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Positive rail growth, partial margin recovery and lower capital intensity could turn the expected earnings recovery into stronger free cash flow.
Annual rail revenue growth at or below 0% in FY2027.
Sell. The $49.00 report-date price sits above Fair value of $24.14 and Potential value of $43.01, so ordinary investors should reduce or exit exposure.3
The main risk is annual rail revenue growth at or below 0% in FY2027. That would weaken consolidated sales and the path to margin and free-cash-flow recovery.
Upside becomes more credible if rail sales grow in FY2027 and capital spending falls to no more than 1.5 times depreciation by FY2028. Sales growth would aid profit, while lower spending would release more owner cash.
A demand-led upswing would support positive rail revenue, better use of the network and higher profit from each sales dollar. That would strengthen the recovery path.
Sell because the report-date price exceeds Potential value while later rail growth and capital normalization remain conditional.
A demand-led upswing could keep annual rail revenue growth positive and support the recovery path. Annual rail revenue growth is the test because rail generated $13.28 billion in FY2025.6
Sell because the report-date price exceeds Potential value. Positive FY2027 rail growth and capex-to-depreciation of 1.5 times or less by FY2028 would improve the business case, but price versus value governs the action.
CSX Corporation, together with its subsidiaries ("CSX" or the “Company”), based in Jacksonville, Florida, is one of the nation's leading transportation companies. The Company provides rail-based freight transportation services including traditional rail service, the transport of intermodal containers and trailers, as well as other transportation services such as rail-to-truck transfers and bulk commodity operations. •The intermodal business shipped 3.0 million units (48% of volume) and generated $2.1 billion in revenue (15% of revenue) in 2025. The intermodal business combines the superior economics of rail transportation with the flexibility of trucks and offers a cost and environmental advantage over long-haul trucking.
See the following page for a map of the CSX Rail Network. Also included on the map, "CSX Operating Agreement" indicates areas within which CSX can operate through trackage rights beyond the CSX network.
Rail contraction would cut sales and operating leverage. A FY2030 margin below 31% would reduce profit from each sales dollar. Capex above 1.5 times depreciation by FY2028 would restrain owner cash. A discount-rate increase exceeding two points would lower the present value of future cash. FY2025 debt was $19.35 billion versus $670 million cash; both enter the bridge from enterprise value to equity value.
Rail weakness cuts sales and operating leverage. High spending then restrains owner cash.
Annual rail revenue growth at or below 0% in FY2027 would remove the supported route to later sales, margin and cash growth.
A FY2030 operating margin below 31% would show that the planned recovery did not produce enough profit from each sales dollar.
The five developments that would weaken our investment case.
Rail provides most company revenue, so contraction would lower consolidated sales. FY2025 trucking revenue was much smaller than rail revenue, limiting its ability to offset that decline.
Current:FY2025 rail revenue was $13.28 billion.
Alert ifAt or below 0% in FY2027.
FY2025 rail revenue of $13.28 billion shows operating scale. It does not show whether customers face switching costs or whether the network has a lasting cost advantage. A durable competitive advantage cannot be established from this observation alone.
NSC and UNP are direct rail benchmarks. WAB is an equipment supplier, while BA is an aerospace company and only broad valuation context.
FY2025 operating profit and cash generation show that the business was profitable and produced operating cash. These are business outcomes, not tests of customer switching costs, network efficiency or lasting cost advantage.5
Each lens answers a different valuation question. Only included lenses set Fair value; floors and diagnostics provide context.
Apply a terminal P/E to the dated forward path, then discount that future share value back to the analysis date.
None of the valuation methods used to calculate Fair value relies on a separate assumption about how long the competitive advantage lasts.
The highlighted cell is Fair value when every assumption sits at its base level ($24.14). Each row and column shows what Fair value becomes when one assumption moves.
Free cash flow to the firm stays positive in the first projected year at $2.8B after modeled reinvestment of $993.8M, with terminal value at 71.9% of enterprise value. A sudden drop in free cash flow is not projected unless capital spending relative to revenue, reinvestment, or gross margin resets materially.
Positive rail growth supports a measured recovery. This path fails if rail growth stalls, operating margin misses the Base endpoint, or investment intensity remains elevated through FY2028.
A beat would strengthen the recovery only if rail sales stay positive while margin improves and capital spending releases more cash.
In-line results do not prove a durable recovery.
Rail weakness blocks the route to consolidated recovery.
FY2025 operating cash funded capital spending, but that spending absorbed much of the cash and constrained free cash flow.45
FY2025 operating cash of $4.61 billion exceeded reported profit of $2.89 billion. Capital spending was $2.90 billion and free cash flow was $1.71 billion. These one-year figures do not rank cash constraints.45
FY2025 debt was $19.35 billion against $670 million of cash. This leaves less room for investment errors and makes equity value more sensitive to weaker cash generation.
The dated figures establish profit and cash generation, but they do not establish a multi-period return-on-capital direction.
No directional comparison is drawn from operating profit and the 8.6171% WACC alone.
Operating cash was $4.61 billion against $2.89 billion of reported profit.
That supports internal funding capacity, but does not prove future growth or investment returns.
FY2025 capex was $2.90 billion, leaving free cash flow of $1.71 billion.
Per-share value depends on spending easing or producing stronger operating cash.
| Revenue | $14,092,000,000 |
|---|---|
| Cost of revenue | $9,407,000,000 |
| Gross profit | $4,685,000,000 |
| Operating expenses | $164,000,000 |
| Operating income | $4,521,000,000 |
| Non-operating items and tax | -$1,632,000,000 |
| Net income | $2,889,000,000 |
| Total assets | $43,682,000,000 |
|---|---|
| Cash | $670,000,000 |
| Current assets | $2,550,000,000 |
| Total liabilities | $30,522,000,000 |
| Current liabilities | $3,133,000,000 |
| Shareholders’ equity | $13,160,000,000 |
| Net income | $2,889,000,000 |
|---|---|
| Operating inflow | $4,613,000,000 |
| Depreciation and amortization | $1,680,000,000 |
| Other operating adjustments | $44,000,000 |
| Operating cash flow | $4,613,000,000 |
| Cash available | $5,546,000,000 |
| Beginning cash | $933,000,000 |
| Investing outflow | $2,851,000,000 |
| Financing outflow | $2,025,000,000 |
| Ending cash | $670,000,000 |
| Investing cash flow | -$2,851,000,000 |
| Financing cash flow | -$2,025,000,000 |
Point-in-time financial data used in the 2026-09-09 analysis.
| Period | Revenue | EBITDA | Net income | Operating cash flow | Free cash flow | Capex | Depreciation and amortization | Stock-based compensation | Share repurchases | Dividends paid | Net debt issuance | Investing cash flow | Financing cash flow | Beginning cash | Ending cash | Cash and investments | Total debt | Operating margin | ROIC | WACC | ROIC − WACC spread |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2016-12-30 | $11.1B | $4.6B | $1.7B | $3B | $643M | $2.4B | $1.3B | $37M | $1.1B | $680M | — | -$1.8B | -$1.3B | — | $603M | $1B | $11.3B | 30.8% | — | 5.7% | — |
| 2017-12-31 | $11.4B | $5B | $5.5B | $3.5B | $1.4B | $2B | $1.3B | $89M | $2B | $708M | — | -$1.5B | -$2.2B | $603M | $401M | $419M | $11.8B | 32.6% | — | 6.2% | — |
| 2018-12-31 | $12.3B | $6.3B | $3.3B | $4.6B | $2.9B | $1.7B | $1.3B | $51M | $4.7B | $751M | — | -$1.7B | -$2.5B | $401M | $858M | $1.1B | $14.8B | 39.7% | — | 6.4% | — |
| 2019-12-31 | $11.9B | $6.4B | $3.3B | $4.9B | $3.2B | $1.7B | $1.3B | -$359M | $3.4B | $763M | — | -$2.1B | -$2.6B | $858M | $958M | $2B | $16.7B | 41.6% | — | 5.7% | — |
| 2020-12-31 | $10.6B | $5.8B | $2.8B | $4.3B | $2.6B | $1.6B | $1.4B | -$37M | $867M | $797M | — | -$649M | -$1.4B | $958M | $3.1B | $3.1B | $17.2B | 41.2% | — | 4.6% | — |
| 2021-12-31 | $12.5B | $7.1B | $3.8B | $5.1B | $3.3B | $1.8B | $1.4B | -$627M | $2.9B | $839M | — | -$1.9B | -$4.1B | $3.1B | $2.2B | $2.3B | $16.8B | 44.7% | — | 5.3% | — |
| 2022-12-31 | $14.9B | $7.6B | $4.1B | $5.5B | $3.4B | $2.1B | $1.5B | $74M | $4.7B | $852M | $1.8B | -$2.1B | -$3.8B | $2.2B | $1.9B | $2.1B | $18.5B | 40.1% | — | 7.2% | — |
| 2023-12-31 | $14.7B | $7.3B | $3.7B | $5.5B | $3.3B | $2.3B | $1.6B | $60M | $3.5B | $882M | $447M | -$2.2B | -$3.9B | $1.9B | $1.4B | $1.4B | $19B | 37.5% | — | 7.1% | — |
| 2024-12-31 | $14.5B | $7.1B | $3.5B | $5.2B | $2.7B | $2.5B | $1.7B | $40M | $2.2B | $930M | -$8M | -$2.6B | -$3.1B | $1.4B | $933M | $1B | $19B | 36.1% | — | 7.7% | — |
| 2025-12-31 | $14.1B | $5.9B | $2.9B | $4.6B | $1.7B | $2.9B | $1.7B | — | $1.4B | $972M | $287M | -$2.9B | -$2B | $933M | $670M | $675M | $19.4B | 32.1% | — | 7.4% | — |
CSX Corporation (CSX) trades at 21.9x forward earnings against a peer median of 22.9x. Its EV/EBITDA of 16.0x compares with a peer median of 15.8x. The comparison uses 4 peers: Norfolk Southern Corporation, Union Pacific Corporation, Westinghouse Air Brake Technologies Corporation and The Boeing Company, as of 2026-09-09.
Capex rose from $2.26 billion in FY2023 to $2.53 billion in FY2024 and $2.90 billion in FY2025.5
A demand-led upswing could keep annual rail revenue growth positive and support the recovery path. Annual rail revenue growth is the test because rail generated $13.28 billion in FY2025.
Rail generated $13.28 billion in FY2025, versus $839 million from trucking. This places the reported bear-cycle exposure in rail, but these segment values do not establish the timing or margin effect of a slowdown.
The presented cycle view is demand-led. CSX's position depends on annual rail revenue growth remaining positive in FY2027.
No new allocation is warranted while the report-date price remains above Potential value. Existing holders should reduce or exit.3
Each condition is independently sufficient to exit remaining exposure. Exit if FY2027 annual rail revenue growth is at or below 0%. Exit if capex-to-depreciation is above 1.5 times in FY2028. Also exit if WACC rises by more than 2 percentage points from 8.6171% within 12 months.
Reduce or exit while the report-date price remains above Potential value.3
Do not initiate because the accepted Fair value and Potential value are below the report-date price.3
Wait for positive rail growth, lower capital intensity and improving free cash flow before reconsidering exposure.
The $49.00 report-date price exceeds Fair value of $24.14 and Potential value of $43.01.3
Analyst forecasts put FY2027 revenue at $15.94 billion and diluted EPS at $2.27. FY2025 capex was $2.90 billion, while free cash flow was $1.71 billion, leaving future cash improvement conditional.
Capture your own thesis, position size, and follow-up questions. Stays on this device, only you can see it.
The records this analysis drew on, as they stood when it was run.
Not every cited input appears here: internal calculations and intermediate model outputs have no external record, and some citations could not be matched to one.
Capex above 1.5 times depreciation after FY2028 would delay cash normalization and keep reinvestment higher than the base path assumes.
A WACC increase exceeding two percentage points from 8.6171% would reduce the present value of cash while debt magnifies the equity effect.
Failure to recover margin would leave less operating profit from each sales dollar, reducing after-tax cash and per-share earnings despite revenue growth.
Current:FY2025 operating margin was 32.08%.
Alert ifBelow 31% in FY2030.
Persistent investment intensity would keep reinvestment high, delaying the expected rise in owner cash even if reported earnings recover as forecast.
Current:FY2025 was 1.73 times.
Alert ifAbove 1.5 times after FY2028.
A higher discount rate lowers the present value of future cash. FY2025 debt of $19.35 billion versus $670 million cash makes the equity claim more exposed to that decline.
Current:WACC was 8.6171% on 2026-09-09.
Alert ifMore than two percentage points higher within 12 months.
Weak cash backing would make reported profit less dependable for funding investment and debt service, forcing a full review of the earnings path.
Current:FY2025 operating cash was $4.61 billion versus $2.89 billion of profit.
Alert ifAt or below $0.80 of operating cash per $1.00 of profit next fiscal year.
| Investment spending fails to create durable operating benefits. | high | Through FY2028 | Investment spending threatens durable operating benefits when added assets do not release cash. Retire this threat only if capex-to-depreciation falls to 1.5 times or less by FY2028 and free cash flow improves without weaker rail revenue. That combination would show lower spending intensity is supporting cash rather than masking weaker operations. |
Convert the revenue and margin path into after-tax free cash flow, discount the annual per-share amounts and terminal value at WACC, then adjust for signed net debt per current share.
Limitation: Terminal value is 71.9% of this model's value, above the 60% level at which the methodology flags concentration; the value leans on the years beyond the explicit forecast.
Add depreciation to net income, subtract maintenance capex, divide by diluted shares, and apply a normalized valuation multiple.
Solve for the growth rate that makes the model value equal the report-date share price.
The higher outcome needs stronger operations and cash than Base. Persistent rail growth and a higher margin raise profit; lower investment spending must then turn more of that profit into free cash flow.
Recovery converts sales into profit and cash.
Lower spending releases owner cash.5
Growth shows investment is yielding cash.4
Cash-backed profit supports spending and debt service.5
| $16.42B |
| $16.75B |
| $17.00B |
| Revenue growth | 7.8% | 5.0% | 3.0% | 2.0% | 1.5% |
| Operating margin | 32.5% | 32.9% | 33.2% | 33.6% | 34.0% |
| Operating income | $4.93B | $5.24B | $5.46B | $5.63B | $5.78B |
| Tax rate | 23.8% | 23.8% | 23.8% | 23.8% | 23.8% |
| NOPAT | $3.76B | $3.99B | $4.16B | $4.29B | $4.41B |
| Reinvestment | $993.83M | $695.44M | $349.53M | $367.41M | $384.13M |
| Reinvestment rate (of NOPAT) | 26.4% | 17.4% | 8.4% | 8.6% | 8.7% |
| Depreciation and amortization | $1.81B | $1.90B | $1.96B | $2.00B | $2.03B |
| Free cash flow to firm | $2.77B | $3.30B | $3.81B | $3.92B | $4.02B |
| Rail revenue | $14.31B | $15.02B | $15.47B | $15.78B | $16.02B |
| Trucking revenue | $903.71M | $948.53M | $976.99M | $996.53M | $1.01B |
| Terminal growth | 1.0% | 1.0% | 1.0% | 1.0% | 1.0% |
| Diluted shares | 1.81B | 1.74B | 1.68B | 1.62B | 1.56B |
| EPS | $1.91 | $2.27 | $2.33 | $2.37 | $2.39 |
| Net margin | 22.7% | 24.8% | 23.9% | 22.9% | 22.0% |
| Implied net income | $3.44B | $3.96B | $3.92B | $3.84B | $3.74B |
| Margin |
|---|
| CSX | CSX Corporation | $90.8B | 21.9x | 6.3x | 16.0x | 24.4% | — |
| NSC | Norfolk Southern Corporation | 22.9x | 5.9x | 15.8x | 17.0% | 35.3% | |
| UNP | Union Pacific Corporation | 20.4x | 6.7x | 15.6x | 39.7% | 41.0% | |
| WAB | Westinghouse Air Brake Technologies Corporation | 22.9x | 4.0x | 20.5x | 11.6% | 19.2% | |
| BA | The Boeing Company | 51.1x | 1.8x | 173.5% | 0.0% |
| Above 1.5 times in FY2028 |
| This breach alone is sufficient to exit remaining exposure because persistent spending would keep reinvestment high and delay the expected free-cash-flow improvement. |
| Enterprise discount rate | More than 2 percentage points above the 8.6171% baseline within 12 months | This breach alone is sufficient to exit remaining exposure because a higher discount rate lowers the present value of future cash. FY2025 debt was $19.35 billion versus $670 million cash.35 |
