Machinist

CSX reports Q2 tonight. The freight recovery has a new playbook. CSX reports Q2 2026 earnings after the close tonight. The last quarter told an interesting story. CSX met analysts' revenue expectations last quarter, reporting revenues of $3.48 billion, up 2% year over year. It was a satisfactory quarter with a beat of analysts' EPS estimates. One quarter of ~2% growth is not exciting. But the setup heading into Q2 is different. The Numbers Tonight * Consensus revenue estimate: ~$3.88B (about 9% growth year over year) * Consensus EPS: ~$0.51 per share, up from $0.49 a year ago * Average EPS surprise history: beat in 3 of last 4 quarters, avg. beat of roughly 3%-6% This quarter, the market is expecting CSX's revenue to grow about 9% year on year, a reversal from the ~3% decrease it recorded in the same quarter last year. That is a meaningful inflection. The question is whether volumes actually delivered it. The Reshoring Angle Here is where it gets interesting. This is not just a freight cycle story. It is a reshoring story. Auto onshoring is under way and CSX has spoken to notable wins that are starting to ramp up, emphasizing that the incremental volume opportunity is large given that imported vehicles did not touch the rail network significantly. That detail matters more than people realize. When a car is imported, it arrives at a port and can go directly to a lot. When it is made domestically, it can move by rail. CSX connects major metropolitan areas in the eastern United States, where a large share of the nation's population lives. Every new domestic auto plant is a new volume source that did not exist in CSX's prior-cycle model. Then there is the Howard Street Tunnel. The completion of the Howard Street Tunnel and related clearance projects is expected to unlock capacity, enhance service reliability, and enable double-stack intermodal service on key routes, which management believes will drive incremental volume growth in 2026. Double-stack intermodal is not a minor upgrade. It increases the number of containers a train can carry on those routes. The Volume Picture CSX stock reflects a freight-rail recovery, with recent results showing higher intermodal volumes, cost efficiency gains, and disciplined capital returns to shareholders. In the latest quarterly disclosure, merchandise volume was flat year over year, intermodal volume grew, and coal trends were mixed (domestic up, export down). Coal is the drag. That is not new. The question tonight is whether intermodal and automotive growth are large enough to more than offset the coal softness. If the answer is yes, the ~9% revenue estimate is achievable. If automotive onshoring volumes came in stronger than expected, there is upside to that number. Bull / Base / Bear Bull: Revenue comes in at or above the ~9% growth estimate, double-stack intermodal volumes show meaningful sequential acceleration, and management raises full-year guidance. The auto onshoring pipeline converts faster than the Street is modeling. Stock pushes toward the upper end of its 52-week range. Base: Revenue comes in near consensus, EPS beats modestly as it has in most recent quarters, and management maintains guidance with cautious language on industrial end markets. The freight cycle is confirmed as turning but not yet accelerating. Stock holds its current range. Bear: The company remains cautious about continued pricing pressure in coal, soft demand in automotive and housing-linked segments, and uncertainties tied to tariffs and global trade. A revenue miss on weak industrial demand sends the stock lower and calls the recovery timeline into question. What to watch on the call Three things matter most tonight. First, intermodal volume growth - specifically whether the Howard Street Tunnel clearance work is showing up in actual numbers. Second, any update on the industrial development pipeline. The longer-term industrial pipeline remains robust, even growing, though customers are increasingly cautious on putting pen to paper on final steps due to macro uncertainty. Third, pricing commentary. Once tracks, terminals, and locomotives are in place, incremental intermodal units can contribute meaningfully to revenue and earnings without requiring proportionate increases in fixed costs. This dynamic is why investors watch intermodal volume statistics closely, as they can offer an early indication of freight demand changes tied to consumer spending and import trends. Bottom line CSX is not a flashy trade. It is a thesis on whether the American industrial economy is actually rebuilding, or just talking about it. The railroad does not care about headlines - it cares about what is actually moving. Tonight's numbers will tell you more about the real state of domestic manufacturing and trade than almost any other report this earnings season. That is the part most investors will skip. It probably should not be. For informational purposes only.

CPKC boosts Mexico-Canada trade with new CSX service, CEO emphasizes "solutions, not excuses" Canadian Pacific Kansas City (CPKC) CEO Keith Creel says his railway is "making its own luck" amid trade tensions, economic uncertainty, and abundant truck capacity, all of which can slow volume growth. "We create solutions instead of excuses," Creel told an investor conference on Wednesday. Key strategies include: * Expanding traffic between Canada and Mexico as U.S. tariffs make domestic markets less attractive * Launching new services, including Americold's temperature-controlled intermodal moves connecting Mexico, the Midwest, and Canada * Developing interline intermodal service with CSX linking Mexico and Texas to the Southeast * Leveraging single-line, cross-border service to and from Mexico Table of Contents Growth despite challenges. For the current quarter, CPKC's revenue ton-miles have risen 2.2%, though carload and container volumes are down 1.7%, reflecting a strong first-quarter 2025 when shippers rushed to beat U.S. tariffs. Creel is optimistic that trade disagreements between the U.S., Mexico, and Canada will be resolved, likely starting with Mexico. He notes strong relationships and ongoing negotiations, predicting that a new trade deal will encourage investment in Mexican manufacturing. Mexico-Canada trade expands. CPKC has seen notable results from its focus on bridging Mexico-Canada trade via the U.S. In 2024, Mexico-Canada traffic represented roughly 2% of revenue; now it exceeds 3%, generating nearly $500 million in incremental revenue, with an additional $100 million expected this year. Shipments include French fries, grain, and petroleum products. New CSX intermodal service. Next month, CPKC and CSX will launch a dedicated intermodal train via a new Myrtlewood, Alabama, interchange on the former Meridian & Bigbee line. Upgrades will allow 49-mph operations over the route, reducing transit time from Atlanta to Monterrey in three days and to central Mexico in four. Creel compares this new Southeast Mexico Express (SMX) service to the already successful Midwest Mexico Express trains 180/181. He emphasizes the need for upfront investment to grow new services, noting that anchor customers like Schneider will help fill the trains. Truckload conversion goals. CPKC is about 40% toward its goal of removing 64,000 truckloads from highways annually, slower than expected due to excess truck capacity, low rates, and the time needed to launch new facilities like Americold's cold storage warehouses in Kansas City, Mexico, and Saint John, New Brunswick. Creel expresses skepticism about projections from Union Pacific and Norfolk Southern that their merger could remove 2 million truckloads, calling the target "highly aspirational" and more complex than often portrayed. Conclusion. Creel attributes CPKC's growth to a unique network and proactive investment strategy. "We've made our own luck in connecting new markets," he says, highlighting the railway's continued expansion in a challenging macroeconomic environment.