CSX - CSX Corporation

Operator : Good afternoon, and welcome, everyone, to the CSX Corporation Second Quarter 2026 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Matthew Korn, Head of Investor Relations and Corporate Communications. Please go ahead. Matthew Korn : Thank you, Audra. Good afternoon, everyone. We are very pleased to have you join our second quarter 2026 earnings call. Joining me from the CSX leadership team are Steve Angel, President and Chief Executive Officer; Mike Cory, EVP and Chief Operating Officer; Kevin Boone, EVP and Chief Financial Officer, and Maryclare Kenney, Senior Vice President and Chief Commercial Officer. In the presentation that accompanies this call, which is available on our website, you will find slides with our forward-looking and our non-GAAP disclosures. We encourage you to review them. And with that, I'm very happy to turn the call over to Mr. Steve Angel. Stephen Angel : Good afternoon. Thank you for joining our earnings call. This quarter, CSX continued to make progress toward our goal of best-in-class performance. Stronger demand led to volume growth across our business, and we manage this growth while delivering strong safety and productivity outcomes. These results reflect the hard work and dedication of our railroaders as they serve our customers safely and reliably. For the quarter, volume increased 6%, and our revenue increased 10%, reaching a new quarterly record. At the same time, we improved operating efficiency and maintained strong cost discipline, driving substantial margin expansion and double-digit growth in operating income and earnings per share. We are proud of our accomplishments so far this year, but our objective is to build an organization that can consistently deliver strong performance over the long term. There are many areas across the business where we can improve performance and network fluidity and service are among them. Plans are in place to address opportunities for improvement, and we expect to see steady progress throughout the quarter while maintaining our focus on profitable growth. Our solid volume growth this quarter reflects the benefits of our commercial initiatives, network investments and the execution of our team across the railroad. Our priority is achieving profitable growth, not gaining market share for its own sake. I believe that industries that become too focused on market share eventually drive out profitability. At CSX, what's most important is that the business we add increases operating income expands margins and delivers good returns on invested capital. Mike? Michael Cory : Thank you very much, Steve, and good afternoon, everyone. The railroad made solid progress in safety and productivity this quarter, as shown on Slide 5. Our team continued its consistent and disciplined approach to managing risk and controlling costs even as the amount of volume we handled grew substantially. The strength of our safety culture is the foundation for everything we do at CSX, and our year-over-year safety performance was impressive in the second quarter. Our FRA Injury Rate improved by 19% compared to last year even as our base of total people hours declined by 7%, and our Trade and Accident Rate improved by 30%. We see opportunities to build on these results through continued focus on risk awareness, field level engagement and applied technology as we pursue best-in-class performance. We managed stronger-than-expected growth in the second quarter, with volumes increasing 6% year-over-year, handling this growth while experiencing seasonal reductions in employee availability created tightness in certain areas of the network. And while our average Velocity improved 3% compared to the prior year, we also saw an increase in Dwell. We're taking clear steps to improve the consistent availability of our crews, and with the effective management of resources, we expect sequential improvement in our service metrics. Network productivity continued to increase this quarter. The metrics on the right side of this slide highlight the specific gains our team delivered. Our Fuel Efficiency improved year-over-year for the fourth straight quarter as we improved locomotive utilization and continue to maximize the use of Trip Optimizer. We increased the number of GTMs we generated per unit of horsepower for the sixth quarter in a row. Our employees are more productive and moved more tonnage per train compared to a year ago. Overall, our team stepped up as customers brought more business to CSX. We ran safely and efficiently, and I expect fluidity to improve as the year progresses. Kevin is now going to review our financial results, and over to you, Kevin. Kevin Boone : All right. Thank you, Mike, and good afternoon. As both Mike and Steve noted, the CSX team delivered another strong quarter, including higher volume, record revenue and lower non-fuel expense. These results reflect continued partnership across the business to improve safety and drive cost efficiencies while meeting increased demand from our customers. Total revenue increased 10%, benefiting from higher fuel surcharge combined with both volume growth and higher pricing across our merchandise, intermodal and coal markets. Total expenses increased by 6%, with a 2% reduction in non-fuel expenses. Putting all together, operating income increased by 17% with operating margins improving 240 basis points despite 160 basis points of fuel price headwinds. This strong performance drove earnings per share growth of 23% in the quarter. Let's now turn to the next slide for a closer look at expenses. Total second quarter expenses increased by $138 million compared to the prior year. This includes an increase of $177 million for fuel driven by higher diesel price net of savings from our record-setting quarter fuel efficiency. Labor costs increased by $40 million with a nearly $90 million combined impact from higher incentive compensation and inflation. These headwinds were mostly offset by savings from a 6% lower head count with declines across both management and craft employees. G&E head count will increase modestly in the coming months to support our Service product with improved demand, while we expect to leverage process improvements and technology to absorb attrition in other areas of the business. PS&O expenses were lower again in the second quarter with efficiency savings across each of our operating departments as well as our G&A and technology functions. Discretionary costs remain under intense review and managers across the company are being empowered with tools and visibility to take action on wasteful spending and other cost opportunities. For example, spend on third-party services across our operations team was lower by $23 million in the quarter, benefiting from better utilization of our internal maintenance functions and detailed reviews of contractor activity. That discipline also applies to our corporate functions with savings and external technology labor, corporate communication support and legal fees. The business also demonstrated an ability to efficiently absorb higher volumes, with a 12% reduction in our Intermodal terminal cost per lift. Moving to the third quarter. Incentive compensation expense will step lower sequentially, largely offset by the 3.75% union wage increase. And within PS&O, we expect fewer property gains and insurance recoveries as well as higher costs for locomotive overhauls in the second half relative to the first. As Steve noted, we are focused on our Service product while embedding a culture of continuous improvement. Our accomplishments year-to-date put us in position to invest in initiatives to drive further productivity in 2027 and beyond. With that, I'll turn it over to Maryclare to review our revenue results. Maryclare Kenney : Thank you, Kevin, and good afternoon, everyone. Before I get into the results, I want to recognize the hard work of our commercial and operation teams, who worked closely together to handle volumes that exceeded our expectations. Heading into the second quarter, we saw favorable trends emerging in select markets. What started as a narrow supply-driven improvement in market conditions, broadened through the spring, resulting in strong volume growth across the business. Customers are increasingly turning to rail for their supply chain needs and we are focused on earning their business through competitive service offerings and reliable execution. Turning to Slide 10. I'll walk you through second quarter volume and revenue performance. Overall, total volume was up 6% in the quarter. Revenue was up 10% and revenue per unit was up 4%. Total revenue per unit, excluding fuel, declined 1% compared to the prior year due to mix, as Intermodal grew at more than double the rate of other business units. In Merchandise, volume was up 4% year-over-year, while revenue grew 8%. Merchandise RPU, excluding fuel, was 1% higher as solid pricing helped offset negative mix. Including fuel, RPU was up 4% year-over-year. Strength was broad-based across Merchandise with 6 of our 7 business units growing or holding flat year-over-year. Chemicals volume increased 8% compared to last year, supported by plastics exports and demand for waste-by-rail. Metals and Equipment delivered a standout quarter, with 14% revenue growth on 3% higher volume, driven by increased customer production and new plate mills and favorable mix from higher military and equipment mix. Forest products volume was flat year-over-year a significant improvement from the first quarter as conversions increased on tighter truck capacity and higher fuel costs. Intermodal continues to build momentum and was the largest contributor to unit growth this quarter, with revenue up 26% on 9% higher volume and RPU up 16% year-over-year, driven by fuel surcharge. Our diverse domestic business drove our volume growth as new service offerings continue to ramp and truck-to-rail conversions have accelerated. Faster service and expanded network capacity enabled by the Howard Street Tunnel have positioned us well to capture this business. Finally, coal revenue grew 9% on 4% higher volume. Coal RPU increased 4%, primarily due to strong domestic contract renewals, and as Hampton Roads benchmark prices were relatively stable during the quarter. Export tonnage increased 12% year-over-year, driven by mine restarts and a best ever 4-month stretch of tonnage through Curtis Bay. Domestic tonnage declined 2% as lower natural gas prices and normalized customer inventories, modestly tempered otherwise healthy demand. As we look at the second half of the year, our commercial initiatives continue to create opportunities for us to grow the business, including new service offerings, the ramp-up of industrial development projects and investments in our TRANSFLO and terminal network. Our opportunities to convert business to the railroad continue to grow as tighter truck supply and higher rates are highlighting the value proposition of rail. On the merchandise side, this is most prominent in forest products, waste and metal. We also expect strength and conversion to support domestic intermodal volume. Steady construction activity continues to support minerals and metals, and investment tied to power infrastructure and data center build-out is driving demand in domestic coal, frac sand and heavy equipment. Agricultural exports are another area of strength with record U.S. corn shipments through Chesapeake continue through year-end. That said, we do see the potential for momentum to slow in some markets. Following a quarter of strong production in Automotive, normalized inventories and summer shutdowns are leading to a softer start to the second half, ahead of new model launches in the fourth quarter. In Chemicals, we expect plastics volumes to moderate following pull-forward activity in the first half. Meanwhile, Coal fundamentals remain strong. Power demand and recent plant life extensions will support domestic utility burn. New business wins are driving growth in domestic steel and industrial markets, and export volumes are expected to remain steady, benefiting from improved mine supply. Finally, on the outlook for revenue per unit, underlying core pricing remains at or above our plan. With most of our contract renewals for the year already complete, we expect fuel and mix to be the primary drivers of RPU in the second half as any flow-through from truck rate pricing to yield typically takes time to materialize. Overall, trends for the back half of the year remain encouraging, and we're focused on converting those opportunities into long-term growth for the railroads. With that, I'll turn it back over to Steve. Stephen Angel : Thank you, Maryclare. Now we'll review our updated guidance for 2026 on Slide 13. Based on our results year-to-date and our expectations for the balance of the year, we are adjusting our 2026 outlook higher. We now expect full year revenue growth in the mid- to high single digits, operating margin expansion of greater than 350 basis points and free cash flow growth of greater than 80%. Our outlook for capital spending remains unchanged at less than $2.4 billion. The updated outlook reflects strong volume growth, improved financial performance and the continued focus on productivity and cost control that you've heard about in today's call. We continue to see opportunities to strengthen service execution, improve productivity and drive long-term efficiency across the railroad. Those efforts remain central to our goal of delivering sustainable improvement over time. Finally, I want to thank our railroaders for their hard work and dedication this quarter. These results were made possible by their commitment to safety, integrity and serving our customers efficiently. Matthew will now open it up for questions. Matthew Korn : Thank you, Steve. We will now proceed with the question-and-answer session. Audra, we are ready to begin. Stephanie Benjamin Moore : Appreciate the question. I guess maybe starting on one of the last points here in the prepared remarks about just the pricing opportunity in the back half. Understand the benefits you're seeing mix and fuel-wise and maybe not necessarily seeing some of the truckload benefits yet. So maybe just help us understand when we would expect to maybe see some of those benefits come through as the underlying environment certainly -- freight environment certainly has seemed to heat out a bit here in the last month, a couple of months or so? Maryclare Kenney : Thanks for the question. So yes, as we think about pricing, we said earlier this year, and we reaffirm it today that we expect our same-store sales pricing to be stronger this year than it was last year. I think as I think about our merchandise portfolio, the team recognizes the value of the service that we provide, and they're leaning-in having conversations with customers and continuing to accelerate price. I think there's a lot of, obviously, conversation out there in terms of the truck market. We did see truck capacity tighten. I'd say, in particularly over the course of the last couple months with regulatory enforcement, I'd say on the Intermodal side, we're near the tail end of the domestic intermodal bid season for 2026, and I'm not going to get into 2027 at this point. But I would say we have seen -- accelerate in our domestic spot segment, which is a smaller portion of our business, but we've also seen it on some of our recent rail asset contract renewals. The team is constantly evaluating what market conditions look like. And like I said, they recognize the importance of ensuring we're getting the value for the service we provide. I do think it's important on the Intermodal side to remember that not all areas of that business have the same market dynamics. For example, I'd tell you, international, I think I've mentioned this before, is heavily concentrated. It's competitive, and it's primarily contracted under long-term deals. So that is not highly coordinated to the truck market as you might see on domestic. Christian Wetherbee : Maybe I wanted to get your perspective on sort of productivity and cost control progress from here. So obviously, some really good momentum so far in these first 2 quarters of '26, particularly seeing it on the PS&O line. I guess, as you think about the bigger picture opportunity, is this sort of just low-hanging fruit that you're capturing now? I guess you've been there a couple of quarters now to have a better sense of what maybe the bigger picture opportunity is. Wondering if maybe you can comment on what you think -- you can continue to sort of generate as a business as we maybe look into the second half and potentially beyond to '27? Stephen Angel : Kevin, why don't you take that one? Kevin Boone : Yes. I would say expenses and efficiencies are never low hanging. There's a lot of work that goes into the efforts. Obviously, coming into the year, we had a plan and we're delivering on that plan, which I'm encouraged about. And we -- I could say we look outward first. We're looking at all of our contractors, everything that we pay outside of the company first. And quite frankly, Mike and his team have come to the table with ideas on in-sourcing, and we found opportunities to in-source activity and use our employees to do that work, and that's materializing the savings as well, and we see other opportunities there. The pipeline is robust. We're in -- currently in the process of building out our 2027 plan and efficiencies, bringing the whole team together. We obviously have targets that we're setting for ourselves internally and goals there. I would say we're about halfway through that process and moving on probably a lot earlier than we normally would in the other year that I've seen. And it's really about creating the muscle. It's about creating the accountability throughout the organization, ownership, common goals. And from a finance perspective, it's about us providing the tools and the visibility for Mike and his team and others to really go out and get those costs and understand where those cost opportunities are. So a lot of collaboration. We're excited. We're reviewing those tomorrow. Again, our status update and more to come on that. Scott Group : I just want to follow up on the pricing question. So First question, I think you answered a lot about Intermodal pricing. I want to ask about Merchandise. We're seeing better volumes there. I'm sure they have some competition with truck market. Like do you think Merchandise price should be accelerating as well with Intermodal? And so maybe in an aggregate basis, you said, hey, we think same-store pricing better in '26 than '25, I don't -- maybe it's too early to ask this, but would you think we see another acceleration in overall same-store price in '27? Maryclare Kenney : Yes. Thanks, Scott. So I would say, yes, I'll reiterate this year better than last year. I would say we're constantly looking at the markets and having discussions with customers. They want us to reinvest in the business. They understand inflation I would tell you, we have seen improvement in several markets as we've gone throughout the course of this year, but too early to get into '27 at this point. Brian Ossenbeck : A question for Mike. We see some of KPIs, some of them moving and what we historically see, not a good direction that you as well. But clearly, you're setting record fuel locomotive safety and the solid results. So just wanted to see if you can kind of square the KPIs we normally see maybe a little bit of a more mixed picture and you still think there's some improvement with sort of the impact on the business, is this really affecting pricing renewals, the service looks at least a little challenged in some areas? And was this any impact from a surprise in volume growth? Michael Cory : Yes. Thanks for the question, Scott. And I'll turn the second piece over to Maryclare on any effect. But you're correct, our service metrics aren't where we want them to be, and particularly Terminal, Dwell and Trip Plan performance. But the short version of that is that demand came in much stronger than we expected and we were tighter on crews in some of our locations. Volume was up 6% across the network and hiring some individual locations, while the head count was lower than last year. But we managed through that by being safer and more efficient. We increased our average tonnage per merchandise train by 5%, and we've improved our workforce productivity. And while we're doing that, it added pressure, obviously, to our service metrics. And I'd tell you, that's our area of opportunity, and we're extremely focused on it. And it's not a structural service issue and certainly not to minimize the importance of it, but we're very productive and just not as smooth as we need it to be. So the forward work is pretty straightforward for us. The fluid network provides reliable service at the cost that we need. And this isn't really about choosing one or the other. It's about meeting our customers' needs effectively and productively. We're going to keep improving on the safety and productivity gains we earned but our goal is to create the capacity where the demand profile requires it. So that's going to include a little modest increase in our T&E head count to support that Service product. However, we expect the productivity to increase. And again, we're being deliberate about it. We aren't going to overcorrect and just the productivity of the team has really worked hard to earn. We'focused on creating the consistency that our customers need and deserve. So bottom line, the quarter showed that we can handle stronger volumes and do it safely and efficiently. And while we on those two things to continuously improve our next step is really to convert that into more consistent fluidity and service. And that's going to prepare us for productive growth. So that's what we're focused on, and I see us sequentially improving our operating and service metrics, no doubt about it. But over to you, Maryclare. Maryclare Kenney : Yes. And I'd just add that the team is obviously staying very close with customers and with our operating team. Mike and I spent a lot of time together. Our team spent a lot of time together and we're constantly reviewing service. We're talking through if we see an area that is an opportunity, how do we work here together and then making sure we're staying close to the customer. Ken Hoexter : So great job on the higher volumes. But I guess maybe just to clarify, the 350 basis point target, that includes the gain on sale, right? So what about $93 million this quarter. And then Mike, on that point of hiring faster or do you need to hire faster given the 6% jump in carloads? I mean isn't this the time where you need to start planning ahead for not just what may come, but if the truck market keeps tightening and we keep getting a spillover, can you meet that with productivity? Or do you need to start hiring faster given the lead time you have to start working on that? Kevin Boone : Yes. Just to clarify, on the margin side, it does include, obviously, the results that we reported in the first half, including some of the, as you mentioned, it wasn't $93 million in the quarter. It was much less than that in the second quarter, but in the first half of the year, it was about that amount. Stephen Angel : Let me take that. This is Steve. So we -- any kind of head count increase is very modest. And one thing that happened, I think Mike covered it, is the summer months where we have a lot of vacations and all those people -- and those people have really come back. So it's concentrated in just a few months, and that's right at the same time that we saw that acceleration in demand. So we kind of got caught a little bit there. But those people are back at work and any increases we're contemplating going to be very modest. It will be in good shape going forward. And in fact, as you look at the -- our service metrics today, they're definitely improving. Jonathan Chappell : Good afternoon. Kevin, you called out two cost line items somewhat specifically. So on labor, it feels like it's going to be roughly flattish as the incentive comp declines, then you have the annual wage inflation. And then PS&O, I guess you kind of insinuated that's going to be higher without the gains on sales, some of the Automotive work, et cetera. We would typically, I think, maybe expect to see the 3Q margin improving, especially when you have this type of volume acceleration, the strong start that you've had in July. Given some of those cost things that you've just noted, maybe some of the hiring, fuel volatility again, would you expect to see a kind of normal seasonal trend as we go through the second half of this year? Or some of maybe the lower hanging fruit or the heavy lifting has already been done in the first half? Kevin Boone : No, I wouldn't say that. I think we have a lot of good initiatives that we're going to continue to carry through on the PS&O side. I think you're spot-on on the labor side, the incentive comp largely will offset some of the labor increases that we have starting in July 1 with our union labor workforce. But otherwise, I think you'll see typically some of the same seasonality. I think typically, you'll see third quarter maybe a little lower than second quarter. Really, the big factor here on the margin side will be the fuel. We've seen a lot of volatility in the fuel price, certainly, we face the fuel lag in the second quarter of the year, and that should go away. But all bets are off on where the fuel could go. We saw a pretty dramatic increase this past week. But all else equal, I think we'll see some benefit quarter-over-quarter, and that's probably going to help our largest story a little bit as well as we move from second quarter into the third quarter. So probably a little bit better than the typical seasonality when we see a little bit of deterioration from an operating income perspective from second to third quarter. Thomas Wadewitz : So I wanted to swing back a little bit to the pricing side. I think maybe Maryclare, if I ask it in the way that you kind of frame where we're at on Merchandise pricing, maybe that will help us to think about what the upside could be. So if we think about kind of a range of Merchandise pricing you've achieved over time, I don't know if the low end 1%, the high ends 5% or 6%, something like that. Obviously, if I'm off on that, please correct me. But where do you think you're at on the range of pricing gains in '26? Just so we can have a sense of as you see some of this market and maybe some strength in your markets how much upside is there in pricing when you look to 2027 in particular, on the Merchandise segment? Maryclare Kenney : Yes. I think. So we're not going to put out a number associated with pricing. But what I would tell you is the team is closely looking at it. I think in several markets, the fundamentals have changed over the course of the last several months. And so it's something that we watch closely. We have a highly skilled team on the marketing side. They understand their markets. They're constantly having conversations with customers, and we're going to make sure that we continue to price the value of the service and make sure that people are looking to bring more to rail, we're taking that into account. Brandon Oglenski : Maryclare, maybe I can ask one of you, too. It looks like your units are running up maybe 6.5% right now early in the third quarter. I guess how can you compare that to your annual revenue guidance here? And I know you called out some headwinds in the back half, but are we just running maybe even ahead of expectations right now? Maryclare Kenney : Yes. Thanks. I would say right now, we called out a couple of areas that we're watching. So Merchandise and Intermodal improved in the second quarter. I'd say if we think about the balance of the year, the tighter truck capacity should create some additional opportunities on domestic intermodal. We've taken that into account as we think about balance of the year and in certain areas of our Merchandise portfolio. I'd say we saw probably the strongest acceleration due to truck conversion in the Forest Products segment in Q2 versus where we were in Q1. When I think about here as we're thinking about the future, there's two areas of Merchandise that were a little stronger in the second quarter than we anticipated that we're keeping our eye on. And I mentioned in the prepared remarks is Chemicals and it's Automotive. I'd say on the Chemical side with the war in Iran, we saw an uptick in plastics as people were looking to pull ahead inventories now, we're keeping a close eye on those. They could moderate as we get into the back half. And so that's an area we're keeping focused up against and then on the Automotive side, overall, Automotive demand really hasn't improved. So the current outlook for North American light vehicle production is still to be down just under 2% for the year. It was slower first quarter, it accelerated some in the second quarter, but we're watching those trends coming out of shutdown. Some inventories are high, and so we're keeping an eye on that. So that could decelerate a bit. But I think as we think about the rest of the markets, there's better fundamentals we see out there now than where we saw starting out this year. Walter Spracklin : I was going to come back to Mike on the capacity side. You talked a little bit about about labor and hiring. But I was wondering if you're seeing pinch points from a structural standpoint, anything that might make you look a little bit harder at the CapEx? I know you held it this year, but when growth comes on. Sometimes you find some pinch points that you weren't -- you knew over there before? And is there any evidence of that at all? Michael Cory : Thanks for the question, Walter. No. In terms of structural issues, no, we're always looking at our capacity. And actually, we're working very hard to define -- make better our capacity modeling. But in terms of the network itself, we showed with the volume we brought with the exception of some locations where we were very tight on crews, we can handle it, and we can handle more. So we'll continuously to look on our demand profile and work hard to find out the capacity that we have and obviously exert everything we can out of it. But in terms of structural, no, we're in good shape going forward, and that's how we see it. Ariel Rosa : Maryclare, I was hoping you could talk about the Intermodal opportunity. Maybe staying on the idea of available capacity. Now that Howard Street is open. Obviously, the trucking market has tightened a lot, especially in the East, and we heard J.B. Hunt speak to that. Just talk about how you're balancing the desire to grow volume against the pricing opportunity and how much available capacity is on the network? Like how should we be modeling that over the next couple of quarters? Maryclare Kenney : Yes. So I'd say when we think about domestic intermodal this year and longer term, we see opportunity out there. We talked about that, go back to even a couple of years ago, and we talked publicly about where we saw domestic intermodal. There's a good amount of traffic that moves over the highway that is suitable for intermodal conversion. Certainly, we're coming out of what was a pretty soft truck market. It's tightened pretty significantly over the course of the last several months, and we're having a lot of conversations with customers. I'd tell you the investments we've made in our infrastructure have allowed us to capitalize on opportunities probably pretty quickly over the course of the last few months. I'm closely watching as the team goes out there and sells against Tower Street Tunnel and the new connectivity that we've put in place, what that looks like on a weekly basis. We've talked about over the last couple of calls, some of the new services that we've put in place, including the partnership with CPKC on SMX. And when I look at SMX and Howard Street Tunnel over the course of the last few weeks, really over the course of the last couple of months, we've seen growth week-over-week in both of those areas. And then as I look at the last couple of weeks, it's adding about 2 -- a couple of points, I would say, in terms of domestic intermodal growth. And so we see additional opportunity there. Howard Street is pretty -- still pretty early for our customers, and it was later in the bid cycle when that was unlocked this year. So as we go into the back end of this year and we go into next year, we see additional opportunity. I think as we think about, i know pricing is a hot topic today as we think about that and going forward, we're we're constantly watching the market, evaluating the market. Not everything comes up at the same time. I talked earlier about the bid season associated with domestic intermodal, and that comes into play. In terms of capacity, it's a constant conversation with Mike and his team. I would say, as I think about our intermodal trains, they're out there running today, there's capacity on many of our trains. And so, it gives us the ability to bring on business pretty quickly within that area and still be able to support it from a reliability and a consistency perspective for our customers. Richa Talwar : So I just wanted to discuss more about like customer feedback. The value proposition for intermodal is pretty clear. But more broadly, I guess, how are customers feeling? What's driving them to CSX, they feel very company-specific. Again, you've optimized your product portfolio, you're exposed to specific projects. Or does it feel like there's true macro uplift here? And then I just wanted to clarify that there's no fear around broad-based pull forward. Maryclare, I think you gave us a lot of plastics and auto, but wanted to confirm, you don't feel like that was -- there was broader pull forward out there given the high level data we see from the ports? And then along those lines, maybe also comment on the competitive environment and how that's affecting your ability to optimize demand in this environment? Maryclare Kenney : Yes, I'll try to remember all of that. Maybe starting on the intermodal side. Like I said, I think there's good opportunity for intermodal conversion. We have a wholesale channel of sale. We work with our channel partners. We have a lot of conversations with them. We also have a BCO national accounts team that talks directly with shippers. And so we're constantly working with them, evaluating what they're moving over the road, looking at their truckload files and advising them on what are the best lines that are suitable for intermodal conversion. And so we do continue to see opportunities there and with that tighter truck market, the value proposition that Intermodal provides. I think is really strong, and it will be an area of opportunity as we proceed through this year into next. When I think about the broader markets, I mentioned a couple in terms of Automotive and Plastics. What I would say is, talking maybe a little bit about Forest Products, that's an area coming into this year, we saw the biggest headwind, I wouldn't say that the demand isn't necessarily strengthened, but the supply really has. And so we do continue to see opportunities within that area as we think about tighter truck capacity out there. And then we've said many times this year about several of the other areas of the business more tied to infrastructure. So think about metals going into data centers, infrastructure investment, your plate, your rebar that we continue to see strength there, expect that to maintain and same with the minerals perspective. So a lot of funding with IIJA, a lot of investment continuing in that area. And so we don't see a material change in that going forward. We're positive about that. Jason Seidl : Steve and team, good job in the quarter. Maryclare, I wanted to talk a little bit more about two things you brought up. Number one, you mentioned sort of your spot Intermodal business. Maybe you could remind us the percent of the total that is? And also, you referenced your SMX advantage business with the CPKC. Just curious sort of what sort of is the longer-term opportunity with that? And especially given that we saw the FMCSA eliminate thousands of sort of individual carriers overnight earlier this year that violated. I was wondering if you're getting a lot of questions from maybe new people that might want to ship cross-border intermodal from Mexico? Maryclare Kenney : Yes. On the spot piece, I'd say it's a very small portion of our business. So it's a small element of our domestic intermodal side. But it's an area that we've seen acceleration recently. In terms of SMX and CPKC, I mentioned we've continued to see growth. We saw good volumes as we started the program a little over a year ago. We've been very happy as we come into this year with the acceleration that we've seen already. And like I said, similar to Howard Street Tunnel is something that is building upon itself, and we're seeing growth week in and week out. We think as we've improved the service in recent months, and we've added additional lanes of service to SMX as we get into the back half of this year and starting into next year's bid season, we're going to continue to see additional growth in that area. Harrison Bauer : Earlier comments, you provided a merchandise RPU ex fuel. I was curious if you can offer what intermodal RPU ex fuel wasor said another way, what your renewals, particularly in the domestic business were like? And then maybe taking a step back off of that, if truckload sees to strong bid seasons of over double-digit renewals, what's the ultimate opportunity for pricing within your domestic intermodal business without sacrificing maybe some of that opportunity for truckload conversions? Maryclare Kenney : Yes. I think I mentioned that fuel was a big driver on Intermodal RPU in this past quarter. I would say, as we think about the future, I mean the truck market has just recently tightened. And so -- when we think about our bid season, it's not different than what you hear from some of the other large trucking companies out there, ones that reported recently and ones that we will report. The bid season kicks off towards the end of the year. And we start seeing pricing then and it's come up to the kind of tail end of it right now. And so I would say the market dynamics have shifted as we've been in bid season for domestic Intermodal this year. As we think about the future, there's some business we can reprice each here. There's some that is in multiyear agreements that have specific things tied to it. And so we're going to lean in as I've mentioned, but I think that's about as far as we're going to go at this point on domestic Intermodal pricing. David Vernon : So Kevin, I wanted to get your sense for how you're feeling about the operating leverage on the incremental business that's coming in. And there's a lot of stuff that you guys have done this year, which is commendable around head count reductions and expense reductions. But when I think about the freight revenue growth in relation to the profit growth ex some of those onetime items, maybe the incrementals aren't so great. I'm just wondering how you're feeling about the leverage you're getting on the new business? And how much of the $54 million of efficiency gains is really kind of volume-driven versus more cost takeout driven? Kevin Boone : Yes. I mean, -- when I do the math, quite frankly, our incremental margins were very, very strong when you ex out fuel overall expenses to be down 2% and the growth that we achieved in the quarter. That's the incremental margins I'm quite pleased with, if you do that math. So as we move forward, this is a model that has a cost and as we bring volume on it, and it's got to be profitable and it supports, obviously, our reinvestments in our railroad. We expect to generate powerful incremental margins. And so I think you did see that in the second quarter, if you do the math and look at the fuel impact that occurred. And moving forward, obviously, that net fuel impact will be less going forward. So it won't be quite of a headwind as we saw in the second quarter. But see line of sight to strong, powerful incremental margins. It's a cost discipline. Obviously, as we build -- take on the volume, not all volume is created equal to your point. So we're looking for volume that supports our reinvestments and returns on invested capital is a real focus for this team. Bascome Majors : Steve, I'd be curious on your perspective as an outsider, now 10 months into being an insider at the railroad. Relative to what you were thinking when you came in and accepted this role. Where do you still think there is a lot of opportunity to do things differently in old economy established industry. And where maybe have you sort of given up where there's more -- too much friction or just processes that are too ingrained to really change? Stephen Angel : Well, I would say it's a 10-month veteran. I'm encouraged about the progress we've made and really what we have ahead of us. And I always think of it in terms of -- there's opportunity to improve everything. And I've always found that to be true. And in operations, I think it's probably a never-ending endeavor to continue to improve operations. And Mike Cory is a 40-year veteran and he knows all about it. And I'm always amazed how much he knows about the railroad -- railroads and how to operate the railroads. And there's always going to be opportunities to improve that. And we talked about that a little bit today, some of the things we're doing to improve. Pricing, Maryclare was had to answer about 18 pricing questions today. And but I really think that's a muscle we're building. I think we'll get better every day at that, building price management capabilities. She's all over it. This is an area where AI can really do some good with good price analytical tools so we can get a little better at that. I'll think about pricing in terms of making sure that we understand the value we're providing the customer what is the value we're providing, what is their next best alternative? Are we earning good returns? Do we have the capacity to serve and all of that goes into those decisions and you make those decisions surgically. It's not a blanket, we're going to do x percent price across this segment of the market. Those are all surgical decisions. And of course, we want profitable business. We want good returns on capital. As Kevin said, and continue to reinvest the business. I think on the productivity side, Kevin talked a lot about that. Mike did too, to some degree. And I think there's a lot of opportunity on the productivity side. I think we obviously, the team responded great so far this year. But as we look at -- we're talking about -- tomorrow we're working on '27. We'll be talking about benefits that will carry forward to '28. So it's really all about building that productivity muscle, and I think that's an opportunity for improvement. But all businesses, great businesses have opportunities for improvement, and we're no different than anyone else. Operator : This concludes today's question-and-answer session and conference call. Thank you for your participation. You may now disconnect.