CSX's Q4 Outlook: Navigating Weak Volume and Rising Costs in a Volatile Market

The railroad industry's resilience in the face of macroeconomic headwinds has long been a barometer for broader economic health. For CSX, the third quarter of 2025 offered a mixed snapshot of this dynamic: while the company outperformed Wall Street estimates in some segments, it grappled with declining coal volumes and rising operational costs. As the year's final quarter approaches, investors are scrutinizing how CSX's strategic adjustments-ranging from infrastructure investments to intermodal expansion-position it to weather a volatile market.

Q3 2025: A Tale of Two Sectors

CSX's Q3 2025 results underscored the divergent forces shaping its business. Operating income reached $1.09 billion, and net income hit $694 million, driven by a 2.1% year-over-year increase in intermodal volumes and higher pricing in merchandise freight. However, coal-a historically critical revenue stream-continued its decline, with volumes dropping 8.5% year-over-year in Q1 2025, a trend that has persisted into the second half of the year. This shift reflects broader industry dynamics, as utilities pivot away from coal and toward cleaner energy sources, a transition that has left railroads like CSX recalibrating their portfolios.

Strategic Resilience: Infrastructure and Efficiency Gains

CSX's response to these challenges has centered on infrastructure modernization and operational efficiency. The completion of key projects, such as the Howard Street Tunnel and Blue Ridge Subdivision upgrades, has already begun to yield tangible benefits. According to a report by , these improvements are expected to generate $100 million in annual savings by enhancing network efficiency and reducing congestion. Additionally, the railroad has prioritized service velocity, a metric that measures how quickly trains move through its network. Analysts at TD Cowen note that these gains have helped offset cost pressures, particularly in merchandise and intermodal segments, where pricing power has provided a buffer against inflationary trends.

Intermodal Expansion: A Long-Term Bet

Intermodal freight-shipping goods in containers via rail and truck-has emerged as CSX's most promising growth avenue. In Q3 2025, intermodal volumes rose 2% sequentially, a modest but encouraging sign amid a broader slowdown in North American freight demand.

The railroad has signaled plans to accelerate this momentum, with double-stack intermodal operations set to launch in the Northeast by Q2 2026 and expanded interline partnerships, notably with BNSF, to follow. These moves align with industry forecasts predicting a structural shift toward intermodal as e-commerce and just-in-time logistics drive demand for faster, more flexible transportation solutions.

Industry Trends and the 2026 Outlook

The North American Class I rail sector is navigating a complex landscape in 2025. According to Oliver Wyman's Q3 2025 performance report, operating ratios and revenue per unit have declined slightly, attributed to shifts in traffic mix and reduced fuel surcharge collections. For CSX, this means balancing near-term cost discipline with long-term investments. Analysts remain cautiously optimistic about 2026, citing three key drivers: the full realization of infrastructure savings, potential industry consolidation, and the return of manufacturing to the U.S., which could boost freight demand. highlights that CSX's strategic focus on intermodal and infrastructure positions it to capitalize on these trends, even as coal's decline continues.

Risks and Uncertainties

Despite these strategic moves, CSX's Q4 2025 outlook is not without risks. Weak volume trends in coal and merchandise exports could persist, particularly if broader economic growth stumbles. Additionally, rising interest rates may pressure capital expenditures, complicating the railroad's ability to fund new projects. However, CSX's emphasis on high-margin intermodal freight and its disciplined approach to cost management-evidenced by a 30.4% operating margin in Q1 2025-suggest the company is prepared to navigate these headwinds.

Conclusion

CSX's Q4 2025 performance will hinge on its ability to execute its strategic priorities amid a fragmented market. While coal's decline remains a drag, the railroad's pivot to intermodal, infrastructure modernization, and operational efficiency gains offer a counterbalance. As the industry braces for a potential inflection point in 2026, CSX's resilience will be defined not just by its response to current challenges, but by its capacity to adapt to a rapidly evolving freight landscape.