CSX Corporation (CSX) Earnings Call Transcript & Summary

Great. Next up, we have CSX railroad. I'm very happy to welcome back Laguna, CEO and President, Joe Hinrichs. Joe, thanks so much for coming back to Laguna.

Thanks, Ravi. Thanks for having us.

Absolutely. So we have a little surprise for you, which is a slide deck in front of you, and Joe is now going to go through those.

Yes. Sorry, we didn't have presentation capabilities today.

That's on us, not them.

Yes, it's all right. Just I want to give you a little bit of data for those who are here. We're going to not spend a lot of time on it, but the first slide of the deck on Slide 4 just kind of shows you the operational metrics. It's kind of an update to everybody to all the investors and to everybody interested, we're having a very strong third quarter operationally. Essentially, from the beginning of May on, our railroad is running about as well as it ever has. And you can see in the metrics. I'm not going to go into it, but velocity is really strong right now with dwells getting back to where we were in '23 and what we measure for customer service, trip plan compliance is really strong. And the cars online have come out really well. This is really important because this is all happening before we open up the other projects, the other big projects we're working on. So it shows you the capability of our network even without those relief valves that are going to be pretty meaningful, Howard Street Tunnel and the Blue Ridge projects, they're going to be completed here pretty soon. So that's good. The second slide is just a reminder of what's been going on because we often get a conversation around what are the things we can control and what we don't control. And so this is Slide 5, which shows you that over the last trailing 12 months, there's over $1 billion of things compared to '22, which is when the peak earnings cycle was for pretty much all the railroads that aren't repeating. Some of that's real estate transactions, big real estate transactions we had in '21, '22, like the Virginia real estate, but also met coal prices have come down. We'll talk about that probably. And supplemental revenue, which was really peaked during COVID, the post-COVID period and then fuel surcharge. So those things will dissipate over time and will fade out. And so we should get back to stronger earnings when some of those things aren't going against us on a kind of an annual basis. And the last slide is just a reminder of -- at our Investor Day in November, which seems like such a long time ago, a lot has happened since -- we talk extensively about how excited we were about the 3-year period. And we even talked about '25 being more of a transition year, but '26 and '27. This is just a reminder of in '26, all the things that are not going to repeat that happen in '25 or that are set up for success, whether that's the opening of the double stacking through the I-95 corridor when Howard Street Tunnel opens in the -- fully opens in the second quarter of next year, but also the nonrecurrence of costs we had this year due to the hurricanes and the projects and also a lot of the new business is coming our way that I'm sure we'll talk about with some of the new work we're doing with some of the railroads. And just we think there's a lot more supportive. Interest rates should be coming down, should be more supportive environment. So we feel really good about '26, and this is just a reminder of all the things that are going to either not repeat or be in our favor for '26. So that's just a quick synopsis of kind of what we brought just to have a little data with you and give you an update on where we are on the operations side. So great to turn it back.

Awesome. Thanks, Joe. Maybe we start with this, right? So this improvement in service that you've seen, obviously, really impressive. Can you just talk about a few steps you took to achieve that? Kind of is it just a case of you getting used to the disruptions and kind of getting past that? Or what drove that?

So yes, if you go back and look, I mean, the start of -- we've been running well for a couple of years. I think you can look at the data. And what really disrupted us was first, Milton and then Helen kind of backed our network up. I mean in of themselves, they weren't that dramatically disruptive, but they backed our network up in key areas in the Southeast, especially. And then when the Blue Ridge was taken out, that was one lane that we had to now move trains away from. And then what happened was so we moved more trains away from the Blue Ridge because we weren't anticipating that to be down. And then we moved a bunch of more trains when we took the Howard Street Tunnel down in February. At that same time that we moved a bunch of trains to our central part of our network because there's only really 4 North-South. So 2 of the North-South routes are closed. So everything is going basically through the Midwest and through either Nashville or Birmingham, Alabama or up to the Midwest. And then we had these subsequent storms that kind of time perfectly. So we were backed up, everything gets pushed to a certain part of our network, and that network kept having major storms, floods in Kentucky and Tennessee, some storms. And we made some mistakes. I mean we should have put more locomotives out in February, March. We did in March, but we should have put them out in February. So, probably a month too late. We had some in storage, some things like that. So we regrouped in late March and said, hey, let's just -- let's go back to where everything needs to be. And within a few weeks, we had it all stabilized. And we put in additional steps on a daily basis to manage the network, and we've kept them in place, and they've been working really well. And what I'm really proud of the team is because there was a little bit of a belief that until the projects got completed, we couldn't go back to where we were. And we were able to break through that. And we were able to demonstrate you can actually get back to our leading industry performance without even these projects being completed. And then once they get completed, we should be able to take another step. So pretty excited about it. I think the testament to the work we've done with our workforce because they really rallied together. And if you have a workforce that's with you, you can get a lot done quickly. If they're not with you, then it takes a lot longer. And I think you saw how quickly we were able to get things back up.

Got it. So as you pointed out, the genesis for the starting point of all this was 2 big hurricanes last year, obviously, going into hurricane season now. So are you -- there's a message that if something similar happens this year, you'll be in better shape because you have more locomotives?

We're in a lot better shape now. It's not just locomotives. If you look at our data, we were letting the dwell in the third, fourth quarters of last year, we were testing some things by letting the dwell go up a little bit to build longer trains to build fast and get faster velocity, if you go look at the data. That made us a little more vulnerable. And then the worst hurricane hit us in 20 years happened. So that's a learning, but also it's just a reality. So right now, our network is in fabulous shape, knock on wood, it is hurricane season. Some Mother Nature can do what she wants to do. But so far, it's been a pretty quiet season. Hopefully, it will be that way for the rest of the year. But our network is in far better shape. The cars online are lower, the dwellers at some of our best levels. So our network is a lot better shape, and we're only a few weeks away from opening up the rest of it. So that should give us a lot of resiliencies. So I think we're in a much better shape.

Got it. Maybe you don't get time to talk about this as much on conference calls given the time constraint. But let's talk about Blue Ridge and Howard Street Tunnel, right, kind of -- why did you guys decide -- remind us again, why did you guys decide to go down that path? How long did it take to assess that and kind of what that timeline is going forward?

So let's start with Blue Ridge because that was a surprise, right? When you look at our -- if you put the map of our network out, we have a North-South route right down to I-95. So basically, Rocky Mount, North Carolina up through -- up to D.C. and up through Baltimore, et cetera, really important route. Then we have that Eastern Tennessee, Western North Carolina route, which is the old Clinchfield line, which is where the Blue Ridge is. And then the rest -- our 2 North-South routes are really Nashville South then through Birmingham. So if you look at a map and you say, well, the Blue Ridge route has gone, you're from I-95 all the way over to the middle of Tennessee. And that's a wide gap. And if something ever were to happen, a major derailment got forbid or a hurricane or something, it makes our system incredibly vulnerable. And so -- it didn't take us very long to do the math around we need to have this -- if you do the math just on how many trains go through every day, you'd say maybe it doesn't make sense. But if you're talking about a 198-year-old company and we're going to be around for 198 years more, we need that resiliency, we need that capability. So it's been more expensive than we anticipated, to be honest, when we first looked at it because it just took so much fill because it just wiped out everything. But the team has done a fabulous job. I was there last week. The team has done a fabulous job, and it's, I'd say, ahead of schedule. It will open up in the first week of October, which we haven't said. We said early first quarter -- fourth quarter. So we're in great shape, and the team did a fabulous job. And it was built in the 1910s. So it's -- now it's a lot more resilient. I mean it was just dynamite and shovels, and now we've built it, so it's resilient. Howard Street Tunnel is different. So we've been working on Howard Tunnel for over 10 years, the desire to double stack and also to do it because it was built in the 1890s and it needs to be redone. It has a lot of problems with a drainage, et cetera. The original plan for Howard Street that was developed for the last couple of years was to do it over 3 years, shut it down over 12 hours every night. And we just physically couldn't get a plan to make that work. So we came up with a different plan, which is just to shut it down for what we thought would be 9 or 10 months. It's going to end up being a little shorter than that and just do it and get it done. Now there's a couple of reasons for that. One, we want to get the intermodal capability sooner. Also, we're on the hook. It's a federal private-public partnership. And so we were on the hook for any overages. And that -- those dollars were years ago before all the inflation hit. And so if we have gone 3 years, it likely would have been significantly more expensive to go over. And third, we just didn't physically know how to do that. I mean the way you think about this is you go in, you dig it lower, you bring in a new piece and you put it back together every night for 3 years and try to run trains through there, impossible. Our engineers didn't have to do it. So the good news is it's going to get done -- actually, it will be -- we're going to run a train through there last week of September. It's also new news. So we're going to beat the clock on that. We're really excited about it. The team has done a fabulous job. And it happens to be coinciding with a time where a lot of Southern utility coal likes to go that route. That's why it was built. And there's more domestic coal business right now in the Southern utilities. So the timing is pretty good. So we're pretty excited about it on the Blue Ridge. The Howard Street -- back to the Howard Freight, sorry, the Howard Freight will be running at the end of September. And by second quarter next year, the bridges will be cleared and we can double-stack. And with all the work we have going on with all the other railroads for a lot of more intermodal business, the timing is going to work out great.

Got it. So Blue Ridge seems like more of a network resilience investment. Howard Street looks like a growth investment. Have you gone out and sold that capacity on Howard Street already? Kind of what are customers telling you about the potential there?

So we haven't sold it yet, but we're -- those discussions are happening. They know it's coming. So I guess we have sold it in a way that we've given the time frame. And as we said at our Investor Day, we think it's 75,000 to 125,000 extra units every year. That maybe even could be some upside given all the work that's going on with some of the other railroads right now. We just don't compete through that quarter on to major -- like Atlanta, New Jersey, we don't even try. So a lot of that will be truck conversion, some share, but a lot of it will be truck conversion. So really excited about it. And the Blue Ridge, what's going on with domestic coal utilities actually might be timed pretty well. We didn't know that, but because there are some utilities now staying open longer and so we'll run more coal through there. So both of them, I think, could add to a little bit of growth, but obviously, the Howard Street being a much more prominent one for sure.

Got it. So let's shift gears and just talk about the demand environment right now, kind of what are you seeing out there? Obviously, very, very choppy macro situation. We've had a couple of rails go already, and they sound a little bit squishy on volumes depending on end market in the third quarter here. So similar to this, do you want to give us a little bit of a run-through as to what volumes?

So it's -- I'd say it's a mixed bag. Intermodal has been -- growth has been strong, more on the international side than domestic, which we have good strong partners on international. So international intermodal has been a growth story for us in the third quarter. Domestic has kind of held in there, but intermodal -- international has been strong. You'll see more intermodal growth in the fourth quarter for us with some of the more recent announcements. As I said, domestic utility coal is up. Export coal is down a little bit. Some of that is because of pricing and the environment. Some of that's because we've had a couple of mines that were single-served by us that went down this year. One is coming back this month. So that's good, but it doesn't really affect third quarter, but it should hopefully affect the fourth quarter. Autos have been kind of mixed. We've lost some share in autos this year, not because of contracts, but because of the mix of customers we serve versus Norfolk Southern. But we think that will get better in the fourth quarter. Metals have been not as weak as they were in the first half of the year, but still weaker. What's been strong, aggregates, so concrete minerals, that kind of thing. Obviously, our presence in the Southeast helps there. Ag business has been okay in the third quarter. It was stronger in the first half of the year. And if you go and look about some of the other things, forest products, we've had some closures of pulpboard and paper plants with some of the restructuring going on in that business, which has impacted our volumes, plus housing has been soft. So merchandise has been a little lower than we expected. Intermodal has been stronger than we expected. I'd say domestic coal has been stronger than we expected. So on balance, we are seeing a little bit of growth in the quarter, but that's more intermodal and a little less merchandise.

Got it. Any share shift in particular to consider or especially given the disruption that you've had?

I think you'll see more intermodal business come our way in the fourth quarter. I think in the third quarter -- oh, I didn't mention chemicals. That's the other big one. Chemical has been a little softer in the quarter than we certainly anticipated. It's a big part of our business, but we still have -- we still have the largest market share there, but chemical has been a little softer for us, too. So I think in the near term, hopefully, with the mines coming back on one this month, probably the other one at the end of the year, the export coal business, we should start to see a little more volume coming.

Got it. You said international intermodal is strong for you. I think a couple of rails so far have highlighted strength there as well, but have also flagged that, that may be some level of preordering or prestocking. Are you seeing any signs of that? Do you have a sense of where the significant...

Yes. I mean I'd say it's been choppy, but we're not seeing -- we don't anticipate a softening in the intermodal business. Now we've also announced a number of new lanes, which will be a volume growth for us. But we don't see -- our international business has been holding up pretty well, and we don't see that changing. We also had some new inland ports, which has helped a little bit, too. So I would say it's been a little choppy. It's been harder to predict to be sure. But I'd say we feel pretty good about where we are in intermodal.

Got it. So given the improvement in the service metrics, given the new lanes you've launched, but also in a choppy environment, how do we think about some of the puts and takes on the OR side kind of going into the second half of the year, kind of any particular moving parts?

So I mean, we did announce in the second quarter earnings that we have a restructuring charge from the management reductions. So that will hit us in the third quarter. Obviously, we had the labor increase of the 4% on the first of the 5% for the union employees. We have all our contracts done but one, and we hope to have that one done shortly. So that's the kind of the added cost side. The efficiency of the network is running really well. And we've had a lot of discipline, as you saw in the second quarter around our costs, whether it's PS&O, whether it's overtime, some of the variable discretionary things. So I think we feel pretty good about the run rate we're on as far as the operating network goes and that. But we will have some of those couple of things hit us in the third quarter. I feel pretty good about where we are. We keep our network running. We get the other -- we still have the $10 million a month of rerouting costs, but certainly, we should see most of that go away in the fourth quarter.

Understood. So let's shift gears and talk about everyone's favorite topic du jour, which is the potential rail merger that they announced. Just I'll just open end and ask you kind of thought so far.

Yes. We haven't said a lot publicly about it because I think it's premature to say too much because we haven't even seen the application to the STB, which I saw the transcripts from yesterday. So we'll see when those get published. I mean, there'll be -- I'm sure there'll be a proxy disclosure and then there'll be the application. So we'll have a lot more information. So my view since I started in this industry, and I think if you look at anything I've said publicly for the last 3 years, I've been imploring this industry to work better together to grow the pie for all of us and to serve customers better. If you go look at all my public remarks and even my private remarks, the first 6 months I was on the job, I flew to Omaha to meet with UP, I flew to Dallas to meet with BNSF. I had meetings with both CN and CPKC CEOs. Can we work together? I'm new. I don't have any old biases. I don't have any -- it didn't work before. Let's just go do things. And the only one we really got to do something was the CPKC out of that. Of course, they had just formed their entity and they were motivated. So we did the new interchange and we did the hydrogen joint venture to run a JV on the locomotives. But now we have an exciting time where there is motivation and there is activity amongst all the rails to work together to grow the pie. We can debate on how we got here. But what's exciting for us is that we're -- our operating metrics are the strongest in the East. Our customer relationships are the strongest in the East. Our union relations are strongest in the East. And we're the preferred partner now on the East of 3 railroads. I don't want to speak for them, but I mean, as far as the activity level goes right now. And that's pretty exciting. And so the opportunity here is to grow the pie for all of us. So how can we finally go work on these issues that have been around for a long time, the inefficiencies of the interchanges, the cost timing, handling the interchanges and the openness to talk about everything, whether it's assets, why do we have so many yards at all the interchanges because we have to have our own, but why does it have to be that way. So we're now at a point where the industry is willing to talk about things that hasn't been talked about before. And a lot of that was largely driven by what's in it for me, view of the world? Like if -- when I -- when we were dealing with railroads, if the other railroad wasn't getting the majority of the benefit, even if they got a benefit, they weren't interested, which is all you get in this long haul, short haul, who gets the longer service, all that kind of stuff. But right now, we have an opportunity where people are saying, you know what, let's just work together to go work on these issues. And you've already seen a number of announcements. There'll be more about, all right, let's just go after all this business that is theoretically out there. It's -- I think a lot of that's overstated because there's reasons why people use truck. But for various reasons, having been run a business for years that moved a lot of material at Ford, but there's still a lot of opportunity out there. And so the exciting thing for me and for us, I think, right now in this industry is let's just -- let's go grow the pie and get more efficient doing it but serve customers better and go after some of this truck conversion that should be out there for us.

In order to work better, do you need to get married? Or can you just do it while dating?

So that's a great question. I get asked a lot. I mean, if you just -- if you stay focused on the interchanges, so that's where a lot of the attention is, there's nothing physically stopping us from making the interchanges efficient and fluid. Right now, we do things like goes into a yard A for other railroad and then it gets trucked over on intermodal and then it gets in our yard and then it gets -- and it's so inefficient. But that's because we accept it. It's not because it's physically required. Physics don't say you have to do that. And so there's nothing physically stopping us from making the interchanges or even going around the interchanges. There's nothing technically stopping us. Again, it's more desire and will and partnership. Now you have to work through, okay, who shares what cost and who gets what benefits and you have to be able to do that. So you need partners who are willing to step back and say, you know what, we just want to make the whole pie bigger and let's get our -- all of us get our fair share of that. So I don't -- you can do that. Now some will say, is it easier to control the whole thing? If not, I mean, perhaps. But it's nothing physically stopping us. And what I'm excited about right now is the conversations that we're having are very open to, okay, what's it take and what's in the art of the possible. why do we have 3 yards in Chicago and Railroad X has 6 yards in Chicago? And why can't we just share those assets? Why can't we just get more efficient? Or why do -- why can't we just steel wheel everything? And what's it take? So the conversation has moved from what's in it for me to what would you have to believe to make it work? And that's an exciting opportunity for all of us.

Got it. Just a follow-up on that. So what is stopping it from happening now? There just needs to be a contract or a piece of paper that people need to sign and say, you do this, I'll do this. Or is it a technology problem?

No, it's not a technology problem. And technology can enhance it, especially from the customer's view. So one of the -- so I didn't talk about the customer side. Ideally, from a customer standpoint, they would like to see it as one entity, but nothing is stopping us from doing that. There are some Rule 11 and other things for pricing. But as far as the experience, it just again, it's a will. Do you want to -- are you willing to do that? Are you interested in doing that? Can you do that? And I think that's another step that hopefully, over time, the industry will be able to do. But some of it is contractual, some of it is just -- let's just do it. You need -- in some cases, you may need a haulage agreement or you may need some kind of agreement on what you're going to do with locomotives. But the teams know how to do that. We've been doing it for a long time. I'll give you an example. We don't talk about it a lot, but for years, we have a haulage agreement with BNSF, where their train comes into Birmingham, it's intermodal train, comes into Birmingham, Alabama, their locomotives stay on it. Our crew jumps on it, takes it to Atlanta. And their locomotives take the -- take it back from Atlanta with our crew back to Birmingham. We just changed crews and then it goes. I mean we've been doing that for years. And it's on our track. It's our engineering conductor, but it's their locomotives, and it works really well. And there are -- so there's lots of things that can be done. It's just -- you got to want to do it and you got to be willing to recognize that if we grow the whole pie, we're all going to benefit and let's not argue over 51 versus 49 or 49 versus 51 versus -- let's just make it better for everybody.

Got it. Speaking of the just do ethos, you just did it with BNSF and CN. So can you just talk about both of those partnerships you just announced and what that brings to the table?

Yes. So I'd even go before that and obviously, the CPKC interchange in Myrtlewood as well. I mean that's the spirit of which we've been trying -- this is what predates a lot of the UPMS conversations. it's just the spirit by which we've been trying to go to work, including we have a great current interchange business with Union Pacific, and it's a very healthy business. I want to acknowledge that. But our spirit of partnership has been there with everybody. And now we have more motivated partners. And of course, we're motivated too, and we're finding new solutions. The one with CN this week, a little misinterpreted yesterday from the transcripts that I read. Right now, a lot of traffic goes from Prince Rupert down to Memphis and then it gets trucked from Memphis to Nashville. And so while we're having these conversations and he goes -- you start having real conversations with each railroad saying, "Hey, where is this volume and where does it go? And look at lane by lane, like there's a lot of volume being trucked from Memphis to Nashville. We have a train running from Memphis to Nashville that has capacity on it. Why wouldn't we just put it on our train?" And that's the extent of it. smart business, no incremental cost, create value for customers, take trucks off the road. I mean, everybody wins. And you're starting to see a lot of those things. I'm not minimizing it. I'm excited by it. On the BNSF side, there's a lot more potential because obviously, they have the largest intermodal business in the West with the partnership with J.B. Hunt. And there's -- they're the fastest in the West. We're the fastest in the East. So we can see lots of scenarios where we can create really competitive offerings for customers and move across the network, especially when we get the Howard Street Tunnel opened up access to the East. And of course, we have the strongest access to the Southeast, which is where a lot of the growth volume is, Atlanta, Charlotte. We're the only Class 1 with tracks in Florida. You can see a lot of that attractiveness. So we're pretty excited about it with everybody and excited about working with everybody, including the work we do with Union Pacific.

Yes. Got it. Sounds good. Any questions from the audience? Yes, one in the back.

I would love to hear from you from a broader perspective, if you look back at the industry, the last 15 years, very little volume growth. We understand the coal situation, but even other than that, so what do you attribute that relatively bad performance compared to the GDP or anything? And what needs to be different going forward, other than the BNSF partnership?

Yes, sure. So I mean, maybe it's a little easier for me to opine on it because I wasn't here for most of that time period. But looking back and talking to everybody and learning, let's be honest, the last 10, 15 years, the main focus of the industry has been restructuring the business to get a lot more efficient and to create better margins, which in of itself isn't a bad thing, but that was the #1 focus. And you can see all the activist activity and all the things that went on to drive that obsession with OR improvement, which is, again, in and of itself is not bad. But there wasn't, at the same time, a same drive to grow volume. It was about -- and so a lot of the volume growth that happened during that time period was truck competitive and that margin difference compared to the carload business is different. And so I said this many times, it really depends on what are people incentivized and motivated to do. And this industry has been incentivized and motivated to optimize OR for the last 10-plus years. Again, I'm not criticizing it because look at the efficiencies and the operating margins that we have that we didn't have 10, 15 years ago. But if your only pursuit is every quarter trying to show a little better OR, then intermodal business is not going to be your priority or other truck competitive carload business, let's say, because the pricing dynamics are different. And so we've got to find this right balance where the business that the carload business, the merchandise business, the business that has the strongest margins doesn't deteriorate. So we capture that. We keep making it more efficient. And we go after the incremental volume, which has good incremental margins, by the way, but might not be quite as good as coal or chemicals or some of those other things. And that's where the industry has struggled. And by the way, you need industry collaboration to make a lot of that happen because it's not just -- whereas 70% to 75% of our revenue on any quarter is within our region, so within our control, there's still 25% to 30% every quarter that is interchanging with one of the other railroads. But a lot of that watershed opportunity people talk about or that truck competitive look at our market share within our region is higher than market share across the regions. And people assume that's for either the interchange inefficiencies or because this fight over who gets what benefit from West to East. If we can get rid of those things, we can go back to that. But the intermodal opportunities or that watershed opportunity is not going to be the same margin as the traditional carload business. So what we have to demonstrate and investors have to believe is that we can do both, not deteriorate the performance of the traditional carload business, which has very healthy margins and add incremental growth with good incremental margins. But maybe not quite as good as 40%, maybe 30-some percent, but still really healthy compared to your cost of capital and still creates value and get EPS growth and cash flow growth, which then can be returned to shareholders or reinvested for more growth. So that's what's happened from my view of the world is that if you look at what happens in this industry, if your -- we talk about margins, but if your OR margins deteriorate for any period of time, people are going to swarm in and get those margins way back up right away, which again, that accountability is isn't an awful thing. But if we don't get outside of that, we're going to get the same thing over and over again. We're going to talk for 10 years more about it'd be nice if we could grow. But this quarter, you better have 40-plus percent margins. And so what we got to show to you is we can do both. I believe we can, and I believe we have an opportunity right now in this industry to demonstrate that. We have motivated players to grow the pie. And so part of the thesis in the past was in order to grow that other lower-margin business, still very healthy margins, it would deteriorate the margins of the other business. And we got to demonstrate to you that, that doesn't happen. Does that make sense?

Where you -- sorry, does it come a point where you take the OR out of your executive team compensation out of the investor guidelines so that you can really focus on growth?

Well, I think we're the only Class 1 that does that, actually. Our incentives are based on margin growth, not on operating ratio. Again, it's minus. I mean, so the numbers -- you can do the math, but it's what's your mindset. But as I showed you, at the same time, we've been growing volume. We were the only railroad last -- Class 1 railroad that grew volume last year versus 2019. We're the only U.S. Class I that grew merchandise volume in the last 2 years. So we have been demonstrating you can do that. But we had all this other noise going on of coming off of peak earnings for things we didn't control. So it's gotten lost. But I'm not here to debate OR versus -- I mean, there's numbers. What's really important is what are you incentivized to do and what are you motivated to do. And I believe the industry now is motivated to profitably grow. And we've got to demonstrate we can do that by working together.

But why not take the OR margins out and just focus on operating profit dollar growth rather than margin?

Well, you can debate that with your other partners, other investors. We have op income growth as one of our incentives at CSX. I'm not making that up. You can go look. So I think our incentives are in line with what you're talking about. We've got to collectively go do it. Now it would be nice if the industrial economy would help us out a little bit. The ISM PMI has been below 50 for 32 out of 34 months. And so we haven't had a lot of tailwinds. But we're aligned with that thinking. We've got to be able to demonstrate you can continue to run a very efficient railroad, optimize your margins, pricing, everything on the carload business and grow and go after that truck competitive business, whether it's carload or intermodal and do both and grow EPS and return more capital to shareholders. And ultimately, if we can show profitable growth, the multiple should expand as well. So that's the thesis. But now we have industry partners that also are now motivated to do the same. So hopefully, we can demonstrate we can do that. That's our plan.

So Joe, maybe just to wrap up here. I know you guys are obviously full steam ahead trying to get Howard Freight and Blue Ridge done. It's going to be understandable, a huge prize for you guys. So forgive me for asking this, but what's next? Like are there more projects like that to come? And do those projects potentially get on pause until you see if the North American radar industry is going to be completely transformed?

So we don't have any major projects. Also the great project in Chicago opens up in November. I talked about that one. So that has been on for years. So we are really in a moment where we're actually going to have all our major projects done, readiest future. And we don't have any major projects planned. I mean, unless Mother Nature decides that she wants to do something else. So I think we're in good shape there. And we got to keep working on the Quality Carriers business, the trucking business has been under a lot of pressure for the last few years. Keep taking advantage of Pan Am that we now have running on our network, and that's growing. We feel good about that. So now it's just about taking advantage of all these opportunities to grow the business with a network that's running really well and that is free to run very well.

Got it. Just on the point very quickly, you mentioned Quality Carriers. Obviously, it was a very strategic acquisition for you. But as you said, has been having some challenges. What are those challenges? What are the solutions? And is there -- is one of the solutions potentially kind of a strategic option or something else?

Well, I mean, like we always say, we're always open to what creates value for our shareholders. The timing of the Quality Carriers acquisition was timed at the peak of the cycle. In the last 3 years, the trucking business, as you all know, is under pressure. It's a well-run business. It's a leading market share in the special chemical business, but it's not a majority of market share. But pricing has been difficult. The intermodal business has been growing every month, and we feel good about that. We bought more affiliates to help expand their -- with the market being depressed. We've been able to buy more affiliates so to bring more in-house. we think the business is structured well for recovery, but it's been a lot longer than we expected. So we're going to keep working on taking costs out, keep working on growing the business, but obviously, look for the truck business rates to come back, that will help. It also helped the railroad business, too. But we've been waiting on that for a couple of years now. So I don't know -- I don't have any crystal ball to be able to tell you when that's going to happen. But again, good business, poorly timed acquisition probably, but you can't -- you don't know that, but we'll keep working it.

Got it. So the wait continues for the cycle, and we'll also be waiting for some regulatory filings, too.

It will be -- yes, it will be very -- there will be no shortage of activity in the railroad industry for the next months.

Joe, thanks so much.

Thank you appreciate it, Ravi, thanks. Thank you, everybody.