CSX (CSX) 24 Jan 242023 Q4 Earnings call transcript

Good afternoon. My name is Krista, and I'll be your conference operator today. At this time, I would like to welcome everyone to the CSX Corporation Fourth Quarter Earnings Conference Call. [Operator Instructions]. I will now turn the conference over to your host, Matt Korn, Head of Investor Relations. begin. may you Matt,

Hello, earnings afternoon, call. Krista. our welcome fourth quarter everyone. you, and Good to Thank

President Officer; Joining President and Vice Officer; Vice President and this Chief Chief Chief me afternoon Sean Financial Executive Mike are Commercial Officer; and Cory, Pelkeyl, Vice Chief Boone, Executive Kevin Joe and Hinrichs, and President Operating Executive Executive Officer.

with this followed that, our forward-looking Slide Slide X, by Now pleasure non-GAAP Mr. find X. is to in disclosure Joe it will And the now my Hinrichs. call, you presentation on our accompanying disclosures introduce on

everyone. All today. you right. Thank you, Matthew, joining and call hello, conference Thank our for

As you very carried are momentum will we we hear from into the team the today, with of the leadership happy start our year. new

gave couple a the success up proud us over this team ONE are we us nature of but the done challenges last work of our for year. has CSX few course, Of set weeks, to mother

performing and better, operations railroad safer Our even and efficiently. ideas already and run bringing the are more team well, are us new is that helping Mike Cory

over opportunities. that Pelkeyl deliver happy how high we healthy is service Kevin strong margins business of the pricing into consistent operating Boone employees to financial our this and remains levels dedicated which very Our customers strong cash profitable delivering, are will are go with discuss will position, continue our translating and Sean flow. as volumes, favorable free

appreciate quarter that the over action XXXX. Everyone details a prevent the strike. past Recall Before expectations entire period active that a team major to of very about to our Congress CSX that accomplished took our a it's our all we to been take for has talk knows and ago step call it back just was year this industry. rail a ONE in on XXXX, for important

our wars all changes. And and supply the disruptions been visible have and significant key CSX interest highly and higher leadership key all major winter growth about the hand manage to Class forward mergers Through completed last have debates made through team chain had X customers sustainable, one aim year, afterwards, through railroad the public stakeholders. Meanwhile, to rates events other. led moving on important safety. delivering railroads on inflation benefits of keep profitable this, our the on to and our that goal of our has ONE of Soon

employees, shareholders live our Our in the our we customers, and communities and serve.

sick we For X in We on the were attendance our released based U.S. by our partners, policies was first paid change also first leave Class significantly union customers. the to to CSX example, reporting employee the first based with were service May, X STB Class and feedback. the our from railroad in improvements back reach service the agreements to railroad our railroad additional on to be metric

lifted we Now steps here important achievements key take several us year from on X, forward. Slide this helped past have that

First injury has strong and report to foremost, accident rates to the fourth especially enabling compared XXXX. over improved much us our the focus in safety year, driven and quarter, results on

CSX remains today, of Our service ahead and led the peers. consistently metrics our have industry, that

Importantly, this gain great us which customers' trust is their a puts gain improving experience, in our share. position and to

this long. You've year me all heard reiterate

initiatives. us in intermodal volume by merchandise grow beat Our production. U.S. our gained that efficiency Improved led volumes growth service positive traction industrial team delivered helped business our market and coal and

ever. closely Our and operating teams aligned are than commercial more

we offer expertise that solution, know customers the it. when commitment a have them Our and deliver we to the

year. through this None are proud accomplished to accomplish we we results this so ONE more of much the renew are as see regular journey. employees complete of can we've shape. team. that the that railroad we the energy quarter. our in is work is is highlight we X, have driven merchandise site growth the surveys culture great ] increased from or family really start key past together the by are X.XX efforts halls, in what seen There quarter. Total we On volume as was X%, at and our grew and Finally, visits, here as million our some Slide done which our our efforts fourth gained feeling reaching our days franchise, take we progress, this a this Much Through And ONE to and CSX. of CSX these year-over-year. units [ pride of X% by town strong

per were other volumes decreased Our to higher by as compared revenue to that, and $X.XX share last X% the With diesel in our over favorable a turn to lower the Cory earned a fuel over of to roughly pricing to I'll compared per offset year decrease the go operations. ago. $X.XX now Mike by due share prices lower details year. $X.XX and revenue to call effects of total We billion as surcharge

everyone. afternoon, good and Joe, you, Thank Yes.

QX to go the Slide go and recap. let's just X, to Let's

we their do. to in said other. on I've safe saw know foundational in and and before, many creating for themselves CSX environment working the every times continued we have. work We every is a that extremely success during still reduction thank each is injuries a to And efforts important. And for have want employee accidents But quarter. As mechanical-related transportation reduction really to we a and engineering safety I

we within listened positive we flat While identify we team respected, them. change feel transportation-related in opportunities improvement, in of improve we sound these the response, practices. beyond. When of improvement to employees we conversations isn't aim and and areas to, its engineering-related Safety are the on showed These increase numbers valued all were XXXX and It's areas organization. how core full incidents. included, listened In work have overall as to saw continue solely successful in converting environment about where and employees, our the year at employees XXXX, accidents. can working accidents an a changes and feel to about in we to an environment made

difference, right, the this a entire a to great making that each have dialogue to continue team when ways to our done When open beginning from but its already and learn efficiently keep it is ONE go. We'll to potential CSX and other. to will and service safely are meet customers. operating comes this we results Our demonstrate

on of and slide performed maintaining to slide. the it To over our is pre-self-explanatory. our we the over shows next well this is And customer-facing one pretty and areas me, Moving we've focus quarter. stabilized metrics. But on our bettering key network

connections allow to while team to volume. hard has the load, started better maximizing at train the horsepower deeper at The plan, our move again and car time has on focused locomotive same dwell the the look fluidity the Our needed been to align to operating us reducing on assets active and maximizing trains.

locomotive to use quicker daily a driving we've our both a connection operating result focus strong fuel train using yards reduction our connections, in this the As finding our standards Titan fuel Altogether, capacity tangible seen to starting to opportunities to to usage are we're network. road more on in to and savings up in plan of reduce in open locomotive active starts. on drive result, overall line contributed cost. technology a has on changes

to metrics forward. improve expect We continue go these as we to

continue in QX key to network fluid. really our Slide metrics to is good and especially improve made XX. I over XXXX, over and we've Going headway believe our

new online attention to Our through manage needed. now coming to We're head is for the close any requirements efficiency at that paying and resource business count point we able when attrition. are

further with locomotives. will Kevin and focus potential CSX right active and I'm performing team service the teamwork. our course, men on together us do and to along about X better safety, start make our Our group tremendous store I'm we'll and closely more his with our with deliver quarter, to matched this during Among continue service to full to In about identify and And extremely and and service on team. excited property, marketing women network greater customers. my asset efficiency as great especially car the daily of up working excited network deliver be be and railroaders. in the opportunities allowed months reduce the tonnage this our things, great sales this territory ONE with with coming customers train quarter learn that connections that to align closing, fluidity improve X.X% of our horsepower use. And one team to to to grow starts of I reviews continue this better and along customer this our we'll other

So thanks for you, the time, and over to Kevin.

several we have customers really teamwork are It together focus has been This in end driven on number of Mike. XXXX attractive our building profitable growth great on new experiencing all including you, and markets our build to momentum Business positive customers key of factors, working with Thank the see opportunities with our recognize well for drive allowing and service. is us by markets. CSX's inventory challenging many conditions how were of and destocking. our they a as to been of volatility our teams across

positive team the strong quarter, the show can saw growth. many deliver our optimism the that combined of we On fourth improvement which, markets in service these industry-leading side, provides revenue with

our look Turning to at merchandise performance. Slide XX, we

we As delivered the up by reduced the volume annual effects basis. domestic with on that fuel that's X% inflationary have experienced. were we've you the of for surcharge, higher quarter full flat. Even production and been can X% the reflect all results a see, outpacing that backdrop the X% increased And our for effectively industrial solid revenues year, both and quarterly pricing

of Looking and waste. but volumes and by delivered plastics, gain to sand most performed to at we caused held the in in service strike details leverage quarter, the to quarter, see as automotive disruption business. continue year, by UAW fourth well even we Chemicals challenged continue total and positive temporary the the shipments was the of with over growth leverage up new driven the

domestic volumes. service CSX but shipments shipments production Metals to an volumes area of constrained a on Minerals, cement quarter volumes. continued be to with growth strong phosphate remained continued where in tailwind supply fertilizers, be issues, and opportunities, potash which our exports healthy For supported new Short-haul for and provides provides demand the yields. over weighs demand by supporting higher very infrastructure-related has

volume demand [ year-over-year started has as to recovery. For Forest pulpboard modestly lower was but sequentially show increased of Products, signs ]

food ramp-up was combined While in [indiscernible] with ramp-up over supplied exports. remaining from and feed local crops, well the buyers fourth quarter with challenged, the in slower Southeastern

and business, see built the encouraged the we with As end we across into are head we've opportunities we markets many we momentum the across serve. XXXX,

continues CSX opportunities to about customers together. with service to we are in grow businesses our us collectively this work to differentiate offers and the excited the marketplace, Our

for very Slide year. ago. growing X% XX. by Volumes and positive, lapped export for from strong the remained quarter to quarter fourth X% Turning pricing we as Coal X% the revenue the a decreased year for

weigh full the of line the that per last quarter, of that's with X% prices be X,XXX supporting our export happened continues accelerating with strong by quarter, lower global restocking production. gas sequentially, that on and the levels up Our service ton fourth export and demand to XX%. Coal over in strong, while would ] and in coal business domestic up remains in natural likely end XX% indicated U.S. demand we prices reduced fourth export what At quarter domestic exactly tonnage RPU tonnage the a declined [ was shipments, expectations. just with and

are supported we global in year, for at healthy export currently continued new optimistic benchmarks the thermal demand and as levels. both strength remain by met For

stockpiles at by growth With conditions a to total remains We growth which achieving more aggressive data be electricity on levels the especially substantial, months very in will XXXX restocking in focused demand industrial and Virginia Domestic in also weather summer. be stations. dependent in demand at That utilities export production centers, driven normal XXXX. the network by West primarily market. new capacity hot said, of EV our incremental charging supported see upside largely Southeast, on was demand on will

Turning decreased intermodal flat to on Slide X% quarter XX. Fourth revenue volumes.

down full For impact drove X%. volumes decreased on year, surcharge fuel revenue the yields. to XX% largest were that the Lower

customer to Our continued our digits well, the that perform which domestic increasing saw service in results. with intermodal satisfaction and key with sequentially continue was industry-leading experience recently on JOCs We business mid-single in partners growth to highlighted performance, a growing volume basis. year-over-year

deliver to growth growth inventories the gain of especially market. extraordinary the were each given domestic encouraged Our challenges with year-over-year to International, volumes facing year, effects significant positive effort, December lower last compared showing trucking ability retailer month but modest traction. In were was improvement as more normalized see to team actually an the we

the growth has showed hard we at as new more XXXX, opportunities, combination to and in team the work and we both work build offerings of create to trends are new business. market, the supportive into head a to shape we that maximize year-over-year our to inland offerings Positive market and domestic in continued service the which expect service serve. taking leverage Our new partnerships, the up higher and opportunities activity international ports we as drive growth conversion

and monitor situations ready to affected customer Sea. the but behavior the we the at by both continue our and at to evolving the not date, We been adapt we any capabilities capacity changes have Panama Red To significantly Canal needed. the with as in stand

page we the development to our metrics of rail enhance our unlock a focus partners to identify many for closely with that experience, opportunities customers ahead. These the few XXXX, the our excited industrial hand-in-hand The identifying work to team. [indiscernible] operating to is been just market-specific From areas are growth. team the in turn customer our the Finally, about as efforts areas growth. to I'm of business with areas for accelerating working

the hand it review. to I'll financial review to Now Sean over

good was down operating X%, or million. Fourth Thanks, Kevin, fell revenue income $XXX and while quarter XX% afternoon. by

Now from discrete these of benchmark gains export year-over-year in Other prices. real million declines include results $XXX estate coal impacts and revenue,

million, However, X%, benefit tax higher relative $XX the prior the year. and effective normal X% also excluding income the the by strong decreased quarter. core $XX underlying Income pricing tax adjustments $XX to coal. intermodal, and increased from and $XX both to million merchandise other momentum team Counter for to operating primarily of XX.X% seasonal in benefiting third $XX merchandise, was delivered expense throughout our trends, Interest rate volume sequential XXXX growing favorable matters included and across the service the million and the of helping million revenue expense year. of levels in state of results favorable increase relative tax coal by the business. Across prior the sustained million compared adjustments gains, fuel growth in volume portfolio merchandise reflect to

by going XX.X%. Earnings rate discrete per previously forward tax share remains including the expected mentioned of Our items. from fell $X.XX $X.XX, impact

reliable we prior fell income quarter than With or $XXX operating customers our while results on were coal in of also our export million, the These year, full we XXXX, CSX of Virginia million how be estate totaling service reporting $XXX lower. profitable earnings in long-term real laid basis. strong profitable intermodal making growth. year and consistent was revenue forward. Starting to lower growth The a results of in the a mind, XXXX For share change per ONE report margins and by benchmarks declining going storage throughout team foundation operating by first hard X% will provided and will rather for a nearly combined a X% ratio. approach the transaction and impacted we transition more conventional operating work

utilization. aligning while volume Our goal improvement, to approach pricing profitable a asset is includes the margin target of business to the around optimizing service, and gains all costs and value balanced our that controlling

expense gains, as PS&O count by increased the and impacts depreciation prices savings efficiency and fourth quarter Let's now lower the estate look turn a and inflation, $XX to head fuel by higher real increased fourth offset quarter of slide were Total and partly at closer next rents. expenses. lower take in million

to up vacation the individual benefits. by Labor million, was to Fringe employee Turning related inflation costs union $XX additional of items. that included headcount. and the and The line timing quarter and sick also impacted

teams. cost sequential expense per in inflation this last engineering increased lower first by employee intermodal from to down quarter. offset as a expect versus was our services adjust year, and Purchased mostly savings other the resulting million We in and $X

in increase to We recent we similar years. what expect a in sequential first the seen quarter, modest have

implementing insurance will we $XX impact XXXX, that $XX expense up an increased a expect for costs need the carry these help cost first a nearly million reminder, quarter. recovery million overhauls prior and we while including of $XX a in technology prior more offset headwinds. cycle related and And adjustment are actively savings in efficiency As to to locomotive year was initiatives periods. million, Depreciation we'll

$XX projecting price. are $XX year driven expense full XXXX. Fuel in depreciation cost by roughly down million gallon $XX a million higher We was lower to million

encouraging These strong and are drive continue XXXX team savings. we million Equipment and car the momentum Mike across meaningful $X improvement. While year-over-year, favorable, typically to was headwinds times faster by into fuel in fourth especially the results sequential was seasonal the face quarter. efficiency in this critical and saw stable we rents efficiency measure as year-over-year markets. expect driven all cycle

do XXXX. significant Finally, not in expect transactions this property unfavorable quarter. At gains individually time, were we during $XX million any the

Now and remains turning billion. flow $X.X Slide free cash cash strong distributions XX. Full on to at year flow

our cash investing of reliability Our growth first use remains for the business. of safety, and priority

a $X.X strategic of return ensure includes of the integrity infrastructure as such, network figure this opportunities. high As across the to billion of range projects as our spend capital wide investment well

about from $X.X cash $X.X that impacted million and by including generation to Cash Payments note of year, shareholder XXXX. nearly for Tax the in to in Looking also Federal flow repurchases $XXX dividends. billion that flow billion will be XXXX, share free deferred close returns of supported $XXX million were Cash

While economic and his been to to has to Joe due storage closing correlate profit pricing, goal our outsized year, returns. over me let increase finished shareholder lower remarks. coal back revenue lower it strongly largely for With for which intermodal turn economic shown is that, profit export time with to the

All right. Thank you, Sean.

initial our thoughts Now we the expectations will on year conclude full our for with XXXX.

new and our industrial based volume our We mid-single-digit service-led the anticipate putting momentum today, wallet we encouraging share in and visibility merchandise from benefiting for see customers low development business, are our we gains our total in but in and share that range. across revenue in and growth to market activity. CSX the place, initiatives As are we with total expectations on of specific and

winds more in cycle our By in network. from moderate on better as making discussed, paid for that our and be getting favorable of see are opportunities and mine solid drive And utilizing the to job better, pricing strategic to safer, CSX the as growing our We a volume, and Export of intermodal a team gaining a coal efficiently. we prolonged initiatives a to network strong from our to existing finally easing provide. of our we cost business and combination we continue new sure continues continues demand growth efficiency expect we service benefit destocking great down a Mike and this profitability kinds Kevin's faster operational all capacity, with very expect new do ramp-up volumes run inflation.

spending We capital expect year portion in in Alabama safety $X.X infrastructure, this of the to investments. Interchange upgrades an including our we other specific increase to New as with CBKC and approximately our technology investments, billion high-return locomotive invest rebuilds,

very Finally, and help, year that through of it hard demonstrating We're XXXX work just to that better your team, a to our excess be all and change fund had had. ONE your our capital strong I In we're we our real state is shareholders. all this in across opportunistic entire am can you facilities great every I of one thank returns, and using our we to the to share year. To past make approach with what in, ONE want something impactful. even closing, of as for no repurchases to before, proud there than cash team operating we our accomplished benefit and in our culture dividends balanced province our position CSX in CSX and can

interest all of for you thank call, support questions. in this to CSX. take on ready and we're everyone now Matthew, your For

Joe. you, Thank

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

of question Instructions] [Operator from John Evercore Chappell line first from ISI. Your the comes

dig Sean, maybe of digit, volume margin though to et even about. mid-single the on you have little guide of I of productivity the you levers low form the your base that to guess, productivity commentary volume have hoping to the that of in I XXXX you do deeper improvements cost some D&A, you cetera. on in expansion wanted If pull some the were How a of fixed of this based part and is delayed some case increases other and you about think revenue? these, spoke

a Well, Thanks, That's loaded lot a best. question, there. I'll bit Jonathan. do a in of my

how margins, I profitably, income. safely the target operating back operating railroad. an we I do and progresses, efficient and coming We think think step When to we and some built We QX the from when volumes. grew I can about That's by QX. year of into that always our growing expand is that momentum case. XXXX grew always not running business sort

to They and strong second half some not the then Our momentum ease talk year-over-year that margins. some as hope a really momentum withstanding are And quarter, headwinds in is of about second the the the first think began very to well. whether the the bit And that's the that where build then see second time by here. to little in that quarter. I into quarter. We've continue incremental comps or get first going the we into easier, we year, quarter can you'll got

question Your the Majors line comes of Bascome from Susquehanna. next from

you least XX your leading focus a over investors you of following will XX call lot opened talk how Can relationships first about lot your to of you've or success focus your next months in progress involved first in you had had the at the the see [indiscernible]? improving year Joe, a business. the about talking made your the stakeholder

heard our that here. has bit stability of little customer needs the advantage the speaking, the take But manpower we We efficient. a levels reached service There's were to business in been the more that the We're generally you that think We've targeting. we're team I or has now to at here be targeting. manpower we the and there. stabilized. threshold opportunity Thanks, commentary recognized were that for levels some industry, going now on get us on Yes. you're seeing in, see from a and of now to always

opportunity And have a feel setting now what with take an to now building shape. his recognizing this in model advantage okay, with opportunity safety, opportunity efficiency, about working to to we're want and ends, and Kevin how more our good was you, culture operating keep our with to working closely good I talk very stable, more together. fourth us have people really on to working to good we perspective of momentum on work people together coming stable We are together. there. XXXX for then momentum last quarter each tell team, into together? The to of building our the going get we in them customers into the can more providing opportunity culture head and we and going be how to we're and the to see one network But never as in and a reliable and Mike our in we much I customers. the of his we grow efficient. So and will improvement year we can shape, that saw strength we safety leverage us over in year persistent, year have do forward service the is grow come the journey we now to are Obviously, about, the have of and we for XXXX,

better The it been is I've together in are good team working than time in levels seen the shape. manpower here. I've Our

over we've established momentum And we so build confidence the last that year. the gives on us that can

from comes question of Brian JPMorgan. the from next Your line Oseenbeck

a further I of like us some down quick stepping in big bit know commentary follow-up path targeting. that And us fluidity it but into Maybe per the improvement last seeing? to taking continues you're over the the terms you improve. give first. the an it's sounds network out Sean still for call, is locomotives the little down just some as in a a for you're Mike, of maybe just area bit efficiency after the about Can sense in you some the more little employee early, fuel then can increase quarter what give XQ? first for the just Maybe comp

would So what seeing order are and be magnitude maybe some you there helpful. rough of

the copper on begin I'll Brian. Sure, employees.

have probably we in true-ups of about was $XX I did that sick vacation leave So million. in quarter. mentioned terms some That and the

also the capital We in have had that quarter. We into fourth work typically that moved OE. from

both quarter be tailwinds first on per those the into comp So will going employee.

I X% what be steady QX. then so scheduled probably efficiency you're versus that couple step initiatives second the half. modeling we And the July, little Mike in in the So the in pretty again, that would a first we a of wage in percentage on. year. if Notwithstanding expect up are reported half have point bit increase improvement Should and the focused of team that

what Sorry. I use, how going for run, and just productive it's front we look we Look, was us to they're trains up. whether at. center locomotives, finish overall of asset all are,

I am and understanding I'm me, in terms X where And so in for of about it's out network people. our really, I'd X XX, to understanding of say a our scale a out

have. focus with things working starting we franchise, right. with the the against we However, what the we think to working do that can we're on aren't aren't really in They network

now, technology everybody get the state the So coming just, most have tackling, the of to whether it's of of blocking it's size use right and It's the out train, locomotive. it's the of we trains, together. the and

network. best we're of the We're the all, the We and So see couple teaching the practices. months things the of that first because, we that was learning, we're to the fluidity that, last reliability we're count. sharing fourth head started the quarter could we really we had doing had things do of really in

of what, every stone. plans over you said over going grinding And there that remarks, corridor this. I the so tell but that and to we're that get as that keep people a into in next to the are I we're my just operating But qualified quarters. going out And few deep charge, I'll leave very to really I've got do to they're lot go ready are

So of see, Sean's further got us, at the and customer safety ahead to at point, service. of efficiency I never we expense but expense never of the

And we come. product we how provide get is the our that this that's customers efficiency that the to hope great So to going and need. continue we'll also are

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

then revenue, per being right all-in with if growth. for was full as Is the provide some for So same for could first revenue assumption expectations and year unit color XXXX for guidance it the either your your the is I And quarter way, think mid-single-digit wondering that RPU on more to and maybe volumes coal you well? low to flattish? the

is Justin, Kevin. this

but market think a know this you I RPU. right there much market can quite on on embed move hit right healthy around very you the bit. how coal now, we We're that forward? optimistic, it Obviously, going

And of year. perspective. upside move so mentioned, it, some through Hopefully, that, outlook bit we maybe a as impacting from but little you an as conservative largely RPU to that's there's the

other highlight The that year this and our the intermodal here, a that's from as business we do be that market bounce growth lower back is RPU a expect I well, thing volume but revenue and contributory will to perspective. would to

So lower overall. ARPU

it mix about. a the will you But down highlighted know bit. that factors you So and are those just that two large

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

bit. dig the So I side little just want cost to into a

up X% but and if just less some cost understand I look, paid about I QX So X%. up noise x from X% vacations with to volume sick fuel with than

the I'm cost stabilize? seen lot a struggling we we chance ultimately, any slower go we've just, to levels guess, just Can I do just to I'm Is but out know. figure in trying that cost start down QX. they bit? about side. continued there think see how they Do of increase a here? don't I creep to it's to could still So start from increase, with overall cost where come little a pace? at

So any help there?

I can stab at Thanks, here. Yes. it a Scott. take

got about year true-up end That's true-up let's recur. And the the quarter, see typically that sick the the of reverses back as that, I unusual were somewhat was bit on capital Livingston, in had there $XX dynamic million work at mentioned. just derailment for off just We but mentioned OE. moving and well. a that on step-up to going a quarter QX. that million to the and depreciation probably reminder, we've We a we $XX $XX going fourth was normal. Kentucky vacation of a not million, think I we it, We'll as of items as $XX then that's another of So call about little remember, $XX in that costs leave, had, million, of some million had

not that together, starts then looked on paying roll efficiency we the kind go the going to momentum. at up. taking some first reduced said, And locomotives. some drive We're into fuel as mean, locomotives as of those That's those already add driving He's well, plan. you tonnage as maintenance he's quarter. some Mike off costs all out. So built train we I

we're So building some momentum. certainly

be of as think the that's we going year. to to why gradually half feel that's in I through going good are incrementals really second go about where add And the year. I the

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

I to Kevin, Wanted bit just ask, for side. it's think revenue probably a on the little

there as factors neutral? think You've down? those about thinking you is 'XX? you How And had headwind have? it of assumption XXXX. surcharge be of headwind? got then impact you we revenue a of kind pricing or you in Are too. pretty 'XX? lingering a do of up stable they what in some you feel Are two price, kind in kind do price in Or is versus terms think I And Or still meaningful storage go can an what

Yes.

part Tom, just the I'll of answer So question, on that. the first

little we're, of this had comps year do revenue year. then the are the and at forget, we don't fuel, the it, normalized QX we've about, on a $XX quarter, lag big on million first call million would model in before And That's plus. ahead piece, be million headwind in what half will Obviously, of $XX of and in almost you it to go get the to tune I that, less the rate. like a is in the which then QX and been $XXX other we a of half running second a the tougher why last math something first kind QX the favorable second On across pretty impact quarter.

have come a prices down little So bit.

of be year-over-year it's this still in expecting year, favorable a lag are We somewhat QX headwind. but

of opposed able two get the we're are half we deliver quarter in more second year. to to as first growth those the So about reasons the why until to sequential momentum thinking being

all quite year, all Yes. are year. And ] environment as negotiate to pricing, on carryover, negotiated experienced, some then some on contracts to last a we year-over-year. lot about much talked of that that higher frankly. think, These period, react know, And, see we inflation we I multiyear had you'll a [ right? a every We

inflation lower. say a be our coming will little fair cost business bit 'XX to our it's So expectation for into is

So that of And what you able when part come to were obviously, volume volume I revenue that's and important expect approach to have historical achieve. balanced healthy but very our still both when story an at is look growth between number price. we down conversations we would our rates,

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

Mike, going more point merchandise about to year, if bringing efficiency additionally. to volume could speak labor wonder have on specifically new in Kevin's that business this you you're to I of reference X especially remarks

opportunities And So efficiency what how for are are you planning the headcount? for there?

network. have We've that size, got And size. time Look, stage add on Brandon, think this and headcount. the what a say can on But obviously very at. in we And customer-intensive to areas got that this not but to impact just of just the, it's I'm I where going run really, we it train we isn't comfortable yet. hope incremental reduces and more the haven't depends the trade volume you're my we that well. is had very a I'm and in I we It at results rate with headcount. without about

head and looking And so with lot have able right that the all, we locals of first to we to a we're reliable. the service of make we're And and do see button count down have now, it. and yards we

we us So do know better. to that leads that can

the see really And cars the of so opportunities in I touches today. the that do we

have make volume count So we handle by to are for. we I want capacity able movements. to I those incremental having improvement. see head being creating the the we've locomotives with sure online to see created have with the we capacity I we're us the got the what right that see with key count to in many that less there incremental further storage added cases. areas we those ability the again, But

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

like the at changed all your So still increased savings? on-time arrivals your the Mike just, on on-time just how that origination either is at What about efficiency see get Joe, since you leverage XX% looked efficiency missing that I there, XX%. Have to beginning those is performance operating are guess, from down thinking or it the additional the to sliding gets get the those improving? what year? Maybe thoughts at categories to of operations

performance, the our It just on goes back Ken. focus I'm really our Again, size. train folks be. that's what cars, talking where yards terminal Thanks, our increasing been getting will connecting to about and I've in to focus and

network go. going the periods trains affecting performance. in that the way on But some we're customer, growth some change trip to the end and our making fulfill counting time we day, at through we in sure And the So the it's going the the it's on-time of of the design sense. cases, yes, plan and we're

of the congestion we It and what out to I'm performance. isn't growing, assets do I call, not more that's network that at capacity. to that are These starting create [indiscernible] growth growth to to So look stage. poor really change observations concerned have with or certainly a about this there anything the the

the Trust it lot, at measured not in minute. a look it's of So me, we concern cause a at at this moment.

got are late, isn't, trains hours. this So late. fractions not it's late, of that These are like we've

miles, efficiency know network. a we're end the have points customer. focused But through more first so the driving operate pain it's day, that's their fine. same we delivery on. we're time, to of the condensed their It's on at last running at And to And mile, the time. that We the running

the question Citi. from Chris comes from Wetherbee of next Your line

you guess, about follow for locomotives, Maybe the headcount, resources portfolio maybe I When about growth think up guys just Can what of in to specifically, associated the but XXXX? you I maybe outlook. Resources about you on be business the have opportunities the think that question. are what that the Or plans? of as informs ahead is wanted the as also the guess, that with the growth plan required, you that I think volume we done?

bit half is second we be a Yes. the I year mean, up little right? in last the in year-over-year just think everything we we ended of to flat that would XXXX, than count Chris, year, So one year X% if just year-over-year head held first half. through added the more thing about to in growth where the with

head a that's and that, with and count I growth by think new on our now coming exceptions, view absorb couple is we the be able of in should hold flat to large, right the network.

to And so that. able do we'll be

the like year we won't tremendous First it just look the we because year. get added quarter, half into through efficiency last the year, employee second of

up. I you're to show see where that's going the think labor productivity

out working, Yes. And of to the too, with Chris. harder. have locomotives, Staying where them just have opportunity use locomotives on we top that, there we still use

we have that's us, whether now. what the whether for I a so they're pulling, dwell, whether have out we it's big just what right believe there And it's capacity focus it's of connection, to grow

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

just expectations Hi, Operator. help in everybody. guess, calibrate us, operating I XQ Thanks, Sean, of ratio. you can terms

the of $XX in about of to talked million You kind fourth one-timers quarter. million $XX

of X Volume that's X%. think a OR. guess, little point like down, over I I is

obviously a that's weather So tough. is headwind

as a pretty PS&O I PS&O bucket. rate an in bring are there's What's on talk opportunity more a What's just than remember I for want 'XX, well? there's to place So but then cost down? to over kind double of to that. 'XX 'XX like if Because efficiency if costs, focus is revenue X about labor. on really inflation just Again, the was lot of a know last I And biggest that line X look side, in on great opportunity correctly, if there? in and your of costs the or And the growth. back cost the the years, it's hold PS&O large there look opportunity. to bucket, going

QX. to our I question, will margins what sort QX. on settle. are if I on to your Amit, building prices said stick think income sequentially fuel Sure. deliver operating momentum margin we what, can, grow as just I'll That's The well in from of before QX they QX. goal. to be to It's margins from can what based where terms of But QX in growth QX we

notwithstanding, certainly possibility. better whether of the out Again, things of or looking across we're speak. within couple a that's network rough are that, as we had think I we of weeks the realm coming

the volumes weekly you'll see So how and from up that catches there. see

a years everybody variable. go ago, quality to In quality carriers we back is shows PS&O your think PS&O, up that quite a portion I good for couple in reminder and a on volume of the of expenses significant the comment understand within terms it's line. And of added

impact see increases line, And trucking to as going we the or decreases revenue in well. PS&O so expense that's as

There particularly we revenue PS&O PanAm. on driven, also We the as And somewhat on expenses PS&O the that related also are well. added that there terminal then across network that side, intermodal associated show the with be can volume up part added the of line. expenses

others we opportunity that to an continue of on cost drive would to QX as PS&O bit a normally on area So those have what like focused no of said I QX increase line item we from savings. and certainly do, to a little going are sequential doubt, was costs we expect in amongst

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

it seem like I drive what specifically just in stages. we're it go of your there early acceleration your would love want any to around Is on acceleration point? I get conversions? back anything, improving Just what truck those at to on It perspective does the still some can to this space commentary of further? domestic conversion. drive intermodal really on reliability Is truck better that could capacity? that the comments

market many seen I've XX think, the years. maybe characterize heard would I worst they've last year trucking as in last the Yes.

those reached or on the improve customer the at frankly. seeing a levels things delivering. ways of Measure the comments, experience lot their there's has terminal way. have I in their going we've of plans I true a measure the even drive bottom been that that I to opening for different quite highlighted further. and service say, those we're customers for Mike all that truck and are hope really important customers, our I where that So the even bottom. some at looking customers time the know value and recognized in And will terminal We're fluidity think we're we're this are to

to confidence that that So gives and of deliver. product with a going only us are service we those through that be underway, top we're has bottomed, that, of move lot hopefully forward that able to on year market the share we're not initiatives lot the as the to a but of able gain

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

$XXX you you was to about anything want low being cash incrementals of So Or I better revenue $XXX the that million million half I timing, think about think back the Kevin, out, share mid-single-digit single, expect how to the that CapEx. year? Is think do for the the just sort confirm as we can half. and were of back-end also I flow volume rate then we loaded? to or up? show tax $XXX called it front on Sean, to at about headwinds clear cadence extra this you'd very than which in got of like the think deferred you and million And rate headwind I Sean, $XXX year? for

David, Yes, I'll start.

So question your on there, Yes.

So to was which deferred benefit tax, $XXX essentially million, XXXX. a

$X.X to that's of in from XXXX. million. half We on then a side. And the will [ So that first going make payment million $XXX basically on the that CapEx, increase million about $X.X ]

Yes.

a perspective, think that high some through the even but the coal perspective revenue we'll we've things watermark or volume pretty have lap, dynamics, from that that. In cadence I a probably and pricing clear cadence to the terms been from first other in of year after quarter,

forest we will that the and lap as we quite weakness You'll about the frankly, chemicals the our into to some second see very second to in quarter industrial third when that strong, side and occur remember, our of started that fourth. quarter, late you the get And weakness were, some products second think started quarter into particular, on business. probably and business, we begin

the year, look year. So, growth achieve across but the throughout to able we when we think we're

from Shanker Your [Operator line from Ravi Morgan comes Instructions] question of the Stanley.

of Maybe seeing the mean operating of cost operating and you kind volumes in come of be think of the kind we itself, the competitive, the of enough truck on kind leverage? I kind if just just operating fixed Or that, do show follow-up are price the the now the absorption? softer do And stays is, market question bulk off shouldn't of to need XXXX, and rates that a that come that? leverage kind leverage be be up longer for we to on you have maximum as you volumes to on to of floor follow-up theory, in of that top converting will guys you continue also drive the

Ravi. Yes,

there year, on underlying business, that QX, we So mentioned would We've of the say down. you go right? discrete this the in you leverage leverage some from headwinds And is I have as into the coming revenue fuel had operating the script. that I half other point, year, first the got lag last

You've up a going it of Those we're is behind in on lot have bit got a second show cleanly. QX well, see lap more get half, an you'll the a tail to recovery. and into to a as us which why reported then basis, insurance things that are little and

our in of pretty even to relatively In that's of face terms the a think, yes, ability macro macro, about the feel I we flat. confident grow we

existing and of if and not got some resources, up be absorb business a some we costs. are save the tighten able with that business some have carryover, new should coming that wins little We bit plan online, that's to most the

Markets. of the Spracklin Your line from next comes from Walter question RBC Capital

afternoon, everyone. Good

to that of in we're that be here the and to capacity. Is XXXX, one in such what sources, just EIA, forecast the that's area? on the and it, be coal-fired is capacity here market? a this a of the other going modestly lead forecast. impacted. saying So production different on coal you're mentioned back of domestic to catchment it of is coal when domestic down wanted coal you retirement coal-fired go expected you're your remarks between to back your U.S. the to I XX% I know to front? that And disparity comparing solar in providing retirement the kind just Like is Is not would and

we a Obviously, we from demand intimately right? your But production upside a decide our we all notes looking a We production is build demand talk limit next we've seeing. to still and We now here. domestic think Walter, at have own market Yes, been that we in up, bottoms-up do read we're to at, look is not, market volumes into we sources. it everything put going either right really that We some impacting an there to continue see year. It's volume of market. some that market. a is upside. our that export production-constrained the don't -- It's or see weakness can our where our that, our what their now they're telling market they're how they're what investors understand this stakeholders demand right is their of We the customers. frankly, in what quite their seeing. And forecasting, business, terms in and seeing they're

we outlet optimism. this quite that hotter some it's Obviously, if market see for domestic is an do than to be if domestic some think we environment shakes business, we global year, some summer quickly. weakness the we as export or usual changes get know side will but of can and, weather impact further that now right there. obviously out, what So telling we'll our as at there an where the there's will are what that business saw I impact our change look But for see there The and the customers into quickly. us,

does further and your may call. in for Thank conclude We participation, now you conference questions disconnect. have with that, no today's this our queue. And you