CSX (CSX)

Freight rail services provider CSX (NASDAQ:CSX) missed Wall Street’s revenue expectations in Q4 CY2025, with sales flat year on year at $3.51 billion. Its non-GAAP profit of $0.39 per share was 5.3% below analysts’ consensus estimates.

Company Overview

Established as part of the Chessie System and Seaboard Coast Line Industries merger, CSX (NASDAQ:CSX) is a transportation company specializing in freight rail services.

The growth of e-commerce and global trade continues to drive demand for shipping services, presenting opportunities for rail transportation companies. While moving large volumes by rail can be highly cost-efficient for customers compared to air and ground transport, this mode of transportation results in slower delivery times, presenting a trade off. To improve transit times, the industry continues to invest in digitization to optimize fleets, loads, and even braking systems. However, rail transportation companies are still at the whim of economic cycles. Consumer spending, for example, can greatly impact the demand for these companies’ offerings while fuel costs can influence profit margins.

Public competitors in the rail industry include Union Pacific (NYSE:UNP), Norfolk Southern (NYSE:NSC), and CPKC (NYSE:CP)

Examining a company’s long-term performance can provide clues about its quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Over the last five years, CSX grew its sales at a tepid 5.9% compounded annual growth rate. This fell short of our benchmark for the industrials sector and is a poor baseline for our analysis.

Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. CSX’s performance shows it grew in the past but relinquished its gains over the last two years, as its revenue fell by 1.9% annually. CSX isn’t alone in its struggles as the Rail Transportation industry experienced a cyclical downturn, with many similar businesses observing lower sales at this time.

We can dig further into the company’s revenue dynamics by analyzing its number of units sold, which reached 1.6 million in the latest quarter. Over the last two years, CSX’s units sold averaged 1.3% year-on-year growth. Because this number is better than its revenue growth, we can see the company’s average selling price decreased.

This quarter, CSX missed Wall Street’s estimates and reported a rather uninspiring 0.9% year-on-year revenue decline, generating $3.51 billion of revenue.

Looking ahead, sell-side analysts expect revenue to grow 4% over the next 12 months. While this projection suggests its newer products and services will spur better top-line performance, it is still below the sector average.

CSX has best-in-class unit economics for an industrials company, enabling it to invest in areas such as research and development. Its margin also signals it sells differentiated products, not commodities. As you can see below, it averaged an elite 49% gross margin over the last five years. Said differently, roughly $49.01 was left to spend on selling, marketing, R&D, and general administrative overhead for every $100 in revenue.

CSX produced a 43.2% gross profit margin in Q4, marking a 4.1 percentage point decrease from 47.3% in the same quarter last year. CSX’s full-year margin has also been trending down over the past 12 months, decreasing by 3.4 percentage points. If this move continues, it could suggest a more competitive environment with some pressure to lower prices and higher input costs (such as raw materials and manufacturing expenses).

Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.

CSX has been a well-oiled machine over the last five years. It demonstrated elite profitability for an industrials business, boasting an average operating margin of 38%. This result isn’t surprising as its high gross margin gives it a favorable starting point.

Looking at the trend in its profitability, CSX’s operating margin decreased by 12.6 percentage points over the last five years. Many Rail Transportation companies also saw their margins fall (along with revenue, as mentioned above) because the cycle turned in the wrong direction. We hope CSX can emerge from this a stronger company, as the silver lining of a downturn is that market share can be won and efficiencies found.

This quarter, CSX generated an operating margin profit margin of 31.6%, in line with the same quarter last year. This indicates the company’s cost structure has recently been stable.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

CSX’s unimpressive 6.1% annual EPS growth over the last five years aligns with its revenue performance. This tells us it maintained its per-share profitability as it expanded.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

CSX’s two-year annual EPS declines of 6.5% were bad and lower than its two-year revenue losses.

Diving into the nuances of CSX’s earnings can give us a better understanding of its performance. While we mentioned earlier that CSX’s operating margin was flat this quarter, a two-year view shows its margin has declined. This was the most relevant factor (aside from the revenue impact) behind its lower earnings; interest expenses and taxes can also affect EPS but don’t tell us as much about a company’s fundamentals.

In Q4, CSX reported adjusted EPS of $0.39, down from $0.42 in the same quarter last year. This print missed analysts’ estimates. Over the next 12 months, Wall Street expects CSX’s full-year EPS of $1.61 to grow 16.2%.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

CSX has shown terrific cash profitability, putting it in an advantageous position to invest in new products, return capital to investors, and consolidate the market during industry downturns. The company’s free cash flow margin was among the best in the industrials sector, averaging 21.9% over the last five years.

Taking a step back, we can see that CSX’s margin dropped by 18.1 percentage points during that time. If its declines continue, it could signal increasing investment needs and capital intensity.

CSX’s free cash flow clocked in at $709 million in Q4, equivalent to a 20.2% margin. This result was good as its margin was 4.2 percentage points higher than in the same quarter last year, but we wouldn’t read too much into the short term because investment needs can be seasonal, leading to temporary swings. Long-term trends trump fluctuations.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Although CSX hasn’t been the highest-quality company lately, it historically found a few growth initiatives that worked out well. Its five-year average ROIC was 15.1%, impressive for an industrials business.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Unfortunately, CSX’s ROIC averaged 3.4 percentage point decreases over the last few years. We like what management has done in the past, but its declining returns are perhaps a symptom of fewer profitable growth opportunities.

CSX reported $675 million of cash and $18.87 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $6.37 billion of EBITDA over the last 12 months, we view CSX’s 2.9× net-debt-to-EBITDA ratio as safe. We also see its $418 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We struggled to find many positives in these results. Its EBITDA missed and its EPS fell short of Wall Street’s estimates. Overall, this was a weaker quarter. The stock traded up 4.2% to $37.51 immediately after reporting.

Updated: January 22, 2026 at 10:17 PM EST

We think that the latest earnings result is only one piece of the bigger puzzle. If you’re deciding whether to own CSX, you should also grasp the company’s longer-term business quality and valuation.

CSX doesn’t pass our quality test. To begin with, its revenue growth was uninspiring over the last five years, and analysts expect its demand to deteriorate over the next 12 months. And while its admirable gross margins indicate the mission-critical nature of its offerings, the downside is its declining operating margin shows the business has become less efficient. On top of that, its cash profitability fell over the last five years.

CSX’s P/E ratio based on the next 12 months is 19.6x. While this valuation is reasonable, we don’t see a big opportunity at the moment. There are more exciting stocks to buy at the moment.

Wall Street analysts have a consensus one-year price target of $39.83 on the company (compared to the current share price of $36.91).