CSX Operating Income Jumps 44% to $1.57 Billion as Service Slips

CSX posted a 44% jump in third-quarter operating income, to $1.57 billion, on record revenue of $4.02 billion — and simultaneously watched its service metrics deteriorate by double digits, a tension that now defines the railroad's outlook.

Revenue rose 12% year over year, the Jacksonville-based carrier (NASDAQ: CSX) said Wednesday, while earnings per share climbed 54% to 57 cents. Those headline gains flatter the comparison: the year-ago quarter absorbed a one-time goodwill impairment. Adjusted for that charge, operating income was up 25% and EPS up 30%.

The operating ratio improved 8.8 points to 60.9%, meaning CSX spent roughly 61 cents to earn each dollar of revenue. Expenses fell 2% even as the railroad moved more freight. Management called out an all-time U.S. quarterly record for fuel efficiency: 0.92 gallons per 1,000 gross ton-miles.

Productivity, measured in million gross ton-miles per employee, improved 6%, with headcount down 6.2% from a year ago. Fewer people, more tonnage, lower cost — the precision-scheduled-railroad playbook executed in its purest form.

What did the CEO promise?

"The progress we continue to make on productivity has helped drive substantial growth in profitability, earnings, and free cash flow," Chief Executive Steve Angel said on the earnings call. "Our goal is to be the best performing railroad in North America, and the entire CSX team is responding to that challenge."

That ambition now carries a higher price target. CSX raised its full-year revenue growth forecast to high single digits, up from prior guidance of mid-single-digit growth. Angel also signaled a turn toward hiring, saying that heading into 2027 the railroad "will be focused on ensuring we have sufficient resources across the network to support a growing business, which will include adding to our train and engine employee pipeline."

A hiring pledge after six consecutive quarters of headcount reduction deserves scrutiny; the service data suggest it may already be overdue.

Where is the volume coming from?

Total freight volume rose 5%. Intermodal led at 7%, merchandise gained 3%, and coal edged up 2%.

The intermodal growth came entirely from domestic boxes — international traffic declined slightly. Chief Commercial Officer Maryclare Kenney was blunt about the tailwind: "Reduced trucking availability, high truck rates, and elevated diesel costs continue to benefit our intermodal segment."

New products are pulling highway freight onto rail, she said, including:

• Interline service with BNSF through Birmingham, Alabama
• Interline service with CPKC through Myrtlewood, Alabama
• Double-stack operations in the I-95 Corridor, enabled by the completed Howard Street Tunnel clearance project in Baltimore

For shippers, the calculus is straightforward: while truck capacity stays tight and diesel stays expensive, CSX has pricing room on domestic intermodal. The railroad has already hit friction — congestion at its Fairburn terminal outside Atlanta is forcing investment in track, switching and processing capacity.

Coal split along export and domestic lines. Export tonnage rose 7%; domestic tonnage fell 3%, as higher metallurgical coal volumes failed to offset weakening utility coal traffic.

Can a leaner network keep up?

Here is the caveat embedded in the earnings release. Average train velocity slipped 2%. Terminal dwell increased 12%. Trip-plan compliance fell 10 points in both intermodal and carload, leaving intermodal on-time performance at 83% and carload at 73%.

"We are handling more volume safely and efficiently, but we know our network can perform better," Angel conceded.

Safety moved the other way, and consistently so: the personal injury rate fell 17% — a seventh straight quarterly improvement — and the train accident rate fell 5%, its fifth consecutive quarterly gain.

Who runs operations now?

Angel praised former Chief Operating Officer Mike Cory, whose retirement was announced Oct. 12. The two operations senior vice presidents, Doug Ryhorchuk and Casey Albright, now report directly to the CEO.

Angel, who joined CSX a year ago after leading industrial gas company Linde, embraced the direct oversight. "Most people think of me as an operating CEO, and that's what I like to do," he said, citing early career running manufacturing operations for GE and installing one of the first lean production systems in the United States in the 1990s.

The bet for 2027 is that added train and engine crews will restore velocity before shippers absorbing 73% carload compliance look elsewhere.