CSX (CSX)

Intermodal-Dense Eastern Network

CSX's results turn on what it carries more than on what it charges. It is one of the two eastern US Class I railroads (the top revenue tier of North American freight carriers), and nearly half its traffic is intermodal: shipping containers and truck trailers on flatcars, which earn far less per load than carload freight. In FY2025 volume was flat and merchandise pricing edged up, yet total revenue per unit fell, because coal rates dropped while the intermodal share stayed high.

Merchandise, mixed carload freight such as chemicals, autos and metals, was 2.594 million units (41%); intermodal 2.995 million (48%); coal 718 thousand (11%). Of the five listed Class I railroads, only Norfolk Southern carries a larger intermodal share of volume, at 57.7% of units, yet it earns 63% of its revenue from merchandise. Volume share and revenue share tell different stories, and the intermodal guide uses CSX to show how rail competes with trucks and why density matters. Market value is 1.858 billion shares (Q1 2026 10-Q) at the $47.21 investor-relations close on 9 June 2026.

An Operating Ratio You Have to Work Out

Railroads are judged on the operating ratio (OR), operating expenses as a share of revenue, where lower means more efficient. CSX's FY2025 filings headline operating margin instead and never print an OR, so the ratio is implied: 100% minus the margin. GAAP operating margin of 32.1% (33.2% adjusted) gives implied ratios of 67.9% GAAP and 66.8% adjusted. The operating ratio guide uses CSX as its worked conversion and labels the row implied.

CSX's 10-K (annual report) says its scheduled-service plan, which runs trains to a fixed timetable, lowers costs and lifts free cash flow when carried out. All five railroads use similar scheduling language, yet their adjusted ratios run from 59.3% to 66.8%. Density and traffic mix move the ratio as much as the operating plan does.

Why Revenue per Unit Fell

Revenue per unit (RPU), freight revenue divided by units moved, fell because mix and coal outweighed merchandise pricing. Merchandise RPU was $3,382 (+1%), intermodal $692 (−2%) and coal $2,646 (−13%). With nearly half its units in the lowest-paying line, a small merchandise gain could not hold the total up. CSX does not claim its overall pricing beat inflation, and labour and fringe costs rose 3%.

Fuel surcharges and contract renewals flow through different line items, so strength in one segment does not prove pricing power across the whole book. The RPU guide sets CSX beside the other filers with each denominator labelled, because CSX divides by rail units and Union Pacific by revenue carloads.

FCF, Buybacks and the ROIC Gap

CSX's free cash flow is its own non-GAAP "FCF before dividends": operating cash flow of $4,613m, less capex of $2,902m, plus $78m from asset sales. Buybacks (44 million shares at an average $30.95) took about three quarters of it, and dividends come out of the same cash. Union Pacific measures FCF after dividends, so payout ratios only compare once both are on one definition.

CSX defines a ROIC for executive pay but publishes no FY2025 figure in the 10-K or its quarterly financial reports, so free cash flow has to stand in for it. The one filed hurdle is an 8% required return on gross operating assets under its Economic Profit framework (FY2024 disclosure). Gross operating assets are a different base from ROIC's invested capital. The two do not substitute, and the filings cannot show whether Economic Profit grew.

What to Watch in the Financials

Start with the implied ratio each quarter, converted from margin the same way. Every 100 bps of ratio is 1% of revenue moving between costs and operating income.

Then watch the mix. If intermodal grows faster than merchandise, volume can rise while revenue per unit falls; truck competition caps what intermodal can charge, and wider freight conditions set the volume. Coal was the biggest drag on FY2025 revenue per unit, and further erosion at a flat unit count extends the headline decline even if merchandise pricing holds.

Valuation Framework

The railroad sequence is operating ratio and return on capital first, then EV/EBITDA on normalised earnings. At CSX both first steps need care. The ratio is implied and ROIC is unpublished. No peer EV/EBITDA table is filed, so any multiple has to be built from trailing EBITDA and an enterprise value at a stated date.

Key Risks

Truck competition. When truck capacity is loose and diesel is cheap, fewer shippers move freight from road to rail. Intermodal revenue per unit then comes under pressure before merchandise contract renewals can offset it.

Cost against service. CSX's implied adjusted ratio is 7.5 points above Union Pacific's 59.3%, a gap that reflects mix and density as well as cost. The 10-K's stated fix is cutting cost without hurting service.

Two lines falling together. Merchandise carries the highest revenue per unit but cannot offset coal and intermodal on its own when both slip in the same year, as they did in FY2025.

Peer Context

Norfolk Southern, the other eastern network, cut its GAAP ratio by 220 bps to 64.2% in FY2025. Union Pacific reports 16.3% adjusted ROIC, the figure CSX does not publish. The Railroads Sector Primer carries the trade-off between mix and efficiency through to a valuation.