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CSX (CSX) is nicely higher despite missing EPS expectations last night in its Q4 report. Revenue declined roughly 1% yr/yr to $3.5 bln, which was in line with expectations. Most notable was FY26 guidance calling for low single-digit revenue growth, 200-300 bps of operating margin improvement, and free cash flow growth of at least 50%.

• Total volume was up 1% in the quarter, but revenue declined as negative mix and weaker export coal prices led to a 2% decline in total revenue per unit.
• Intermodal continued to drive growth, with revenue up 7% yr/yr to $562 mln on 5% volume growth, supported by domestic and international wins and new service offerings despite soft trucking.
• In terms of merchandise, volume and revenue were both down 2% with revenue at $2.16 bln as it continues to face market-driven headwinds. Chemicals (-6%) reflected weak industrial demand and tariff and inflation pressures, while forest products (-11%) stayed soft due to plant closures and outages. Offsetting some of that, minerals (+6%) benefited from infrastructure activity, and fertilizers (+7%) improved on stronger phosphate production and nitrogen wins.
• Operationally, service remained a bright spot, with velocity up 7% and dwell improving 13% in Q4, while carload and intermodal trip plan performance improved 9% and 8%, reinforcing reliability.
• Speaking on the guidance, management does not see a near-term catalyst to lift major industrial markets, and is planning for flat industrial production and modest GDP growth, with fuel and benchmark coal prices roughly in line with current levels. The improvement in margins and cash flow is driven by workforce optimization, tighter discretionary spending, efficiency and productivity initiatives, and a step-down in CapEx.

Briefing.com Analyst Insight

This quarter underscored CSX's improving execution, with service metrics continuing to trend positively even as the demand backdrop remains mixed. The pressure points are still concentrated in the industrial complex, particularly chemicals and forest products, while housing- and auto-linked lanes remain constrained by affordability and production uncertainty. Against that, intermodal continues to stand out as the most constructive area. Looking to FY26, management is not expecting a macro-driven lift in the industrial cycle, so the focus is shifting to stepped-up productivity efforts, tighter cost discipline, and more selective capital deployment, consistent with new CEO Stephen Angel's best-in-class playbook. Investors appear to be leaning on execution and capital discipline to support profitability and cash generation while end markets stay soft.