CSX Corporation (CSX)

How it makes money

CSX earns revenue by the carload: shippers pay a negotiated rate per shipment, priced by distance, weight and commodity type, not by subscription or one-off retail sale. Rail's economics reward volume — the track and locomotives are already paid for, so an incremental carload costs little beyond fuel and crew, which is why operating margin above 30% is normal. Rates are negotiated directly with large shippers and are partly capped by federal regulation on routes where CSX is the only practical rail option.

Revenue by segment

Building a second rail network alongside CSX's would cost more than any competitor is willing to spend, so shippers along its routes have few practical alternatives. But the moat is narrower than it looks: Norfolk Southern covers much of the same territory, trucking competes on shorter hauls, and the Surface Transportation Board caps rates where CSX is the only rail option.

Rail volumes track the health of heavy industry — steel, chemicals, autos, construction — so shipments rise and fall with factory output and housing starts. Coal, historically CSX's second-biggest earner, has been in structural decline for over a decade as power plants switch to gas and renewables, adding a one-way headwind on top of the ordinary economic cycle.

Key risks

• Regulatory rate caps — The Surface Transportation Board can cap the rates CSX charges on routes where it is a shipper's only practical rail option, limiting pricing power exactly where CSX would otherwise have the most leverage.
• Structural decline in coal — Utilities are retiring coal-fired power plants for gas and renewables, and CSX says lower coal-fired generation will keep pressuring its coal franchise regardless of the broader economic cycle.
• Rail and highway competition — Norfolk Southern operates an overlapping eastern network, and trucking competes for shorter hauls; looser size and weight limits on trucks could shift more freight off rail and onto highways.
• Weather and network disruption — CSX expects hurricanes, flooding and other severe weather affecting its network to grow more frequent and severe, and any line closure or washout directly halts the freight that depends on it.
• Unionized workforce and strike risk — Most of CSX's employees are covered by collective bargaining agreements under the Railway Labor Act; a failed negotiation or work stoppage would shut down train operations across the network.