CSX (CSX) Morgan Stanley‘s 12th Annual Laguna Conference 2024 summary

Demand environment and volume trends

• Third quarter volumes are up compared to the first half, with strong performance in chemicals, intermodal, and autos, though metals and fertilizers remain weak.

• Midwest grain harvest is expected to be strong, supporting agricultural and food shipments.

• No significant slowdown observed in industrial end markets, except for a brief auto restart lag post-shutdown.

• Merchandise and intermodal volumes are both trending positively, with continued strong export coal demand despite lower prices.

• Volume guidance remains in the low to mid-single digit improvement range, with no expected acceleration.

Growth strategy and customer focus

• Emphasis has shifted from cost-cutting to growth, prioritizing reliable, repeatable service to regain customer trust.

• Customer needs are diverse across segments; intermodal values speed and terminal efficiency, chemicals prioritize safety, and autos require timely delivery of both finished vehicles and empties.

• Over 500 industrial development projects are underway, especially in the Southeast, expected to contribute to revenue growth for several years.

• Nearshoring and new interchange points, such as with CPKC in Alabama, are seen as long-term positives for network connectivity and growth.

Pricing, cost, and efficiency

• Intermodal pricing faces pressure from excess trucking capacity, while merchandise pricing remains strong due to service improvements.

• Lower fuel and metallurgical coal prices are expected to impact revenue, placing results at the lower end of guidance.

• Labor agreements covering over half the workforce provide cost visibility, with wage increases set for the next two years.

• Efficiency gains have been achieved by balancing customer needs and operational tweaks, such as combining trains to lower costs.