CSX on the Wrong Track: When Rail Giants Meet Mergers, Tariffs, and Tumbling Expectations

If you want to know why CSX Corporation lost steam over the last week, don’t just watch the tracks—watch the horizon. The world of American freight is rumbling, and it’s not just the locomotives making noise.

Rails Rattle as Titans Merge

On July 29, a seismic event hit the industry: Union Pacific and Norfolk Southern announced plans to merge, forging the first transcontinental railroad network in U.S. history. The news sent shockwaves through the sector, and CSX (NASDAQ: CSX) was caught in the aftershocks. Over the past five days, CSX shares slid 10.2%, a sharp contrast to its 6.9% gain over the last three months and a tepid -1.1% return for the past year.

The merger promises unprecedented scale and efficiency—but for CSX, it spells new competition. Investors fear that a coast-to-coast behemoth could siphon away lucrative intermodal contracts and squeeze pricing power in the East, where CSX has long been dominant. The regulatory process may take years, but Wall Street doesn’t wait for paperwork.

Freight Volumes: The Cargo Conundrum

The romance of rail may be eternal, but volumes are not. The latest quarterly numbers tell a sobering story: CSX’s Q1 2025 operating income was $1.04 billion, down from $1.34 billion a year prior, with revenue falling 7% year-over-year to $3.42 billion. Intermodal volumes held up in May, but fresh U.S. tariffs and global trade jitters threaten to derail that momentum.

This isn’t merely an earnings miss—it’s a narrative shift. In 2023, CSX boasted a robust 7.8% sales growth. By the trailing twelve months to Q2 2025, sales growth had slipped to -3.3%. Margins—once the envy of the sector—are narrowing: net income margin dropped from 27.4% (2023) to 21.9% (2025 TTM). Operating margin is down to 34.6%, and return on equity has faded to 24.8%. The industry’s iron horse looks a bit less invincible.

Tariffs, Trade Wars, and the Macro Maelstrom

CSX’s tracks run through the heart of America’s industrial supply chain, but those arteries are clogged by geopolitics. Ongoing tariff battles and trade conflicts have investors bracing for weaker imports and soft intermodal demand. The company’s sensitivity to global shipping is both its strength and its Achilles’ heel: when global trade sneezes, CSX catches a cold.

Even as the U.S. Environmental Protection Agency floats regulatory rollbacks that could eventually benefit rail, the near-term picture remains foggy. Supply chain volatility, a strong dollar, and intermittent labor disputes (recently tamped down by a new IAM deal) all add to the uncertainty swirling around the sector.

Valuation Signals: Smoke or Fire?

On paper, CSX still looks like a stalwart. A trailing P/E ratio of 19.88 sits comfortably below the sector average of 54.86, suggesting value—but only if earnings stabilize. Return on invested capital is a respectable 9.68%, and the company maintains a 1.60% dividend yield. Yet, investors are pricing in risk: the stock has dropped to $35.05, near the lower end of analyst forecasts, and a consensus “Moderate Buy” now comes with more caveats than confidence.

Meanwhile, Warren Buffett’s recent comments that Berkshire Hathaway is “not in the market” for new railroad acquisitions doused any hopes of a white knight bid. The message: in this new era, even the Oracle is content to watch from the sidelines.

The Track Ahead—Fog, Forks, and Fast Trains

CSX’s five-day stumble is more than a blip. It’s the sum of merger anxiety, weakening freight, and a shifting regulatory and macro landscape. As the tracks ahead twist and turn, investors are left with a paradox: the company is still a vital artery of American commerce, but the future is more contested—and more unpredictable—than ever.

For those who thought railroads were the ultimate steady-Eddie stocks, the last week has been a reminder: even the oldest engines can hit a sharp curve.