CSX Q2 2025: Profit Squeezed by Pricing Pressure and Rising Costs

Today, we're digging into the second-quarter 2025 financial results of CSX Corporation, a prominent railroad operator in North America. The company's latest 10-Q filing with the SEC shows a business navigating a difficult economic environment, with revenue declining while certain costs continue to climb. Let's break down the numbers to see what's driving their performance.

For the three months ending June 30, 2025, CSX reported total revenue of $3.574 billion, a 3% decrease from the $3.701 billion generated in the same period last year. This revenue dip, coupled with a 2% rise in expenses, resulted in an 11% drop in operating income, which came in at $1.283 billion. Ultimately, net earnings fell to $829 million, or $0.44 per diluted share, down from $963 million, or $0.49 per share, in Q2 2024.

To help visualize how the company's revenue flows through its various costs to arrive at its final profit, we've created the following chart based on the income statement data.

Revenue Under Pressure

CSX's revenue is a mix of merchandise, coal, and intermodal transport, and the second quarter revealed divergent stories across these segments.

• Merchandise, the largest segment, saw revenue decline 2% to $2.257 billion. While shipments of agricultural products and minerals saw modest gains, this was offset by a 5% drop in automotive revenue due to lower vehicle production and a 7% decline in forest products revenue, which was affected by paper plant closures.

• Coal revenue saw the steepest decline, falling 15% to $477 million. What's particularly noteworthy is that coal volume actually increased by 1%. The sharp revenue drop was driven by a 16% collapse in revenue per unit, indicating significant pricing pressure.

• Intermodal revenue, which involves moving shipping containers and truck trailers, decreased 3% to $491 million. Similar to the coal segment, this decline occurred despite a 2% increase in volume. The company attributes this to a "soft trucking environment," which creates price competition for rail services.

The Squeeze from Rising Costs

While revenue was down, total expenses rose to $2.291 billion, an increase of $38 million from the prior year. Key drivers of this increase included:

• Labor and Fringe: These costs increased by $25 million, with the company noting that $18 million of this was due to inflation.
• Purchased Services and Other: This category rose by $19 million. The company cited inflation and higher volume-related terminal costs ($21 million) as well as approximately $14 million from the "effects of network disruptions and congestion, including rerouting impacts."
• Fuel Savings: One bright spot was a $32 million decrease in fuel costs, thanks to a 12% drop in locomotive fuel prices. This provided a partial offset to other inflationary pressures.

The combination of lower revenue and higher expenses squeezed the company's operating margin—a key measure of profitability calculated by dividing operating income by revenue—which fell from 39.1% to 35.9%.

Returning Capital to Shareholders

Despite these financial headwinds, CSX continued its commitment to returning capital to shareholders. During the second quarter, the company spent $401 million to repurchase 14 million shares of its stock. In addition, CSX paid out $243 million in dividends, reflecting an 8% dividend increase authorized earlier in the year.

In summary, CSX's Q2 2025 results highlight a company grappling with both macroeconomic and operational challenges. While management is contending with inflation and network efficiency, the significant drop in revenue per unit for its coal and intermodal businesses reveals intense pricing pressure. Even as CSX moves more goods, its ability to translate that volume into higher revenue is being tested. Investors will be watching closely to see how the company manages costs and whether it can regain pricing power to protect its profitability in a demanding market.