stanley has shown positive results recently, and Abbott is considered reliable [4] - Thursday will see earnings from Taiwan Semiconductor, CSX, and Charles Schwab, with positive figures expected from Taiwan Semiconductor, which supplies chips to Nvidia and AMD [6] - American Express and SLB will report on Friday; American Express shares typically decline post-earnings, while SLB management is known for transparency [7] Market Context - The week is complicated by a sharp decline in Treasury yields, which usually indicates better economic conditions ahead, but current sentiment is negative [2] - Salesforce's annual conference begins on Monday, and clarity on President Trump's new tariffs on China is anticipated, following threats of a significant increase in tariffs on Chinese imports [2]

Core Insights - Oakmark Fund underperformed the S&P 500 Index in Q3 2025 but has outperformed since inception [1] - Financials and energy sectors were the largest contributors to performance, while health care and consumer staples detracted [1] Company Analysis: Union Pacific Corporation (NYSE:UNP) - Union Pacific Corporation is the largest and most profitable Class I railroad in the U.S., with a market capitalization of $137.332 billion [2][3] - The stock had a one-month return of 7.74% but lost 4.44% over the last 52 weeks, closing at $231.54 on October 9, 2025 [2] - The company benefits from strong pricing power and minimal risk of technological disruption, supported by irreplaceable infrastructure [3] - Leadership under CEO Jim Vena has driven significant cultural and operational improvements, although the stock has underperformed due to macro headwinds and merger uncertainties [3] - The stock is considered undervalued, with potential upside if the proposed merger with Norfolk Southern is approved [3] Hedge Fund Interest - Union Pacific Corporation was held by 89 hedge fund portfolios at the end of Q2 2025, an increase from 85 in the previous quarter [4] - Despite its potential, certain AI stocks are viewed as having greater upside potential and less downside risk compared to Union Pacific Corporation [4]