Declining profits at CSX due to reduced revenue and increased expenses
CSX, one of the leading railroad companies in North America, recently reported its Q2 2025 results, showcasing a mixed performance. While the company faced revenue and earnings headwinds, its operational recovery has been commendable, improving train speeds, on-time metrics, and operational efficiency.
Financial Performance
CSX reported an operating income of $1.28 billion, down 11% from Q2 2024, and net earnings of $829 million ($0.44 EPS), a 10% decline year-over-year but a 29% sequential EPS growth. Revenue declined 3% year-over-year to about $3.57-$3.6 billion, influenced by lower export coal prices, reduced fuel surcharges, and weaker merchandise volumes, although total volume remained flat year-over-year and rose 4% sequentially.
Operationally, CSX made strong strides:
- Operating margin improved sequentially by 550 basis points (to 35.9%) despite a 320 basis points year-over-year decline, driven by disciplined cost management and efficiency gains.
- Average train speed increased by 8%, and on-time performance improved, marking a clear recovery from earlier disruptions.
- Volume mix shifts included a 2% increase in intermodal, 1% increase in coal, and a 2% decline in merchandise, with growth in metals, minerals, and agricultural shipments only partly offsetting declines in automotive and chemical sectors.
- Expenses rose 2% year-over-year, which, combined with revenue declines, led to a 3.2-point increase in operating ratio to 64.1, reflecting cost pressures despite operational gains.
Infrastructure Improvements
CSX highlighted forthcoming infrastructure improvements, including the anticipated reopening of the Howard Street Tunnel and Blue Ridge subdivision later in 2025. This will enable enhanced service levels and double-stack clearance by 2026, expanding network capacity and growth opportunities.
Key Operational Metrics
The number of cars online - a key congestion metric - declined 10% as the quarter progressed. Regulators received zero complaints from shippers despite the impact of congestion. Intermodal volume increased by 2%, while merchandise declined by 2%. Customer switch data of 94% was flat compared to last year's second quarter and a 1-point improvement over the first quarter.
CSX's operating ratio (including trucking operations) was 64.1, a 3.2-point increase from a year ago. The company's customers gave the railroad the highest marks ever in a second-quarter internal survey.
Looking Ahead
Work is being done to upgrade CSX's capacity and throughput at Avon Yard in Indiana. The hurricane-damaged Blue Ridge Subdivision is expected to be completed on schedule in the fourth quarter, while the Howard Street Tunnel clearance project is on schedule for completion early in the fourth quarter. Related bridge clearance work in Baltimore is on pace for completion in the second quarter of 2026.
CSX's operational recovery has been solid, improving train speeds, on-time metrics, and operational efficiency. This should support long-term performance and margin expansion as network investments complete. The completion of infrastructure projects such as the Howard Street Tunnel and Blue Ridge Subdivision will further enhance CSX's network capacity and growth opportunities.
[1] CSX Corporation Q2 2025 Earnings Release [2] CSX Corporation Q2 2025 Investor Presentation [3] CSX Corporation Q2 2025 Earnings Call Transcript
- Despite a decline in financial performance, with a 10% year-over-year drop in net earnings and a 11% decrease in operating income, CSX's focus on investments in technology has contributed to operational improvements, such as an 8% increase in average train speed and improved on-time metrics.
- In the world of general-news, forecasts for CSX's future success are optimistic, as the company's investments in infrastructure, like the planned reopening of the Howard Street Tunnel and Blue Ridge subdivision, are expected to double-stack clearance by 2026, expanding network capacity and growth opportunities.
- The business sphere is closely monitoring CSX's expansion into sports, as the company's work to upgrade capacity and throughput at Avon Yard in Indiana, along with the scheduled completion of infrastructure projects, may lead to increased efficiency and growth, particularly in sectors like automotive and chemical industries.
