CSX Corporation (CSX) UBS Global Industrials and Transportation Conference (Transcript)

Summary of CSX Corporation Conference Call Company Overview - Company: CSX Corporation (NASDAQ:CSX) - Event: UBS Global Industrials and Transportation Conference - Date: December 4, 2024 - Participants: Sean Pelkey (CFO), Tom Wadewitz (UBS) Key Industry Insights - Railroad Industry: CSX operates in the freight transportation sector, competing with other railroads and trucking companies [1][5] - Market Trends: There is a noted strength in certain markets, particularly in chemicals and petroleum, while coal and agricultural products have shown weakness [2][9][15] Core Points and Arguments - Volume Growth: CSX anticipates volume growth not seen in a sustained manner for a long time, driven by industrial development and customer partnerships [4][5][30] - Impact of Hurricanes: The company faced significant disruptions due to Hurricanes Helene and Milton, resulting in an estimated $50 million impact on revenue for the quarter [6][7][8] - Current Volume Trends: Despite challenges, CSX reported a 2% increase in volume over the last few weeks, with intermodal showing strength [9][10][24] - Chemicals and Aggregates: The chemicals sector has been strong, with expectations for continued growth into 2025, while aggregates have also shown recovery post-hurricane [25][26] - Coal Market Challenges: Coal has been a drag on performance due to production issues and plant closures, with expectations for continued headwinds [9][15][86] Financial Guidance and Projections - 2025 Guidance: CSX expects headwinds in 2025 due to network disruptions and external market factors, including coal pricing and fuel costs [81][84][86] - Long-term Outlook: The company maintains a three-year guidance of high single-digit to low double-digit earnings growth, with merchandise growth expected to outpace industrial production [75][80] Operational Efficiency - Network Resilience: CSX has shown resilience in operations despite disruptions, maintaining customer service metrics in the 90% to 95% range [52][54] - Headcount Management: The company plans to keep headcount flat while managing growth through efficiency gains and improved training processes [60][62] Customer Sentiment and Market Conditions - Positive Customer Sentiment: There is optimism among customers regarding investment and growth, particularly following recent elections [42][43] - Tariff Exposure: CSX has limited exposure to potential tariffs on trade with Mexico and Canada, estimating it to be around 10% to 15% of overall revenue [47][48] Pricing Strategy - Pricing Outlook: CSX expects to price ahead of inflation in merchandise and intermodal segments, with ongoing contract renewals showing positive trends [98][99] - Impact of Trucking Market: The company anticipates a lag in pricing benefits from the trucking market, with potential positive impacts on volume and pricing as truck rates increase [100][102] Conclusion - Overall Sentiment: CSX remains optimistic about future growth driven by industrial development, customer partnerships, and operational efficiencies, despite facing short-term challenges from external factors and network disruptions [86][112]