CSX Baird 2026 Global Industrial Conference
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Good morning, everybody. We've got a few more people coming in. I'm sure the doors will close here in a moment, but in the interest of staying on time, my name's Dan Moore. I'm the Senior Transportation Analyst here at Baird. I think I know most of you in the room. We have Kevin Boone, CFO of CSX, joining us today. Pleasure to have you here. Thank you for being here. Thank you for everyone's attendance. Hopefully the conference is going well. I had put together a list of questions here. One question I just kind of wanted to start off with, it's big picture, very interesting backdrop. Not a normal cycle, not being driven by interest rates, certainly not being driven by lower fuel prices. The tenets that normally undergird economic activity and acceleration, just uniquely different this cycle.
I was wondering if maybe we could, in fact, just start off at a very high level talking about where you think we are in the cycle, how the cycle's maybe different, the durability of it as you're thinking about 2027, where you're seeing strength, however you'd like to kind of unpack the high-level view of the business.
Well, first of all, thank you for having me. I'm joined here with Matthew Korn, Head of IR. I've been coming to the conference for a long time, even sat in the audience 10, 12 years ago.
I may have joined you.
Yeah, nine years ago, I started at CSX, so just had my nine-year anniversary.
Congratulations. When you take a step back, traditionally, even when I follow the railroads from the other side, you would think there are two important markets that you always kind of watch for the railroads.
It is the autos are very, very important, and then housing, right?
Right. It touches a lot of the different markets that we serve, whether it is chemicals, forest products, all those markets on the merchandise side that are very important and key, and we haven't necessarily seen that this year.
Those markets Right with interest rates going up, have not been supportive.
What we've seen is other areas, there is infrastructure spend.
We continue to see that come through. Our aggregates business is strong, and we've done a really good job of going out and capturing business. I think you see it on the truck side as an unusual cycle, supply-driven cycle, which is a first that we've seen in a long time. I don't know if we've ever seen a supply-driven cycle like we are seeing right now, and that's Right that's certainly supported our merchandise business this year.
We've seen truck conversion that has materialized in certain areas of our business. Forest products is one we talk about a lot, but that's pretty unique. The consumers remain strong, and we've seen that with our intermodal volumes, and that continues. We have the value proposition that is helping us on that side too. Our competition with truck is obviously the differentials in price have driven some opportunities for us. You add on top of that the investments we've made, and I don't know if you can point to a railroad that's made more investments over the last two to three years in terms of growth, and those are starting to pay dividends, whether it's the Howard Street Tunnel, you obviously have the SMX coming over from Mexico and our relationship with CPKC on that endeavor.
Those continue to grow, and you'll see benefits as we go in the next couple of years. All these things are coming together. I think from a backdrop of an industrial economy, we're not seeing a lot of tailwinds right now. Hopefully, as interest rates come down, you might see some activity from the auto side and from the housing side start to help our business, which would be where the real cycle could take off for us.
Right. Well, that probably provides a little bit of an entry into the next question. When I think about this year, or maybe even a statement, when I think about this year, part of it was you guys making, to your point, a lot of investments in previous years, really kind of laying the groundwork for potential growth this year. A lot of things came in line of sight to make that opportunity a very real one, very substantive one. So in some ways, I feel like this year has been a cost story.
And then at the same time, we've had this growth that I think to some extent has surprised maybe some folks. I think we've kind of been very much on board with it. But as we think about 2027 and the path ahead, typically, when you go from a cost story and an investment story to a growth story, price follows. So, I think for a variety of modes, investors are very curious about the pricing opportunity going forward to the extent that we continue to see a fairly robust, fairly healthy volume backdrop. So maybe if we could just spend a few minutes talking about pricing, where you see opportunities going forward, and where maybe there is an opportunity where people may perhaps believe there is, for that matter, so.
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