CSX (CSX) 20 Jul 232023 Q2 Earnings call transcript

Good afternoon, and welcome to the CCSX Corporation Second Quarter 2023 Earnings Conference Call.

I will now turn the call over to today’s speaker Matthew Korn, Head of Investor Relations.

You may begin your conference.

Thank you, operator. Hello, everyone, and welcome to our second quarter earnings call.

and are Executive President Kevin Chief Vice Vice of afternoon Officer; Chief Boone, Financial this Pelkey, President Boychuk, Sean Jamie President Sales Officer. me Joe President and Hinrichs, Executive Executive Executive Joining Vice and and Marketing; of Operations;

on on In presentation slide disclosure three. call, followed by find our you the two will our this forward-looking accompanying slide non-GAAP disclosure

Hinrichs. that, And pleasure Joe my Mr. it's with introduce to

you, and call. joining afternoon, our Thank everyone. for Matthew, you Thank good conference

our met of quarter led second by results the over performance strong expectations our the Our business. merchandise

at we had manage and As revenue prices. we quarter, knew intermodal lower we indicated and to year-end have again export coal last would normalizing storage that through

intermodal soft and We imports expect be to volume the continued. as slowed destocking activity

knew customers, we with performance also momentum our workplace service improved hold. that led our in CSX gaining our our and own ONE as were That said, took by efforts we

and employees' difference commitment initiatives to we much continues company's show value-creation. as combined but our more network to to helping groundwork progress and making the long-term and our with apart. for to this the are our do, we set run There Our signs quarter results lay railroad making was and work a well, our growth hard of big

Turning to slide five.

highlights of strong margins carloads including the XX%, in the merchandise our X% operating the in review and impact by and for moved X% an trucking million We remained growth volume Quality Let's in ratio business. the second the led over X.X quarter. a second quarter, with growth Carriers' below coal,

XX% related XXXX to to by comparisons EPS $XXX included a per share the and quarter property flat earnings our sale. gain, results last to lower X% Commonwealth making second share Virginia When representing year, of which $X.XX to $X.X Operating of year billion billion decreased from that million income important our previous remember $X.X it's $X.XX. and quarter. generated We revenue, to the was in the X% year-over-year first decreased per than

All fact to was macroeconomic a performance highlighted volume work we to solid when business. results testament market The our do by uncertain that was such together. merchandise a in, able is able great what core to an in X% are this we team growth in our drive

of moving talk six. CSX report, our the about and moving forward. XXXX need progress a supportive which Earlier company. valued feel Now like I slide fall, in communities to the its the made our who about all stakeholders that does respected? Since it on have means about CSX, as and its new month, the in are really team and where released What last feel where railroad included, measuring appreciated, building our ONE are this heard success started highlights you and me has practice. culture ESG customers you've here a where our tremendous positive which operates its asked look consider what to you company Many in me, of this people

us, goes think view this highlight taking incorporating here share. at all that hand-in-hand environmental, here how CSX into These the and actions the that of see are purpose To authentic with priorities company ONE greater picture that sense the and Adding we're you into our making we're of small CSX. offer I considerations happen social we focus. real, to our today. governance the a

to suppliers, technology, use here part as to we customers By core of and and about our progress. make clear advantage a of our to testing and trucks our leadership practical often of over our expanding alternative encouragement our support our value proposition talk fuels conducting environmental shareholders. We and our continue offering

a in testing as solution. emissions week, joint talks last venture that service. revenue Last to the in heard low release press biodiesel our in blends are month, of promise form fuel encouraging hydrogen-powered you locomotives locomotives, offer reported which we for we we a As are with development in CPKC

not talk all which It's ours efforts cultural up work. probably are to And been of live a we increase am and we What in the have company's build priority enough places the people our about CSX do positive the incredible in proud railroaders, made to how quickly of responded. I by our impact.

are see volunteer you hours our As here, substantially. up

to have and who people number able support events help community has of look CSX-sponsored to Our been to I come. have multiplied. forward been the much we more incredible. And

and much There's injury top like item is and mention. to our rates. we CSX, I'd last our on so At safety one why focus accident reported priority, that's

to safely of home and one our of Our lost we every it make is fundamental last affects as that deeply. one every that day. does When we lose Little colleagues gets sure us goal happen Derek our month, employees not

why so to and need we much reminder, a we As effort do. on make safety work much more how

me let to Now turn team. it over the

Thank you, good everyone. Joe, and afternoon,

effort performance. enhance company's to As safety continue Joe every make we our said, just to

progress made shows, both FRA injury rate As train and slide good quarter we this eight frequency sequentially. with accident FRA our improving

the injury for also we've quarter seen that improved year-over-year a and since second rate Our lowest rate was XXXX.

that hires our who understands Our to are familiar, part employee, appreciates and focus including culture. is less reinforce new safety-focused to their every ensure

Turning to slide nine.

second to every the operating the performance railroaders, firsthand who the to plan seen up culture. positive I've by being to operating industry. work day. Our and strengthen held our employees the our hard well our response the made continues quarter Thanks lead of efforts the execute over to

customers. delivering show field and women in feel them, opportunities and the to ahead. model railroading excited there as well of our appreciated how included, helps which the valued, Our them even men scheduled and our able they works, in respected, am more to, are more to pride Because listen are I we're service are

than from percentage quarter, of points X the trip while points. year. improvement by performance period Velocity of quarter, over compared XXXX. to averaged XX%, carload of XX the X.X miles percentage last year-over-year, averaged second same same substantially hours, plan Dwell performance the in trip XX.X per hour by improved slightly but period plan increased up Intermodal lower XX%, XX% in last an

shareholders I'm pleased received with our compliments regulators, improvements. we customers, on and service our support the and have from

to keep improving Our so for show growth this long-term and over continue can that we CSX. drive to sustain we goal service can time is our

With sales that, it and marketing turn I Kevin discuss to to performance. will our over

Jamie. you, Thank

As Joe of across many headwinds noted, improvement despite capitalize team our the service. to year-over-year markets, strong on able was in

focus pipeline a of opening where work of opportunities. I'm our Importantly, our as progress up growth to the XX%. ahead seeing there’s of proud remains made. we with building team our pipeline us of up in we and we improved, lot service has new discuss business customers year-to-date There opportunities the are on have as

into our with new Initiatives by transload with sessions technology increasing engagement to our both and team and medium-sized customers, areas better our move as and including direct focus we network and of small finally, for our whiteboarding expanding shippers, the customers back with collaborating the tools Class leveraging short-line reach X with of year. the are half few partners bringing a serve the just

slide XX. Turning to

performance revenue driven and compared on strong increasing a even revenue fuel merchandise X% increase continued was in lower per surcharge higher to declined with X% This second into quarter, growth volume, last substantially prices. the by year Our X% diesel all-in unit. our as

of service which are quarter, seeing As their opening encouraging to customers improved up we is in network. saw our business levels, the bring and them opportunities first our more to

demand volumes improving of our of times. the Minerals many year. quarter, and commercial we relationships in convert market spot, and service production for new with we metals from consistent wins. In the lead equipment the cycle equipment. more construction be seen are the saw aggregates to business trends start and scrap, from service and and to our strong business For to And benefited new across and our successful wins. continue We've we've expanding opportunities automotive, been up continues improved seeing steel, a translating in bright our product business our

fertilizer our domestic I'm by also year-over-year, and of volumes supported shipments higher strong pleased delivered business nitrogen. potash that

On the remains of our challenged book chemicals soft side, demand broad to continues across business. other be as

headwinds paper grains [Technical some and We've and products. export ag also in faces food. Difficulty] Forest for slowdown seen in products pulpboard.

build new the continuing away truck. expect the we more successes of customers, had attract year, existing efforts our of customers we've For while the from share win to to second-half our to wallet on

supportive XXXX. to auto, growth in for will expect of the many over and markets look of so markets including wind We to be We volume the contributors serve remainder remains we and important remain uncertain. chemicals, metals destocking there down minerals, activity to timing

that is our markets is important most waiting What's to and sitting back turn. for team not

our We forward are initiatives. pushing own with

business Select making strategically capabilities additional we're And to new drive has pipeline been and with expanding group to in partner of Our great progress Site transloading program railcars providing more locations, our developing our business CSX. and in investing investing projects. development

slide XX. Turning to

at expected, lower unit, on export due was we Southern gain volume natural burn. tonnage in Bay in quarter revenue by among as coal favorable. prices a low export markets. coal We declined move a as the X% and our per demand coal continued offset Curtis more our into terminal to performance utility X% customers volumes saw beneficial decreased Domestic by push a utilities good coal revenue in growth shipments gas decline as weighed X% times, overseas benchmarks. Though remained cycle than Second more to driven

markets. making in momentum the the supported second-half opportunistic mine capacity markets volume the with over to export by new the into expect producers We coal year, international CSX continue of and shipments

second-half we last providing On seeing and But domestic recently see for the comparisons are year. we tailwind the a few strong just hot in sets. customers versus looking helpful additional is a early side, this quarter summer tougher a

will impact met quarter. on all-in our We of benchmarks coal and have Current exports mid-teens we per very Of of year. third will anticipate metric international with half benchmark remained back into the international coal from decline the our record per the course, a pricing supportive benchmark into an last $XXX are our percentage. see prices Most of by strong quarter production healthy around highs, sequentially ton. year's as revenue the eased third RPU unit

turning Now XX. to slide

and fuel revenue effect decline per reduction Second by decreased a due in surcharge. lower the quarter volume unit, reflecting a to X% XX% XX% revenue in of

to the first drove team's identify seeing of good modest most the the headwinds destocking. in efforts from showed the a As in [Technical the markets make intermodal Volumes imports lanes. conversions progress new with declining by continue domestic Difficulty] quarter, and rail decline business decrease to the inventory we volume with much and and international more business

Our best-in-class conversion continues quarters us service for Eastern in and to years the ahead. product truck position

are seeing pressing And growing initiatives, other activity our strong while business, value opportunities shipper at product. forward, service Looking late the that still on a and rebound new in in quarter the a our inland own looking lanes, customers we're of ports. new international ahead our brought with for we in recognize the we

truck target conversion. Domestically, we're encouraged all with more by many opportunities our work to closely X to Class of partners

of Just with is in example reached in a to create will weeks markets our link few CPKC key agreement we Mexico. and us. new one all just the new ago that there's very this more a customers even the the opportunities partnerships interchange with for Southeast excited creative Alabama of we think of opportunities that ahead We to can And the about railroads. business across much help more remain Texas bring

Now the I financials. to will discuss Sean turn over it to

and you, Thank Kevin, afternoon. good

merchandise as from X% was down cycling benefits to on property at merchandise revenue, the $XXX reflecting pricing million a was by Looking a gain Virginia $XXX lower Operating Difficulty] well coal headwind transaction. income recovery, from the [Technical other fuel volume declines benchmark-based XX% and revenue across billion, export million, growth $X.X and as in second quarter export results, strong pricing, or coal.

million I'll earnings. detail the expense prior was on the and items pre-tax other $XX next decreased higher lower in income slide. Interest expense the year, on expense tax and to $XX compared discuss more by line million

As result, reflecting lower $X.XX by a fell EPS gains. impact of a $X.XX, property

was next now Lower slide by gain. expenses. quarter turn million. the expense offset second a to look prior price take increased closer largely Let's the Total $XXX at year Virginia and fuel

$XX of more network from While depreciation. million was headwinds overcome labor, resulted PS&O, over than efficiency higher enough cost across improvements and and inflation of not million to in $XXX it savings rents,

increased inflation expense the and individual to impacted increased Labor line fringe headcount. items. million, $XX by and Turning

from more with sooner, XX down home Importantly, home significant are get over and XX% us ratios reduction service in away nearly number employees a the of hours. tuck helping improvements overtime employees

will rates As mid-year cost second union a in and on employee. by our reflected reminder half X, July wage X% per be stepped-up

of inflation higher acquisition. expense maintenance partly Pan savings increased with and and $XX cycling expense, intermodal million by to repair PS&O the offset in related and operations costs Am

as last and result overhauling rebuilding as a of improved was up are we larger year, year's in than locomotive a as engines more While quarter. the $XX asset million Depreciation study, X% last well equipment was efficiency base.

better by and in was and gains favorable, down year. strong was market. cycle cycles $XXX automotive in XX% reflecting gallon inflation more million with particularly costs last volume, Equipment $X cost lower merchandise million times offset than car improvement Fuel from driven efficiency price. rents the These than higher

property gains unfavorable in quarter. discussed, as were Finally, million the $XXX

approach cash-generating of dividends. receive and commitment supports economic in upgrade. of move reflects After supported Now CSX repurchases including ratings to turning We year-to-date. CSX returns, $X.X billion $X.X projects, of $X.X on billion slide strong opportunistic to the credit free investing encouraged fully through and cash distributions power were capital cash funding billion in strategic to infrastructure XX. This million has flow and over of flow share cycles, news has balanced core investments recent to a our shareholder in This return. and which the our $XXX ongoing generated business

is Economic profit, year-to-date. million over CSX up earnings, as $XX cash measured by

coal revenue impact return-seeking see intermodal the gains. and long-term cultivating a remain projects more in year-over-year that of declines While we’ll storage pipeline second-half, in committed significant and efficiency investing headwinds mid we have and growth the to export in

With turn his it closing back to me that, Joe remarks. let for

Sean. you, Thank Alright.

on conclude XX. on our XXXX some comments Now as with for shown let's outlook slide

the expectation metals First, be with volumes the revenue through the miles in happy and we of first-half we that ton in We very for strength automotive, to and for marketplace. the the remain in business minerals look had year performance continued digits we've by merchandise will our grow our reiterate the supported of and the successes low-single full-year.

coal higher, driven full-year strong be volumes by export to coal. for expect demand We

likely As last shipments gas will natural noted demand coal by we low as domestic is soften quarter, impacted prices.

occurring For decline of benefiting supplemental the as recovery the activity still seen the though quarter, is earlier, domestic from pricing said modest revenues expectation improvement in with near-term starting in intermodal the that yet Kevin a reduction there for signs intermodal, in We're have our we million most second-half signs second of are late but business. for of for of favorable unchanged, international environment, a $XXX year-over-year year. no

benchmark coal will our met prices of per impact over international unit year. remainder Lower also coal the the revenue

focused are our offset billion focus at we costs with we and control service innovation still committed to a customers. real improving before, on efficiency inflationary efforts making best to And pressures, and drive staying As strong and $X.X on to estimate finally, are we to expenditures our capital growth.

proud team is in no the I CSX There continues we up, that to To am that sum some make. of the economic face doubt progress ONE mixed conditions the near-term.

our many However, expand about together. up is for win execution service, very for working and opportunities there are opening am profitable so CSX. us to growth ahead and what achieve remain safety, I markets we excited if on share, focused

questions. Thank you, and we'll now your take

Joe. Thank you,

one to to and now will sure to the only and opportunity, process. question-and-answer we're time to yourselves ready make question. has the everyone that We move In our ask interest one an session. you we start of please to Emma, limit all

Wetherbee from comes today question first Your the with Instructions] line [Operator you. Citigroup. Thank of Chris

Your now open. is line

Certainly, uncertain, volume start think you the back we like resources wanted you some is you that in Joe, guess thoughts guess, how are Good the a little noted we're you guys. the year-over-year thanks. in now, to maybe and and economic half revenue greater matching into that I Hey, revenue I with it's of have about second-half right year. mentioned and around environment you to have -- as a Joe, on move as other the basis the of how particular, year headwinds on still you volume afternoon, outlook. the bit coal, as

starts in be coming the there to know think sequential you we is is it think service Do do done Is conceptually, on how what that of may sort profitability be there? the decelerate means basis? of more about a that work you back year? time I it that And the in and So back. managing half resources? to how about fits headcount think to

Chris. Thanks, Joe. It's

noted repeat we've level, high as year's last second-half of that a things at referenced. the think I you from some won't

we've we're XX%. pretty the And with improved that's delivering. our plan highlighted resonating getting since levels the the manpower around We've second and continue quarter been that the customer up Jamie So to sustain service regularly now focused been on November customers. last really of in compliance levels really our to year in trip XXs

little have We're business. watching has Intermodal kind seen highlighted. know, volume. up what's we when growing on you mixed business. We've market been metals our And very we our the chemicals, and carefully we'll And there. speaking, out we've the see of down, automotive highlighted, And know, other that you holding merchandise a happening parts with volume of growth But in merchandise as turns. been softer has generally Kevin side. been and

and we're of customer we service. the watching So making to high have sure volumes sustained the very staffing that support levels carefully levels

And important we're and his that started momentum levels some And having really improve. levels to the to in up now gained We higher second is really reason why the that continue sustaining the the -- share conversations that, of Jamie our good it's and year quarter. our high as picked and very good customers Kevin first-half of in so team with these we service, have conversations to noted, we're customers. with have want

really have that levels same But now volume we right our high we're supporting now, volumes reductions to able we're the see that. further time, are be seeing accordingly. if making focus growth and we sure the of on manpower service. will seeing to merchandise what And right sustain our of But also, it than is volume course, the respond at this

question Your of with Jon line comes from Chappell the next Evercore.

Your open. line now is

first you million ask about to the million. you to afternoon. Thank Sean, In wanted productivity the $XX $XX you. said Good quarter, I improvements.

in than quarter. million more $XX second the said You

to think eventually plan million. $XX I get to the was

get do you question is had million could Chris' half run $XX environment kind by think $XX is And the of the you million to you that anticipated of bit ‘XX? of become essentially, as guess volume I a even quarterly a about as the this question, if year along than the lines ago, back softer six greater months rate? XH So

recollection for what Jon, of we quarter. Thanks, your said your in right is question. Yes, first terms

million, momentum I over year-over-year. of are sort $XX call we of savings fluidity-related would some a $XX yes, with what million building So little

or be of volume aren't that, Now number up just cycling and is of, if the like down sort lines. related independent in This costs in those of cars counting, costs we things along to clear, things sort that. This is there's related that reducing to to really that. faster reducing overtime, changes

do of and have feel second-half labor here more we year, summer as get We get set increase employees the that's million availability line good starts We to out us up that balance for is half year sight our the pretty about that of out up, of of we pick of and number some in especially plan, year. over million training. to the the to in going should to what to range we be the the of in continuing $XX $XX second

of question Oglenski comes Barclays. with the from Brandon next Your line

Your line is now open.

that Hey. was revenue the Good pricing commentary could afternoon, reflecting and follow-up but taking merchandise contrasting and if and surcharges, you could? environment, if I on inflationary thanks question. service you a intermodal coal higher loss Kevin, the my maybe for with around wondering

and prices. the you moves particularly coal the at mean our with it I market, market, Yes. export benchmark look when

the in continue. we just mean last as year and good. worked it's nobody very, that in market, U.S. We that. that great the obviously, supportive. very, something participated I prices that's well here extraordinary mechanism. pricing producers very expected it the and participate, when swing producer again, it's remains very the would had But a in very a is So We keeps

go the side, you our surprised are their rest of discussions on not it environment with When our are merchandise getting they're across those price And customers. and market the that similar -- portfolio, of remains and supportive our have there. our customers the having they're the in to what ability inflationary look to particularly out

the So there. alignment is

little down market the are would little pricing and perspective, bit maybe continues. year. for merchandise be spot but bit, But a and market to see a a that's market still the bit very inflation -- forward into little a will we'll come very, the side, I in how softer, from both the obviously, so think in next Certainly, healthy less and carry market looking been on intermodal people

of Wolfe question Research. Group next the line Scott from Your comes with

open. is line Your

Hey, thanks. guys. Afternoon,

can Sorry hear about my voice. you me. Hopefully,

And third the puts that the Like, the So bigger feels gap How profit RPU coal between fuel really are QX guidance ratio, think about there's then a underlying mind? helpful. and like normalize when just like should we think it was quarter? inflation. still QX? your and as picture, pretty the about I What in some does in good to elevated pricing impact takes operating other

going are Scott, terms of minute going the but not to and time, I it's ultimately trying win just to seeing of it's number the bottom if just best off impact of margins, QX, of I and the Sean. in positive -- it's grow think well got QX in in been That's product of and opportunities step a ability certainly company. ultimately We're We've that's also have one where think versus line and top into the the those. the to to being able really we're on Yes, those back a Over industry. we present best, a seeing what service not that's mean here. so the on themselves. a about business achieve translate excess to highway obviously

a rate positive headwind quarter relative the increases we've little look then X%. quarter. the second, third had of at on we've We've mentioned, I year And as be prices pricing. the lag seeing of the all wage into we talked got coal that settle long. here headwinds bit a bit so little could specifically about When We're a fuel Kevin that union got fuel third the to

So that will add some costs.

the and and the gap other. going persist of purchase the That's line. across the We're into of of In set to got from year between question, perspective. balance labor pricing essentially terms of the line labor PS&O inflation the sight year. the a here for fringe services most We've inflation. And of both seeing second-half mid-single-digit is clean your rate and for a and

I info, pricing think the We'll done. additional would towards chime can year pricing of the Kevin the most to year. but start next also say, there's into for year as in been get of we and I for if the has get end

far, And so continue supportive. be have conversations to -- been very

think Yeah, back probably this we'll inflationary seen the We've multiyear I need that's a that inflationary have well reflect of there's still is right. But today. environment. the what particularly market contracts I little And out pricing the of that merchandise business the there, the catch-up. think to touch with beyond half bit at in that, year on line it's

Your America. with Hoexter next from of line Bank Ken comes the of question

is line Your open.

afternoon. Hey. Great. Good

about or So X% third environment, so you're maybe targeting ton-mile I or running into low-single-digit growth. as guess Kevin, year-to-date. to just understand targeting revenue you Joe -- this the move quarter, you're still

talking moves seeing that improve the far at if you're based above do the think now? inflation? that on we volumes can of get environment if into And you we're we you we're do revenue that right weak So third so ratio that quarter still negative move stay operating looking about, current as cost weak then Thanks.

Yes.

we of of markets the into you'll easier comps, quarter, the fourth or going some whether the the you Ken, and as move international back you that remember, the intermodal enter saw. it's a to think, I into half of lot year we're lap market as think I also

the Some begin order fourth September carry softness in really quarter. through and

helpful So through probably revenue positively I from things RTM will be which say would a trend perspective. the -- will quarter, growth

bit summer this lot now. before business. three market of ago Coal outlook we're can weeks, what two and a on is just domestic we dynamic coal for given lot getting a inbounds heatwaves interest Look, But recently, little the probably started having. more some do we're a weeks hot right lower more a

think Jacksonville heat I In got we warning afternoon. a here fact, this in

that's market. things have been So of hot. supportive Obviously, that

change dynamic quickly. are change things And can very so -- can and

-- think, markets of prepared stops, business. the mentioned while or that's I right seen in call when my that The I out destocking destocking, I there month the markets. in where We've of many think, I I the for it now there's quarter the in remarks. don't can't demand these some but we're underrunning a

into normalizes And as move I those we'll that once the think fourth of demand dynamics the to I'm So that that's for see an too. opportunity underlying some play the in hopeful quarter, out. economy, us, we

pointed there's And the fantastic been Joe then out, team as -- job. has doing a

And some on is we've and of wins we had collaboration and as the his start year, of side business and in well. to the move layer the start in to and you'll next efforts resulting those some as see operations that with in the and team Jamie through year our that into

to the that presents just not second on in Ken, But And gain we Yes. extent grow goal jeopardize here we're profitability. ability is truck, question, the ultimate suggests Kevin grow calling a the would that, pull. things do, can macro but of there's pullback commentary part the of of the the your off that volumes. there's something I not that think the like you heard to levers momentum share the we to pie our and to we do kind And certainly, which look can that to to gain from and continue

next Your Brian J.P. comes question line from Ossenbeck of Morgan. with the

Your now is line open.

Good Hey, afternoon. thanks.

size several have getting sight been truckload that call. getting making in of -- like what you mentioned say that of line maybe But be you you're you're and wins some on but to a at the clearly, just times terms quantify that in after on Would it's it's of relative sounds go or us some big topic able context conversion, the the any you give time opportunity. point to? it's because could hard be? can to to So the long-term decision Obviously,

quarter? employee well. we there And another you next other in the mix that expect the few over time, or could as I go then, should wages payments know clarify Sean, up got go if cost per things just for you a up but X%,

clarify if you. it So can be helpful would that, you too. Thank

Yes.

numbers, focus it future. in we'll probably on over pipeline the an time put at focus and There's of team three terms I and on think conversion a really our finer opportunity. years huge the the measure some next at truck opportunity look the in there's where to customers point a those by

And opportunities lot making that have customers more resources customers we those up and to drive the others against some conversion. a than really have sure

So of a activity. lot

internally tools We have focused that. a of lot terms of on in new measuring we're that

momentum. year-over-year data pipeline, our better On that. significantly, of day, is than as every dollar mentioned, up a up So basis, as a our And better it's more getting is I perspective, there's volume we on and even up a it and lot XX%. measure

building. So momentum a lot of

the trucking to upwards against the we to we're up now. market more is work over most optimism customers Hopefully, the more drive right months firming that and even some few as there's next drive with here, compete will Obviously, sessions come opportunities. to lot XX receptive that's think not over those well. year-to-date, are opportunities translate market opportunities of are fruition shift as necessarily a tomorrow. those They we from a to driving to into going quarters, truck and of opportunities. don't lot whiteboarding of of next But share couple the And

that in right these I things don't you, forward. Sean. control So of of much us to some are very teams It's terms very, going excited. think we the we've obviously momentum can we're -- this just had Over are against markets now. of

X% the union employee, be Yeah. in should piece. terms increase Thanks. per than on other of stable fairly it wage And cost the

to are think I efficiencies there some there. drive some opportunities

feel the to from than impact to first-half a X% increase the second-half, better of but do we wages. certainly higher we'll the So hope

from of next Stephens. the line question Justin Long Your comes with

open. is line Your

back trends. because into I was volume looking market that domestic around big there's And kick the wanted Is international intermodal to how intermodal, And business about could compared gaining about domestic I better intermodal Thanks. expectation your numbers the if comment function for wins and getting half, the starting quarter. in in? Thanks. you or demand second wondering those a intermodal share your between to momentum. the of a divergence ask

Yes.

and it's the improved that look range. international about We that when from in think the I you bottom perspective, high-teens peak that in quarter, being slightly mid-XXs, market down there. down from probably, think at a second

we middle So we month-over-month better our is month sequential or than the move rate year-over-year side exit the as the we on basis what quarter is the on get domestic to of What through a through saw improvement little a saw each quarter. quarter. bit

us gives there. optimism that So

quite done, some introducing partners fantastic with to lanes, The new of job and that our working some team new business. frankly, identify of has a Class X do

those playing really are out. things And of some

Some really, obviously, market headwinds the, have the of of in well despite there. our really partners some done

identifying them, where with some working opportunities. have So markets we

and And work flexibility and things, look go may look at it try opportunities, you at out markets, kind in there network, that of really it. things these more gives your -- after out identify to go work

in do So to the using And rebounds. growth that's team you're here. been up market the market as the has for to in set I and that think softness go what see the and the us starting numbers

from of UBS. next Wadewitz the Tom comes question with Your line

line Your is open. now

not maybe And questions, you've in momentum tough But there's think on a do Yes. customers. of you Great. Kevin, -- service, with I good have clear not -- it. the how lot kind guess, discussions to about I got you've Good this of of environment. afternoon. good the type ball volume. Appreciate a got with crystal know it's

pipeline that the improvement bit demand, talking see up about reduction, of a get going see we conversion good. you you're maybe truck some inventory improvement coming bigger think just evidence through? maybe You're beyond is to cyclical see some If in more and swing of a do of

a know that about -- a we maybe I'm ways? Is these improvement digit Or, do backdrop, at mid-single potential think in you framework about How but -- when looking I see some rate markets? you guess little translate how do volumes higher? it think is just to tough things what trying it's

you'll of move conversion move levels cases, or we're see business that. in Yes. there's I more rebound. probably think to up the just going to put internally, time. over firms numbers won't markets but around current reason the is first nicely we willing that think yes, I setting up, to rail our create things businesses -- when rail control And where the us discussions these to that some to There's for having the around -- it freight back of lot And it, market demand least as see a a leverage the combination I we're for do can in to truck some hiring. all the at of returning markets we

of -- while cyclical But occur. It's participate pipeline was others. earlier, pointing that's help all yeah, when Joe it, the out the starts since idea investments, to up. sooner upside to it's will build we've to it's these some So as the reacting are obviously, than months And improvement. takes a -- been about nine been us that seen customers that rail

line comes BMO with Capital the of question Your Fadi Markets. next Chamoun from

Your line open. is

rebuilding work we issues the two the Thank you. the like rail that question and -- on three done saw the in on a a you some we years were great service culture My of longer term. comprehensive related. all know, job Yes. doing building or sustain as level, to the service service in have the last But like obviously,

obviously your network. you outside lot a had to You of of from friction coming own

thinking how network. of wondering, about your some affecting these outside you are just service of your are problems from kind I'm that

kind Some of has of service you there out about, try that historically of opportunities of service even talked supply level Kevin to sustained Or which that build these comes in levels? chain? are demand see iron friction kind be areas to challenge partnerships that a the some back, these the can as been to

question. This Yes. Joe. Thanks the is for

right. You're

chain and up that generally a things benefits some globe from the But storage. in were the customer supply of some across that. definitely impacted everyone. going felt last We've challenged, Over speaking, the years, several revenue things because from of got standpoint, we it the certainly of effects side was on supplemental

the past, we the XX% provider. in around noted we've side of as another carload moved what And rail touches on

of are important. service important rails levels So overall across the really and Class I the the interchanges partners have is we

about of all cetera. et and the the congested much forward, up and aren't a as ports in intermodal as have they we facilities think going network the gummed you lot were, don't If

to be we run back able So side should especially. comes on more intermodal fluidly when the market the

think help. collective improve going an for to that we're well, as the as calmed customer the holistically X our will service way which thinking I service, it. things their improve opportunity from perspective, partners the customer rail to a that give we That's industry And down -- Class about forward. the have the whole that's continue So

overall control business and more the parts it, the our to piece up able as We also to, getting market we'll manpower for the of and so better other way, system economy. do better and was same and it Class rail handle of Kevin comes the working better a repeatable alluding also time, At can in the to -- we'll fluidity predictable and when be which that we freed our network in have more with the have have want the should to partners be same. the back, I levels, and should our keep overall

question of comes with Your next the Deutsche Amit Bank. from line Mehrotra

Your line is open. now

the of quarter in Thanks kind XQ. for a second incrementally, better was headwind performance a just taking expected can in for know pretty sequentially. have guys. headwinds Hey, fuel the bit Kevin, severe you question. that of moderates the yield? just I few direction that's there travel little talk about would non-coal I of a

the what direction that just So on travel of wondering is.

about relative around made quarter you I some the did that in the coming to PS&O leases some adjusted what the the right Sean, quarter? guess, the you've gain and are know Thanks. that back in like insurance half. jars way then on back storage in quarter. half first down second like intermodal you things to, What's progress to good I PS&O costs container relative in got that think And expiring

international our broadly, cyclical always chemical obviously, in is market, is business, general, about on markets of right? obviously aside, one which when you a Yes. Obviously, we've side. And at putting highlighted pressure has typically mix, look merchandise When right now at talked the coal RPU. higher we've the under that yield there's you the look

the on side, of it. the seen from lot and merchandise weighed that's So there's within overall moving you've parts benefit a

were But truck on obviously some at within think you is I the the saw. quite achieve intermodal despite the if healthy of look that the challenges unique, we what of you and The given some able headwinds fuel is do what we individual markets absent to by contracts, And a much surcharge market is the there, had impact of flattish-type our on rate. positive spot market. have larger there. a that RPU, and again, particularly some you obviously mainly was saw longer-term fuel impacted But that, to surcharge

better with markets held on the the the lot obviously, spot the the flip some side, out than rates of market truck. and trucking saw we've NPA a pleased But some But of it results what do there across measure the some highest markets or along the there. downgrade in, a long was as the in very if But that the we I seen of you some of results time, overall, broadly significant in markets. look some

can costs the always I'm because we And a intermodal on puts the we're up the say Amit, will sure your volumes costs. -- cost the will it impact different question to on little to extent got PS&O, I that on control necessary bit, an predict line, a to we've that we're that and that PS&O only are move very quarter. and that pick there's volume making that takes are order have focused hesitant that impact within number of in

means absorb see. at it be for in I volume-related PS&O second of, the year-over-year in basis the on of might on any kind half, that second-half, would sort impacts expect to that expenses, able inflationary forward. in And outside the most second probably be But look to, improvement of we'd going you a volume-related line quarter the of impact if that able notwithstanding the saw fully we hold the you that we'll

with line Sanford comes of Vernon question the next from Bernstein. David Your

Your line is now open.

call the for Thanks question. for thanks guys. and taking the afternoon, Good

So the the about And mid-teens $XXX? for then of guidance mark-to-market just to sensitivity? us bring that think kind to for of RPU we do into kind Kevin, dig Does how sequentially.

that long-run Is sensitivity think extrapolate go either if $XX good we're further pricing benchmark it, way going sort $XXX sensitivity average we the in of to or Can to that about was expect up down? a forward still, decade. Because prior on price changes? the call going above to the

think uplift cases, positive we're ourselves then bit the that of protect in both end. $XXX embedded as of what the -- in Obviously, extreme couple we that's right, the the quarter. there's We've even bottoms, there's in days. Yes, the seen some We kind and into I on top that's participate so of as bottom is of fair. a but little coming on stream fair. don't I think last recently and

brings. So that we've in we'll see what and market that stability, lot But the little see of fourth uptick here trends. seen quarter a if a recently, slight where not we'll

from question the next line of comes Goldman Your Sachs. with Jordan Alliger

Your line is now open.

going freight Coast on Paul recent shoremen, anticipation some This there's diverted Hi. how the are West thinking be some terms intermodal? you with West you the agreement Thanks. back the long-term? of for in Long guess I Coast. could think I there intermodal more by that's to about that be to that the offset being Jordan. Stoddard guess for And on international is do domestic

serve made, on there's Coast, to which from. you I continue we'll look at think opportunity long-term to all benefit Charleston, just go in the Coast and the to Savannah the and long-term East you the growth trend, growth East our investments and if go being see you continue to you'll a

the going helpful. Coast is Some West stability to on be

the know, didn't comes see of and across you West international some a interchange was the given still a and of that our volume. lot congestion Chicago we West other on trucked, business of that points. And through either unfortunately, the As lot volume

we as a recovery that should benefit from So there. --

see from that will -- in network some something basis a the don't necessarily share to the perform and rails if coming as away that better it of I begin East, to what West as us. So in taking obviously, we're doing year-over-year the the Eastern benefit traffic on more

of with Fargo. Wells Poliniak from line Your the next comes question Allison

now Your line open. is

Hi, good evening.

to you is from perspective looking Or a yet? on to back go any that's talk Thanks. thoughts aren't holding just convert to When them question yet, simply ready back? service price there provide want to something that. there you that Brian's modal quite that conversion. customers to it is for quite Just Just on they're that's not

of thing most that right? those conversations. in some to reliability. see for important see more They they a they reliability, today. have eyes, Look, And got to perform I is to and think customers' We've customer the want continue like what

sometimes that where carload-by-carload And confidence a It's get customer. lane-by-lane. from we it's

one those And in even expect of and innings from we first fourth to more conversations pick so and continue quarter the feel and as up we're second we the quarters acceleration this, in I the quarter, with to to early confidence, our very third issue. we is their helpful. but what doing perform. Sharing what we're on winning incredibly to that's plan number resilient, them do It's the side more Sharing hiring the to not make network price.

XX% truck pricing of the have our versus advantage competitor. we time, a

opportunity the us. So for that's

We advantages. the have environmental

prove So the get reliability we have all and sustainable. reliability these got things, the is that to we've just

with [Operator the Instructions] next line comes RBC Your from Spracklin of question Capital Walter Markets.

Your open. line is

looks Thanks on bulk in Kevin, into next of very looking and areas base and presumably for merchandise ag much, a But operator. -- I just that's particular, pipeline its your has just wanted bit? forecast focus year quite revised downward mainly. good, XXXX some the the by really EIA and from to coal, shift

ag current to And there's that's the like severe forming the season. drought impact side, then going looks some on it growing conditions

digit down double particular offset those two in any of volume looking some for two suggests that those could XXXX, offsets next we categories. that mean there So those be I into bracing fairly some for year negative flag Is growth would that for that there commodities? would you forecast

heat what we're the and with referencing doesn't a the hurt running and from certainly And in obviously the I customers over upside a we're surprise dependent here that's summer weather of Obviously, the perspective full inventory side, the replenishing hot levels. that coal on mainly seeing weeks. really a last few weather some our and of middle the domestic of. Well, you're and lot the here perspective a is from to think out that's conditions

see we'll how so And the out. plays winter

it. we global coming bit a in think driven to as to really It's competitive the me. We a to market But healthy are early serve that's in conditions. supply really, that in very we to ramp export no is up new that I by expect participate the call going almost what land see will That Many online be going matter market year. supply we conditions. next seems Obviously, and in in have mines XXXX. it's well. July market, macro the to very premature market. the That of

the So there we see volume sustainable.

followed I for again, side, long ag these a time. the markets On

quarter. is a bit well. moving good see little indications I up a a we has We're quarter, premature in but into but third lot bit think how the firms parts. the been there's some hot of see the as July of We'll weakness here It fourth little market out there. seeing here,

So we'll the of the back we moves railroads, from how export conditions the you have franchise side see into other that a Obviously, trends, and the of watch the as as are don't see crop an how half that large we'll particularly as in some perspective. to West of that on year.

So a little exposure. less

line comes Your Jason next with from of question the TD Seidl Cowen.

Your line is open.

Elliot Alper Thank is on Great. This Jason. you. for

intermodal international the year. were side, about how your the On customers of the of expecting a last half back quarter, in you talked some pickup larger

no that your So changed the been I inflection view resulted said peak any months has three into in Thanks. guess, has customers what change past in over yet? there's season? Maybe have that

an inflection obviously the don't wouldn't in our easier I comps I fourth of lot in a up read type market. I basis. lap any down. real-time inflection a I year-over-year quarter, we any in start We're And that earlier, -- seeing -- the been there's there's just don't -- comments mentioned on think of we're to

growth be that perspective, throughout much quarter hopefully, than So And fourth the comp will carry seen from I will what a easier into momentum we've year. next overall think a year.

the up. perspective. And the how consumer season bottomed on quickly is market that and we the indications is forward. into question market heavily necessarily that be the will how holiday don't I picking going no pans recovers. that from think relying there's But that -- I out The

Ladies and today's attending. gentlemen, for you this conference call. concludes our and today for Thank Q&A session

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