The conference call for CSX Corporation's second quarter earnings has begun, with operator JL welcoming everyone and introducing the speakers. The call will include a question-and-answer session. Matthew Korn, Head of Investor Relations and Strategy, is leading the call, and other executives including President and CEO Joe Hinrichs will be speaking. The company acknowledges the impact of Hurricane Debby and prioritizes safety. The quarter's results reflect the teamwork and momentum within the company.

The company is implementing strategies to improve safety, efficiency, and customer satisfaction. They are also focused on growing the business, controlling costs, and leveraging their network capacity. The second quarter saw positive results, with total volume growing by 2% and the intermodal franchise leading with a 5% increase. Despite challenges at the Port of Baltimore, the coal team found ways to deliver for customers. The operating margin also showed improvement.

In the third paragraph, the company discusses their revenue and operating income for the quarter, which was in line with their expectations despite facing unexpected events. The focus now is on execution and moving forward. The safety performance showed positive trends in train accidents, with a reduction in mechanical and human failure accidents, although human failure remains the highest causation factor. There was an increase in employee incidents, with slips, trips, and falls being the highest related cause for injury. The company is focusing on developing heightened risk awareness for less experienced employees to reduce personal injury.

The company is working with union colleagues to improve safety and has embarked on a three-year initiative to promote a culture of risk awareness and care. This initiative will focus on strengthening safety leadership skills and engaging employees. The company's fluidity metrics have remained consistent, with improved train speed but some variability in dwell. The company is working to eliminate unproductive handlings to improve the customer experience and reduce costs.

The company is evaluating its network infrastructure to find ways to increase efficiency and reduce dwell times at yards. This includes analyzing production levels, implementing standards, and making self-funded improvements. Supervisors are being trained to lead these improvements and understand their operations better, with the support of the senior leadership team. The company expects to see continued improvement in these areas.

The company is working to align operations with customer needs and maintain cost discipline. They are focused on understanding customer needs and providing high-quality service. They have identified areas for improvement and are working to increase customer engagement. The operations leadership team has been together for six months and is dedicated to learning and improving. They believe there are many opportunities for improvement and are committed to delivering on them.

In this paragraph, the speaker discusses the positive momentum the company is experiencing in sales and marketing collaborating with operations. They highlight the success of market reviews where teams come together to improve operational efficiencies and deliver new solutions to target profitable business. The company is also aggressively pursuing truck conversions, industrial development projects, and creative solutions to meet the growing demand for rail transportation. However, the transportation industry as a whole is facing challenges, such as a sluggish housing market and fluctuating commodity prices. Despite these challenges, the company is focused on increasing its market share and expanding its addressable market. The speaker then turns to discuss the company's merchandise performance, noting a 5% increase in revenues and a 1% increase in volume. They attribute this success to strong performance in the chemicals and minerals markets.

The Forest Products business is experiencing growth due to demand in pulp board and strategic partnerships. The Automotive business also saw growth with a competitive win. However, the metals market is facing uncertainty and fertilizer volumes are being affected by production issues. The Ag and Food segment is also facing challenges due to unfavorable crop supply dynamics. Despite a sluggish economy, the company expects to see growth in the second half of the year, particularly in the Chemicals and Forest Products segments. The Ag and Food business is also expected to improve with larger hog and chicken herds in the Southeast. The coal business was briefly mentioned and the company's overall outlook for growth was reiterated.

The team in Baltimore successfully found solutions to move coal after the Key Bridge collapse, resulting in a smaller decline in revenues and volume than originally projected. Export volume increased by 8% despite the closure of the Port of Baltimore. The company expects a mid-to-high single-digit decline in all-in coal RPU in the third quarter, but is finding other opportunities for export capacity at the Curtis Bay terminal. Domestic volume has been impacted by low natural gas prices, but there are signs of improvement with strong demand for coal units and lower inventory levels.

Intermodal revenue increased 3% on 5% volume growth, but RPU declined 2% due to lower fuel surcharge revenue and negative mix. International business drove volume growth, while domestic intermodal business remained muted due to weak trucking conditions. The team has been capitalizing on opportunities and demonstrating CSX's strengths to customers. The company is looking ahead to strong growth in the second half of the year after cycling through some discrete items that helped previous year's results.

In the second quarter, merchandise and intermodal revenue increased by 5%, but was partially offset by lower export coal benchmark pricing and the Francis Scott Key Bridge collapse. Other revenue, fuel recovery, and trucking also contributed to a revenue headwind. Expenses were 1% higher, with increases in labor and fringe costs, but were partially offset by lower incentive compensation. Interest and other expenses were higher, while income tax expenses decreased. As a result, earnings per share remained stable at $0.49. There were also immaterial adjustments to previously reported financial statements related to engineering scrap and labor expenses. Total expenses increased by $20 million, with labor and fringe costs accounting for the majority of the increase. Headcount is expected to remain stable for the rest of the year, with labor efficiency gains expected in the second half. Union employees will receive a 4.5% wage increase starting in July.

The paragraph discusses the increase in purchase services and other expenses, depreciation, and decrease in fuel costs and equipment and rents. It also mentions the company's free cash flow, capital expenditures, and distribution to shareholders. The team is focused on growing economic profit and expects it to increase in the second half of the year. The paragraph concludes by mentioning the company's guidance for the full year 2024.

The company expects moderate growth in volume and revenue for the second half of the year, with some uncertainty in the macroeconomic environment. They anticipate growth in merchandise markets but lagging performance in metals and fertilizers. Intermodal is expected to improve with strong port activity and service performance. They also expect a slight increase in coal shipments and plan to focus on efficiency and capital returns. The company is encouraged by their progress so far and is focused on executing their plan for sustained growth in the future.

The speaker discusses the company's readiness to be the best railroad in North America and mentions an upcoming investor day. They then move on to a question-and-answer session, where the first question is about potential labor disruptions and the impact on international and domestic volume. The speaker states that they have not seen a shift in customer activity from east to west and if it were to occur, it could present opportunities for the company. They are closely monitoring the situation and are prepared to capitalize on any potential shifts.

The speaker, Sean Pelkey, is discussing the company's recent earnings call and the outlook for the rest of the year. He mentions that the recovery has been pushed back, but they are hopeful that the import business will lead to better days ahead. The speaker also mentions that they expect significant margin improvement in the second half of the year, but they cannot give a specific estimate. He also mentions some factors that may impact margins in the coming quarters, such as lower coal RPU and a wage step up.

The company is facing some challenges in the second quarter due to positive lag in fuel prices and wage increases. However, they are controlling expenses and focusing on delivering growth. There is uncertainty around the potential port stoppage and its impact on the network, but the company is well-positioned to adjust and sees opportunities for longer haul business if there is a disruption on the East Coast. The company's team is working closely to manage capacity during this time.

In this paragraph, Kevin and Jon discuss the capacity of their network and the impact of an accounting change on the second quarter results. They mention that their intermodal team has been working hard to provide good service for customers and that the network has the capacity to handle increased business. The question of pricing going forward is also brought up, with Kevin mentioning the challenges of converting truck business in a competitive market.

The speaker discusses the current state of the company's pricing environment and their strategy to focus on volume and price while delivering value to customers. They also mention changes made in the past six months to improve service and safety, which may have caused some deterioration in certain metrics but are expected to improve in the future.

The speaker discusses the opportunities in the company, particularly with a young group of employees, to improve their services and focus on cost, service, and safety rather than just metrics. They also mention the success of the chemical side of the business, which has been aided by wins in the industrial and plastics markets.

The speaker discusses the company's success in the market and their strong relationships with carriers and customers. They mention a recent customer where they are working together to improve their network. The speaker also mentions the progress they have made in industrial development and their plans to share more details at Investor Day. They are seeing an acceleration in their growth this year.

The company is seeing a pickup in projects that will contribute to growth over the next few years. These projects are diverse and range in value, with some being as large as $2 million. The company expects to see meaningful improvement in the coming months, although they are not specifically guiding to sequential improvement. Labor costs are expected to remain flat, but there may be opportunities to cut costs in the future.

The speaker is optimistic about low to mid-single digit growth in the second half of the year. They believe there are opportunities to drive efficiencies in labor, particularly in reducing overtime and increasing retention. They also mention the truck market potentially moving closer to balance and the possibility of truck to rail conversions picking up in the back half of the year. However, they do not have any additional insights to add on this topic.

The speaker, Joe, is responding to a question about any potential uncertainties for the company. He mentions that they are well-equipped to handle volume due to their intermodal operations, but there has been some uncertainty in the market due to recent events such as negative PMI and job numbers. He also mentions that they are closely monitoring the automotive industry and the economy as a whole. Overall, there is some uncertainty about the state of the economy, but the company is still optimistic about the future.

The speaker discusses the current state of the economy, which seems to be more fragile than it was two months ago. They are monitoring it closely and are optimistic that it will pick up. A question is then asked about any potential slowdown in infrastructure and industrial investments in the southeast, but the speaker states that there is no significant slowdown and their diverse portfolio is still on pace. They also mention that they have a clear line of sight and expect their projects to continue and be a positive factor in the future. Another question is asked about their long-term OR, which is not specified who it is directed towards.

The speaker is addressing someone named Walter and discussing the company's efforts to achieve a 55 OR (operating ratio) in the past. However, with cost inflation and new work rules, they wonder if 60 is the new 55 or if there are other impediments to achieving their previous run rates. Mike and Sean both believe that their focus on efficiency and eliminating waste will help improve their margin, but they also acknowledge that margin is not the ultimate goal.

The company's primary focus is to grow earnings and economic profit by being disciplined in capital spending and investing in high-return projects. The company expects to continue improving its financial performance, including the rail operating ratio, and credits the success to its formula and the addition of quality carriers. The second quarter saw a 39% margin in corporate results, and the rail operations had a 41% margin without exceptional factors.

The company is optimistic about the performance of its rail operations and recognizes the importance of service and efficiency. However, the pursuit of optimizing margins may result in turning away good business opportunities. The company aims to grow earnings and cash flow to return to shareholders and invest in profitable growth. The first half of the year saw a 2% increase in volume but a 4% decrease in operating profit, and the company hopes to see more operating leverage in the second half of the year.

The speaker discusses the first half of the year and how it was affected by unique challenges such as the Baltimore collapse and lower export coal pricing. They expect the second half of the year to be cleaner with less significant headwinds. Labor productivity was negative in the first half but is expected to turn positive in the second half. There is some mixed sentiment on the cycle, with an inflection being pushed out and the economy being more fragile, but the company is still guiding for strong operating leverage in the back half of the year. The speaker acknowledges that this may be difficult to achieve in a fragile market, but they have confidence and visibility in their ability to do so.

Sean Pelkey, the speaker, discusses the company's performance so far this year and how they have been able to meet their goals. He mentions that they have been successful in offsetting challenges and have some promising opportunities in the second half of the year. He also talks about their focus on both increasing volumes and getting the necessary prices in the market. The operator then asks a question about the company's ability to improve margins even if there is not as much growth. The last question is from Jeff Kauffman about excess capacity and an increase in dwell time.

The speaker is discussing the potential for improved asset utilization on the rail, including running with fewer locomotives and cars, using technology, and reducing out of route miles and handlings. They are also looking at ways to create mass in certain areas to eliminate unnecessary touches and improve efficiency. More information will be provided at an upcoming Investor Day.

The speaker concludes the Q&A session and conference call and instructs the participants to disconnect.

This summary was generated with AI and may contain some inaccuracies.