CSX Corporation (CSX) Earnings Call Transcript & Summary

All right. Good morning, everybody. Thanks for joining us here on the first day, first presentation of the JPMorgan industrials conference and the transportation track. So I'm Brian Ossenbeck. I cover transports for JPMorgan. Very happy to start off with CSX. We have Sean Pelkey here, the CFO; Matt Korn, Head of IR and Strategy, in the room as well. So we're going to pass it over to Sean. He's got a few slides that I believe are posted. He's going to give us a little bit of intro and then we'll jump into Q&A. If you've got any questions in the room, we should have a few mics here as well. So guys, thanks very much for coming and kicking us off here. Sean, I turn it over to you.

Thanks, Brian. And appreciate you guys having us here so early but happy to kick things off. And what I wanted to do is just kind of give you a sense of how the year has been trending, so far, a couple of months in for CSX. And before I get into those details, of course, we've got our forward-looking disclosures related to any comments I'll make during the presentation. On Slide 3 here, if we look to sort of how January and February trended relative to normal historical averages, what we've got there in those blue ranges is January and February volume relative to the Q4 average volume, the range that we've seen over the last 9 years. And the little diamond shows you where we fell in 2025. The gray-shaded area gives you a sense of what the mean has been over that time frame. And coming out of the gates, in January, you can see -- actually held up okay even though we navigated through some difficult weather. The market that was off the most in January was auto. We saw production go -- get off to a very slow start. Inventories were high going into the new year. Coal was off a little bit as well, mainly both producer issues as well as weather, but in total, volumes were about what we would have expected in terms of normal seasonality. Similar story in February, I would say the one big difference, of course, being the auto market did recover in February. And then I would say the weather had more significant impacts in merchandise. Through both months, intermodal was a little higher than normal seasonality, which was nice to see. Hard to say how much of that might be pulled forward from tariff impacts and whatnot. The other thing I would say here is that, even though total volumes were in line with what we would have normally expected on a seasonal trend basis, they were not what we expected coming into the year, so we are a little bit off our own plan through January and February. March, of course, is a really important month. We're a little over 1.5 weeks into March. And we're actually trending fairly well in March, pretty close to what we would have expected across the board. When we get into the details kind of around individual markets, I won't go through every single one of those, but like I said, intermodal is off to a pretty good start both on the domestic as well as the international side, for different reasons, but both are up more than 2% on a year-to-date basis. Ag is up as well. That's really been driven by demand for feed grain. Export has been a headwind, and some of the other markets within ag, but overall, ag has been good. Auto was off to a slow start. It has picked back up. Domestic and export coal. I would say, going into the year, we thought export coal would grow, domestic coal would be down; still expect overall coal to be down, I should say, domestic with some plant closures, export with some production issues that will linger here through the first half. Metals is one that's down year-over-year. We're cycling some comps from last year that will start to fade. And we actually think metals may have a little bit of momentum given the tariff trade. Now you get off to a relatively slow start. And you start questioning and saying, "Hey. What do we have built in, in terms of productivity initiatives?" How do we make sure that we're managing our costs well while also leaving the door open to capture growth as the markets begin to normalize, hopefully, later into the year, in particular the truckload market? But Mike Cory has been with us now for 1.5 years. He has brought in a fresh perspective. He's brought in some leaders that he's worked with across the industry for a number of years and worked very closely with my finance team to go through line by line every single one of the budgets within the operating departments. I would say where Mike has brought a tremendous amount of value is envisioning what the idealized train plan looks like that achieves that balance of cost efficiency as well as service to the customer. And if you look at kind of where our service metrics have been. The one that has been as stable as it can be is our delivery of service to the customer, which has been right around 95%, plus or minus a couple of percentage points. And we've done that while making significant reductions to the number of road starts that we're running. Now part of that is volume, with coal volumes down, but there's a significant amount of reengineering of the network. The Cumberland yard, which we can talk about later, has been a big driver of that. And you can see there about 1,000 fewer crew starts a week. Just to give you some perspective: That's around $1 million a week that we're saving there. And then on the right-hand side. The costs that we can manage kind of most directly are the purchased services costs. And if you look at how well CSX has done over the last 2 years on that line item, we've been able to offset all of our inflation and essentially hold those costs flat on a 2-year basis. There are a lot of initiatives that go into that. Certainly, keeping a very close eye on locomotive utilization and productivity is an important driver there. We, last month, hit our highest horsepower per trailing ton that we've seen since 2016. So definitely headed in the right direction there and more initiatives to come. I did also want to take a moment just to talk about Howard Street because it's a significant project that just began in earnest February 1. When we originally started talking about Howard Street, I mean -- I should say we've been talking about Howard Street my entire career, 20 years. And forever, it was Howard Street is the bottleneck in the network. "It will never be fixed." And then 5 or 6 years ago, we started to envision a world where we could double stack clear the Howard Street Tunnel, which would open up the New England area in the Northeast to us to be able to double stack and create tremendous capacity for CSX. The problem was to think about shutting down that tunnel for an extended period of time would have significant customer disruption. We didn't see a way of being able to do it, so what we were going to do was do a 3-year plan where we would run trains for 12 hours a day. And the other 12 hours, the team would come in. They would basically pick up a 12-foot section of track, take it out. If you see that crane with that giant piece of concrete: They would lay that in, which would go under where the existing ballast and track was. They would lay the ballast and track back on, do all of that within a 12-hour period, start running trains again and repeat every single day for 3 years. When Mike came in, he challenged the team to find a way to do a full shutdown of the tunnel, knowing that, that kind of disruption was going to be probably more impactful to the customer for 3 years and there were things that were going to go wrong. There were going to be days when we just didn't -- weren't able to get [ the track time ]. So we came up with a plan to do this in 6 to 8 months with a full shutdown. Part of that plan included the redesign of the Cumberland yard that Mike talked about at our Investor Day last year, which is now complete and has almost doubled the processing capacity of that yard, taking a lot of the pressure out of that Baltimore area and allowing us to reroute a significant number of trains around the tunnel. In fact, 10% of our trains would have run through that tunnel. They're being rerouted today, about 15% when you include what we're doing on the Blue Ridge. It's a big project. It's about $500 million. CSX' commitment is about $140 million. The other $360 million is funded through partnerships with federal and state and local governments, so -- and in fact, CSX' capital, we've already spent about half of it even before beginning construction in earnest in terms of clearance work that's been done around the tunnel. So we're getting closer and closer to the finish line as we speak. And what it will do for us really is kind of open up -- well, my arrows aren't on the screen, but hopefully, they're on the slide on the website. But there are some nice arrows that show you the flows and everything. Basically the punch line is the merchandise traffic is going to go across from Willard directly to Baltimore, given the work that we've done at Cumberland. And the intermodal trains are going to have a faster high-speed route through New England and down into Philadelphia and Baltimore. What that does for us, it allows us to consolidate trains, reduce crew starts, reduce costs on crews and locomotives. It also allows us to grow into the opportunity into the capacity. We've got, we think, an opportunity to increase intermodal volume anywhere from 75,000 to 125,000 loads once the project is complete, so very, very significant benefits. And we will start to see that at the end of this year, going into 2026.

Okay, thanks very much. I don't know what happened to the arrows there, but I think we can envision it nonetheless.

Yes.

So a lot of good detail. To start off, Sean, I think, just to focus a little bit more on the near term for the time being. So you've got the $350 million headwind that you laid out on the last earnings call. We're pretty clear about what that meant, but obviously it's been a tough start for the network and for the industry on a weather basis as well here, so any more specific thoughts you can offer at least to how the year has started, particularly the first quarter which we know is always tough for the rail industry but specifically to you guys here?

Yes. One of the things we said in the, on the January call is that Q1 was going to be trough earnings for us. I think we -- that's still what we have line of sight to. In terms of the $350 million of headwinds, that's primarily related to export coal price and fuel price as well as roughly $10 million a month of costs associated with network disruptions as we shut down the Howard Street Tunnel and reroute around the Blue Ridge as that reconstruction takes place. That number is pretty similar to what it was going into the year. Met coal prices have been fairly steady, down a little bit, but I would say we expect a little bit of recovery, from where we are right now, over the balance of the year. So no change to that per se. On the volume side, off to a little bit of a slower start than we expected in January and February. March is holding in okay. So not really ready to kind of change anything in terms of the full year guide, still expect low to mid-single-digit volume growth in total.

And when we talk about all the uncertainty that's out there from the tariff headlines. I mean I don't know if any have come across this morning as we're speaking, but it's hard for the network and for customers to adapt to that, so what have your conversations been with folks as you've gone through this in the first couple of months of the year? And you had the slide with auto as having a little bit of volatility or off to a slow start in the January time frame. Was that related to kind of the stop and the start of the tariffs? I'd love to hear just how you and Mike are planning to -- with the customers, to adjust to that. Because it's a bit of a whiplash.

Yes, yes. Well, let me start more broadly. And then we can talk about auto. So just in overall in terms of tone around tariffs, I think everybody -- all of the customers are saying something very similar, which is, "We're watching this very closely. We're very curious about what happens. We're trying to make contingency plans," but in terms of the actions that are being taken to date and how it's impacting our volumes year-to-date, I don't think we're seeing anything all that significant. You could debate maybe there's a little bit of pull forward on the intermodal side. There are isolated examples of fertilizer from Canada that isn't moving today, that was previously, because of the potential threat of tariffs. We're not talking about big numbers, big dollars right now. I think that, those impacts will be felt if and when certain tariffs go into effect. And we've got markets that could benefit as well. When you think about metals in particular, we saw that back in 2018, a positive uplift in terms of domestic metals production. That favored CSX. There is capacity to ramp up production in the metal space. And so there are some positives as well. In terms of auto's, I don't think January had anything to do with tariffs. I think it was largely a little bit too much inventory on the ground going into the year, retooling of plants that took a little longer shutdowns than they normally would have. When we think about the network impacts and how we manage through that. I think -- talking to Mike about this, I think it's something they keep an eye on every single day. And as changes occur -- and we've had a couple of fits and starts with auto tariffs on, off, on, off. The team has been at the ready. They adjust the train start plan daily based on what's happening. We can reduce starts very, very quickly. We get immediate benefits from that because, unlike other crafts and other areas of the company, when we don't run trains, the crews don't get paid. So there are benefits. There are carrying costs, of course, of having those crews, but the network is flexible enough to be able to adjust the train plan on a daily basis. And you think about that road crew starts slide that I showed. That didn't all happen in a day. That was going in and making plan changes gradually over a period of months to see how the network would react. Are we able to still make our connections? And there are areas where we've unwound some of the changes that we've made to be adaptable and make sure that the customer is receiving the level of service that we would want them to receive.

So when you think about the commodities or end markets that could be exposed to the tariffs as they're written, which is a big if, how that changes or if it changes, what are some of the ones you're more -- you mentioned metals, potentially a bit of an uplift. What are some of the top 5 ones that you're focused on? I would imagine maybe a little bit of a concern from a retaliatory perspective on China, for maybe export ag and coal, but what are the ones that, I guess, you and Kevin are focused on from a end market perspective?

Yes. If we start with China. We really don't have any export grain exposure to China per se. Most of the grain that we export goes to South America. And in fact, our export grain is a very small percentage of our total ag and food volumes and has already been impacted by a strong Brazilian crop. So our export ag is down quite a bit to start the year -- and probably expect it to be, but again it's not a significant part of what we do much, much bigger for the Western roads. In terms of exposure to export coal, it's a very small portion of our export coal does go to China, so -- but there is some percentage that does. That could be impacted. And I think the expectation is, if we see that happen and U.S. tons are not going to China, there will be a displacement effect. The amount of demand for export coal out of the U.S. should remain fairly constant. And we'll just change destination, so we may have more that goes to India, as an example, if that were to happen. When we think about Canada and Mexico specifically. About 10% of our volume is cross-border between Canada and Mexico and the U.S., a little bit more exposure to Canada actually than Mexico. And that transborder traffic to and from Canada is sort of diversified across a number of merchandise markets. You think about fertilizers, forest products, chemicals, metals. And then in terms of Mexico, we do have some exposure to auto; so certainly would expect, if we see an impact there, that auto volumes would be impacted. Now there is capacity opportunity at U.S.-owned plants as well, particularly with the big three. Whether they can ramp that quickly, how long the tariffs last, all of that kind of remains to be seen, but there is the ability to produce more at some of the U.S. plants.

One other big wild card we're watching for the time being is just the potential to levy some fees on the China vessels coming into the U.S. and -- obviously not a direct impact but certainly a pretty big indirect one I would expect if that were to happen. So when you speak to your ocean carriers and everybody else in that supply chain, do they have a read on what that might do? And then how would that affect the CSX network?

Yes. So it's a big one. First, I would say, when we talk to our international partners on the international steamship line, we're off to a pretty good start. And I think there's good line of sight to that continuing at least through the first half of the year, so -- regardless of what happens around tariffs and everything else, so feel good about that market as we speak. That being said, certainly this potential port fee that could come into play would be a significant disruptive impact not only across international intermodal. You think about export coal as an example. There are Chinese-built ships that serve the Port of Baltimore and Newport News as well that could be impacted. It would be significant in terms of the supply chain impacts. I think everybody is speculating at this point. Certainly there are some numbers out there in terms of the dollar impact on the costs to land that freight here in the U.S. that, we think, would drive behavior changes, some of which would benefit us. If there's more consolidation at ports that we serve and there's more volume that wants to come into those ports, that's a good thing. We can be a part of the solution for that, but it could also result in more congestion as well, which could have significant disruptive effects and, of course, lead to higher inflation. So that's a -- it's a watch item for us, I think, like everything. We're not going to change our network plan or our projections just yet until we see how things play out.

So on the met coal and, I guess, export met coal specifically, last year had some closures. You had a ship loader break. You had obviously the bridge collapse, so tough year last year. It sounds like the first quarter is maybe off to a little bit of a soft start, but is there -- you already talked about the headwinds year-over-year, so is there room just to have a little bit of an improvement just because last year was so difficult?

Yes. So on the export side, off to a slower start than we had hoped, with both weather, producer issues. And then we had another mine catch fire. That mine is likely going to be out through the first half of the year. We had another one last year that had a more significant fire event. That one may be out towards -- through most of this year. So that will help us in terms of comps for 2026, but there is -- I think demand has remained relatively steady for export coal as well, which I think is the good news. And the issues that we had at Curtis Bay and with the Key Bridge last year should provide a little bit of a year-over-year uplift as we get a little bit later into the year. So I would say, when you think about overall coal volumes, we would expect domestic to be down a little bit more than export. Or certainly that's what we expected going into the year. The domestic picture has gotten a little bit better, particularly with a really cold winter, which has helped stockpile levels. Those have been worked down. And we actually have a number of customers that are looking at adding additional sets. And we haven't necessarily seen a lot of that benefit just yet, but I think, as we get into March and certainly into the spring, into the shoulder season here, we'll start to see some rebuilding of stockpiles. So Q1 coal volumes will probably be the worst in terms of year-over-year.

Can you talk a little bit about the domestic market for intermodal and the truck conversion? Because it's more of a theme and it sounds like it's actually getting some momentum. Maybe it's the service product you guys have had out there for a while, but what's driving that? And I guess, kind of more importantly, how do you think it can stick? Because it's -- you said it's a pretty weak truck market, so the fact that we're seeing it now is worth the question.

Yes, yes. Well, in terms of truck conversions, it's not just intermodal. It's not just domestic intermodal. It's across merchandise as well. I think the team tracked over 100 different projects last year that led to truckload conversions. Now many of those are small, $1 million or less, but there are some larger ones as well. And I think it's a combination of running a stable, consistent service for a number of years now really since 2022; and doing that in a way where we're communicating differently with the customer, being much more proactive when things are not running well, to let them know when freight may be delayed and when to expect it. We've invested heavily into the technology platforms that interface with our customers. And that provides them greater visibility and line of sight into what's happening with their freight, which it doesn't go unappreciated. I think the collaboration between operations and sales and marketing also goes a long way. There's much less casting blame and deflection going on as there has been historically not just at CSX but across the rail industry, sort of this natural tension between operations and sales and marketing. I think they're working together in partnership and responding to each other's concerns. And that goes a long way with the customer, so we are seeing a lot of success there; and I think it will continue. I think you sort of hit the nail on the head there. The truckload market, we're going on 3 years now where it's been challenging. And as we start to see a turn there, I think there's some volume that we've already won that we'll -- there's an opportunity to ramp it up and win even more of that share as that price dynamic between rail and truck widens.

And on the domestic side, in particular with the early start of the bid season here -- or early in the bid season, rather, how do you feel your channel partners are faring? Anything you can do to help them? I'm sure the service, product, communication are helping, but what's the sense, as we get underway here for bid season, for that group in particular?

Yes. It's less bad than it's been in the last couple of years. Let's say that. I think we're seeing -- on the UMAX side, we're seeing -- and that's our joint owned product between us and Union Pacific. We're seeing pricing flat to up a little bit, which is encouraging. We have not seen that for a couple of years now. And that, the pricing on the UMAX product, tends to be much more sensitive to what's happening in the truckload space than the rest of our domestic volumes, so that's encouraging. Our truckload volume in domestic intermodal with our partners is actually up on a year-to-date basis, so that's encouraging. So I think it's less bad. I think there's been a little bit of inflection in terms of the pricing, probably not what many had hoped going into the year, but we are seeing some BCOs that want to line up multiyear deals, which is also encouraging in terms of what they're thinking coming out of, exiting bid season here in 2025.

With all the stuff that's happened over the last couple of years with the ports and the labor uncertainty, I would assume that we get a little bit of a share shift back to the Gulf Coast and to the East Coast, but clearly you can handle transcon and interchange, anyway, so what are you guys planning for? What do you see right now? And I guess, ultimately how will that impact the network if we were to see sort of a normalization or reversion of that share shift?

Yes. I mean certainly the East Coast ports have been investing. They're continuing to invest in capacity. And so naturally we'll see growth at the East Coast ports, whether it's share shift back from West to East or whether it's growth in total, with the disproportionate share landing on the East -- I'm not sure, maybe a combination of the two, but CSX is relatively indifferent, right? If it lands West and it's coming inland to the consumption markets along the I-95 corridor, landing on the West Coast is probably better for us. If it's going into the Midwest, we're relatively indifferent, so -- and we've seen a tremendous amount of inland port activity and growth over the last couple of years. And CSX has been a big beneficiary of that. We were just at a groundbreaking for the inland port that's going in, in Montgomery. That's a -- there's been billions of dollars of private investment in and around that domestic terminal. And in the next couple of years, we'll see that open; and CSX will be a big beneficiary of that as well. Those are short-haul moves that essentially take that volume off of the truck and onto the rail, but they're quite profitable. A lot of the costs are borne by the terminal operators, and so the contribution margin on that is actually quite healthy.

Maybe you can talk a little bit about the industrial development pipeline. You guys have been pretty vocal about that adding 1 point or 2 of growth per year, over the years, you talked about at the Investor Day. Has any of that really shifted or changed given all of the uncertainty here? Or those are just long-lead projects that take time, anyway.

Yes. Well, I think one thing that's encouraging is the phones are still ringing. There's still activity going on. There's still interest. In fact, I think, if you were to ask the industrial development team, they'd tell you they've probably seen a 15% to 20% increase in terms of total call volume coming into this year versus last year. So the inquiries are out there. Is there a little bit of hesitance to actually put new capital into the ground given uncertainty around where things play out from a tariff and policy standpoint? I think that would be fair to say, yes, but it's not stopping the amount of activity that's going on in the background. We now have almost 600 active projects. I think last year, at the Investor Day, we said, what, over 500, almost 550. We're now at 600, so the pipeline is growing. That gives us a lot of confidence as we go into the next couple of years. Industrial development projects, both new and expansion of existing facilities, added about 1% to our merchandise growth last year. That will be similar to this year; and ramps up as we get into '26 and '27, to the point where it's likely accretive to the tune of 1 to 2 percentage points of total volume. So we have line of sight. The projects that are being developed are not slowing down, and we're excited about where the future takes us.

So cargo theft isn't something we really talk about on earnings calls, but the more we talk to shippers and go to these conferences, it comes up almost all the time. And it's getting more coverage in the press as well, so how do you think about that at CSX? How does the industry address that? And is this really as big of concern as it seems to be when it comes from a shipper perspective?

Yes. There's been cargo theft forever, right? Ever since freight has been moving by truck, by rail, by buggy, there's been the issue of cargo theft, so this is not something new. It's something that we've been dealing with for almost 200 years, all of our existence, and yet at the same time, clearly it's an issue that needs attention, that must be dealt with. It's a supply chain issue. This is not just about railroads. Everyone is impacted here. The rails put some numbers together through the AAR that indicated it's "over a $100 million a year" program -- problem for the rail industry. CSX is a part of that. We've got our proportionate share of that. There are years when it's a little bit more and years when it's a little bit less. I don't think there's a sharp trend upwards, but it's not going down either, so I think the bigger issue is the confidence that shippers need to have in the ability to get their freight to destination. And so I think what the industry is looking for from a supply chain perspective is the ability to coordinate a little bit better with law enforcement and do a better job of prosecuting because there's a number of times where we see repeat offenders. And the stick needs to be there in order to make sure that there's enough of a threat not to continue to come back to the well. So we're optimistic that we get some traction there. I know there's a bill that's being floated, so that would certainly be helpful. CSX does have its own police force, as do all the railroads, and they do a tremendous job. We try to strategically position them in places where it's needed. We've invested in a lot of technology, particularly around facilities that have higher-value freight, but it's something we've got to watch out for.

So you mentioned some of the productivity initiatives earlier and Cumberland yard. And how are those progressing, so far? I think we heard a lot of them at the Investor Day. One that was -- pretty interesting as well is just the real-time visibility, I think, Mike was talking about into the network. So it sounds like it's a pretty big initiative. So anything else that gets you excited as you look forward the rest of the year here?

Yes. I mean you talk to Mike. He -- there's always new ideas and new opportunity. And I think again it's that collaboration between his team and the finance team looking at every single line item where we spend dollars. And some of them are large like crew starts and network planning. And when you make reductions to the crew plan, you save crew dollars. You save fuel dollars, locomotive dollars. It's big, but there's a lot of things that are not as big that are still important initiatives that we've got to look at, things like how much money are we spending on freight shipping parts to mechanical facilities. How much money are we spending on vehicles and maintenance related to that? Any outside or third-party spend? Everything in that purchased services and other bucket, that's flexible; locomotive utilization, fuel productivity. We delivered over $45 million of fuel efficiency last year. We're off to a good start again this year with year-over-year gains. So it's broad-based. We've got scorecards that have over 100 different initiatives that we're working on right now. And the idea here is not to -- I always tell people, "If you don't do something this year that you normally spend $1 million on and then you do it next year, that's a $2 million year-over-year swing." That's not what we're looking for, right? "We're looking for you to take that $1 million spend, make it $750,000 and keep it there," right? How do we get more efficient in the dollars that we are spending? How do we get better utilization out of our assets? And there's a lot of ideas. I think there's a lot of opportunity out there still to be had. And certainly, growing into the capacity that we have also generates productivity. Filling up trains that are running at 75%, 80% capacity today gives us tremendous incremental margins, which is a big part of the story over the next couple of years.

Maybe just give a little bit of color on pricing and how it's flowing throughout -- the start of the year. Obviously the truck market is not really helping too much, but I would imagine the better service product can also help move the needle a little bit on that as well. And then on the other side, you did talk about costs, about the productivity, about the crew starts coming down, so maybe just thoughts on general inflation and how that started, to begin the year, relative to where you thought it would be.

Yes. Well, let me start on the cost side. We got a pretty good read, going into the year, in terms of where inflation is going to come in. And I think we'll be, on the purchased services side, generally in line with what you're seeing in terms of CPI, PPI. So that has come down. And maybe it's not back to the 2% level, but call it 2.5%, 3% is kind of what we're seeing across that area. And then in terms of labor, we know what the wage inflation is going to be. We've got some -- about half of our workforce already has signed agreements that will go into effect July 1. So 4.25% wage inflation. Health and welfare is actually deflationary, so all-in labor inflation will be less than 4% this year. So clear line of sight in terms of where the bogey is there and what we've got to try to offset. On the price side, I think we're off to a fairly decent start. What I'm always looking at is the dollars of price relative to the dollars of inflation. And are we seeing drop-through that helps drive operating income growth? We've seen that every year for the last decade and we expect to see it again this year. Through February, we've repriced about 1.5 billion of the merchandise portfolio. Only about 5% of that has come in below plan, so that's very encouraging, to start the year. We're not -- on the flip side, I don't want to get you too excited. We're not blowing the plan out of the water, but we are definitely ahead of where we expected to be coming into the year. Conversations are constructive. And the goal is to optimize bottom line profit through a combination of price and volume gains and truckload conversions.

Okay, so 5% below plan but still above expectations...

Only 5% of the renewals came in below [indiscernible] 95% are on or above plan, yes.

Okay, okay. Maybe we can wrap up just with a little bit on the Howard Street Tunnel because, like you said, we've heard about it for quite some time. And at the Investor Day, it's all pulled forward in a pretty accelerated fashion. So you did outline some of the, I guess, engineering that you had to go through, but the train starts coming down, the rerouting -- you've laid out the costs, but what are you going to do in terms of like the revenue side? Is there going to be a disruption on service? Like maybe you can explain that a little bit more. And then you did give some opportunities, but like is there a bigger market we should be thinking about that now that -- when that's done, that's now available to CSX as it hasn't been in the past?

Yes. So let me start and just sort of say, every train, every customer that's impacted, we have a solution for. Those solutions are higher costs than they were previously. Some include a little bit of trucking as well in order to get the freight where it needs to be, but we are preserving the service to the customer. We expect very minimal revenue loss as a result of all of this. Now it's hard to tell from a network perspective. As we digest challenges like the weather we had in January and February: We have impacted 2 of our major -- 2 of our 4 major North-South routes across the network. And when you do that, even if you have a plan for how you reroute around that, the recoverability of the network is hampered. It is challenged. And we've seen that play itself out over the first couple of months of the year. That has an impact on cost. That has an impact on -- likely on perishable revenue. A lot of what we move is able to be made up, but some of it isn't. And the customers don't always tell us when they divert that traffic, so there probably is a little bit of a hidden cost on the revenue side that we don't see in terms of missed opportunity because of the challenged recoverability with those 2 routes out. And we did not plan to have the Blue Ridge out at the same time as the Howard Street. That happened once we had already made the decision to move forward with Howard Street. But I think that this is part of what makes us optimistic about 2026 and beyond, is when we look at what the network will be able to handle in terms of the amount of capacity we're creating not just through the Howard Street project and shoring up the Blue Ridge subdivision but projects like Cumberland. We've got a few others in the works that we're working on this year as we speak. And Mike is coming up with new ideas every time he goes out to the field, in order to get more efficient direct routing that saves on costs and improves the service to the customer. So there's opportunity out there, certainly beyond the 75,000 to 125,000 loads just directly due to the Howard Street Tunnel, as we think about gaining capacity across the network. And I think that's what's exciting. And that, combined with the industrial development activity that we're seeing across the network, gives us good line of sight, tariffs or not, to seeing some growth and being able to deliver it over the course of the next couple of years.

Okay, well, that's a good place to wrap up. Since we're out of time, we probably should, anyway, but thanks very much, Sean, for kicking us off here. We appreciate you being here.

Absolutely. Thanks, Brian. Thank you.

Thank you.