Csx Corp (CSX) May 13, 2026 Conference Transcript

Good morning. Next up, we welcome CSX and Kevin Boone, EVP and CFO, as he reclaims his CFO seat in October that he held from 2019 to 2021, with a quick step into the CMO seat in between. We welcome Kevin for his fifth time at our event, along with Matt Korn up here in the front row from Investor Relations, also for his fifth time, and CSX for the 18th consecutive year attending the conference and 23rd time in the 25 years we've hosted the event. So truly thank you for your steadfast commitment to the conference. And what an outlook for CSX, right? New CEO, Steve Angel, continues to press the culture of the organization to be better. It has easy comps against some of the Blue Ridge subdivision work and Howard Street Tunnel Project for about $150 million in easier cost comps. So let's dig in and see what's going on. So, Kevin, I'll turn it over to you. Just understand you have a few thoughts and updates to start, but, you know, maybe please include three key thoughts or takeaways you want us to walk away with as well.

Yeah, so when we came, well, first of all, thank you for having us. We also have Angie Williams here in the audience. That's what's the company. She's our chief accounting officer. I've been coming to this conference for a long time, even when you had it in Boston, even as an investor, before I moved over to the corporate side. So thank you for having me. You know, when we came into the year, we put a plan together pretty quickly with Steve coming on board, and, you know, we obviously guided to low single-digit revenue. And we also had a very ambitious plan, aggressive plan around improving our margins. So 200, 300 basis points of margin improvement. And as you saw, we delivered on my lease in the first quarter and continue to have a plan to deliver on that. And we took up our guidance. On the revenue side, you know, we adjusted mainly due to the fuel surcharge and what we've seen with the war outbreak and what that's done to the price of oil. But we've also seen some favorability in some specific markets, mainly tied to the energy markets and what's happening there. So some favorability, chemicals and other areas. On the cost side, despite some of the margin headwinds that fuel surcharge does create from a margin perspective, we did take that guidance up to the higher end of the range. So very happy with what we did in the first quarter. One quarter doesn't make a year, so a lot more to do. And then three things that I think about as a CFO coming back into this role. Obviously, on the revenue side, you know, Steve's been very clear that we need to go out there and get value for the great service product that we're delivering. And so a lot of focus by Mary Claire and the team around that. Revenue growth is about volume and price. And that's important to cover our costs, cover our cost inflation. And as we deliver a better service, we expect to get value for that. So that's been a big emphasis, I know, since Steve's been on board and really pushing the team in that area. On the cost side, I got into it. You know, we had a great performance in the first quarter, really across the board. When you look across mechanical engineering, our transportation costs, Mike and the team fully engaged. What we're trying to do as a finance organization is give them the visibility and the tools to really go after those costs and really measure them and create processes around it. So once we find the efficiency that we don't let it creep back into the system. So a lot of great work there, a lot more to do. We're building the pipeline already for 2027 in terms of the cost initiatives that we want to deliver. And so I think some of the success we've had has given us the leeway to start thinking about, you know, the next year and years ahead and really putting a plan together and being really thoughtful about it. And then, really, we always want to make sure the service, safety, and all those things are prioritized when we do all these cost efforts, and I think we've done a great job so far of doing that. And then, finally, you know, capital is part of that as well. Capital efficiency, I think you'll see a multi-year strategy around how we get better about maintenance capital, using a lot more data, analytics to really inform our decisions out there. I think, you know, today and historically, we've replaced a lot of the railroad or a lot of track and rail based on going out there and looking at it and less based on data. And I think Mike is a data junkie. And so some of those tools and obviously with the AI and all those things that are coming our way, it's giving us more visibility. And as you can imagine, if you can extend the life of your railroad with obviously preserving safety and making sure safety continues to improve, there's huge, you know, returns, impacts. When we think about ROIC, it's a metric that is very much aligned to our compensation going forward. It's something that Steve has used previously in his career, and it's something that we talk a lot about internally. And so there's a numerator and a denominator, and if you can affect both, you're going to make a lot of progress. So that's what we're really focused on.

All right. So not much is what you're saying. So great stuff. I appreciate that. So I'm going to change subjects from kind of results to what's going on in the backdrop, but as the industry looks to potential consolidation, obviously, CP was here just arguing their view pretty hard on it doesn't need to be done, but how does CSX position itself competitively in the eastern U.S. in light of what's going on?

Yeah, I think a lot of the things that you've seen us and some of the success we've had recently has been, I think, wrongly tied to the mergers. I think the team, I was obviously part of the sales and marketing organization. Some of the things where we talk about. The southeast business on the intermodal side, that had been in the works for 18 months. So I would argue that had really nothing to do with the announcement on the merger. And, you know, we're always looking for ways to grow. And similarly, the SMX, very, you know, that was in play. That was a discussion that happened long before the announcement of the merger. And you're going to continue to see us as an organization lean into those opportunities where we can grow our volume. That hasn't changed, and nothing with the merger is going to change that, you know, our goal is there. And so we'll continue to find, we'll work with all the partners that are available to us, short lines, other class ones. If there's more volume, if there's truck conversion opportunities out there to add new service that has a return that meets our thresholds, we'll go after it. And I think you can continue to see us do that, and that strategy hasn't changed.

Let's talk about your network performance right now. You mentioned my query a couple times, but, you know, just the result of what's going on, I guess your car loads are up 4.5% quarter to date, about 200 basis points above our target. But more importantly for CSX, at last week, 132,000 car loads. That was, I think, the second or third best week since week 25 of 2018. So you're talking about eight years of, you know, catching up on carloads. Talk about what's driving that performance. Is it, you know, is it weather? Is it better ops? Is it winning share from peers? Is it, you know, now easy comps against the construction you did last year? Maybe just talk about what's going on.

Yeah, I think it's a lot. I would first tell you that Mike's not satisfied where the railroad is today. Obviously, year over year, we've had improvement, but he would say there's a lot more to do, a lot of optimism around there to continue to improve the service product, and that will lead to more wins. So you've seen a number of things that have happened. You know, post-war, you've seen the trucking market tighten. Certainly that is helping on the domestic side. We're seeing a tough comparison year over year on the international side. Imports are slightly down in our business right now, but domestically, supply, you're finally seeing that coming out of the market after, what, the worst trucking cycle that you probably witnessed in your career, and the first one certainly that I've seen. And we're seeing some of the benefits, even beyond intermodal areas like forest products, where they can make a decision daily, whether they use rail or truck, we're seeing that start to convert over to rail. And with our service product and what we're delivering, we're pretty optimistic that that can continue here. You know, there are some benefits that we're seeing from low-cost energy in the U.S. that advantages some of the chemical producers here in the U.S. globally. We've seen an initial pull in demand from the domestic customers for their domestic customers, and we anticipate that there'll be some international pull on some of those products. When we have... You know, natural gas-based production versus the world where the world is mainly oil-based. When you look at Asia and other areas, that really advantages the U.S. from a production standpoint, and we're the beneficiaries of that. I'd also say we're really optimistic. We talked about it on our earnings call on the industrial development side. And look, in this environment where you have secure energy. Low cost energy, I don't think there's a better place in the world to invest in today. Labor, you know, I call energy the new labor, right? People used to chase labor costs around the world from a manufacturing standpoint. I think they're going to chase energy costs and having secure energy, cheap energy definitely advantages our network. And we have a great, you know, the Southeast, other parts of our network in the Midwest have a great work base to handle some of those projects. So we're optimistic. We see some of those coming online and ramping up over the next year or so, end of 2027.

So when you think about some of the volume wins right now, right, you're peer in region, maybe a little discord, employees don't know what's going on, and so that might affect service. So you're winning some, I presume some relative share just given that status, right? So how do you ensure whether the merger goes through or not in a year and a half when they settle down that you don't give back that share?

Yeah, I think what we've seen a lot of it is we want to grow the pie, and I don't think, you know, we're not out there. We certainly will win with service, but we think we have a unique value proposition that we're delivering. We're not out there to undercut our service and discount the things that we're doing and all the hard work that Mike is doing. So we're out there. We're very much what you think you've seen is some depressed markets. We have some leading market share in some areas that have been hurt over the last few years. You look at the chemical. Producers, some of those, you just look at their stock price, right, year to date, what they've done. So they've benefited from what has happened in the world and their advantaged kind of supply, cost advantage versus the global producers, and we're benefiting from that. So we don't see major share shifts occurring within the rails. It's more about growing the pie and going after that truck volume.

Let me take a step back in your opening comments. You talked about kind of the underlying market. How would you define the freight environment today? Is it still uneven demand? Are you seeing more consistent recovery across some of the end markets?

Yeah, I, you know, I would call it cautiously optimistic. Coming into the year, we, you know, it was hard to tell in the first quarter, we had a lot of weather impacts that created a lot of volatility in January, February, and then coming out in March, and then we saw some better trends, probably, you know, almost across every market that we had. And when you look at our merchandise today, almost every market is in growth, with the exception of forest products, where we saw some rationalization in production last year. And obviously, there's a lot of exposure to housing there as well. So that market, while better, you've seen some sequential improvement and less negative growth, I would say. That one is still a headwind. And then I talked about the tough comps on the export side. On the coal side, you know, with utility demand, AI, all those things, we're seeing strong demand out there. We'll see if we get a hot summer. That always helps as well. But we had an unusually cold winter. That helped from a demand perspective. The unfortunate part was coal gets frozen. You can't move it as much, but we'll catch that up as well. And then the international markets, I would say, are stable. We haven't seen a real uplift there. I do think, you know, where you see Australian coal prices and where you see the US, it's the largest gap we've seen in a long time. Hopefully that converges and it converges upwards. But we'll see. We certainly don't have that in our outlook, but that's an opportunity for us too. And as well, and we have two mines, as you remember, that were down last year that are now back up. So we're seeing an incremental volume from both those mines. And so I would say internationally on the coal side, stable. And we'll see if we get some better pricing as we move in the next year.

We're going to blame the groundhog for that extended cold weather because it's not been fun up here. Talk about the culture change brought to CSX by Steve and what's different in the organization, right? Obviously, we know you've moved back to CFO and Mary Claire and to CMOC. What else do we not see that's going on?

Yeah, we have Riz Chan who just joined us. I think he's been on the job for a few weeks here on the CHRO side, so leading our human resources, that area. Talent's still a huge focus for Steve in developing talent across the organization, so very excited to work with him. He's bringing a lot of great ideas. He has some railroad experience, but he also has a lot of experience outside the industry that he's bringing to the organization and really making a best-in-class organization around how we develop people, how we think about that, how we compensate folks, all those things to align to our goals. In terms of Steve and the culture he's bringing, he continues to say, Almost every week, make the important things the important things. And it starts with delivering financial results because that allows us to do a lot of things. It allows us to invest in our people. It allows us to invest in our network. It allows us to invest in customer service and serve our customers better. And so those are the things we're focused on is as you drive financial results and you get more competitive in the market, you have the ability to go out and get more volume and grow the business. And so those are those are the things that starts with delivering results and being part of a winning culture. I think we're all excited about that. It's nice to win. It's nice to put up a good quarter and you can feel the energy around the building. Certainly, that's been that's been fun. Now we got to sustain it. Yeah, that's that's the challenge for all of us. And I think we're up for it.

So let's talk about some of those financial goals then, right? So you target revenue growth in mid-single digits. That's what you talked about. But is that solely a bump from fuel, or does that align to what you were talking about in some of the underlying industrial?

Yeah, I think largely, you know, right now it's from fuel, but there are a few markets where we've seen some better or more optimistic than we were coming into the year. I would point to chemicals. We were optimistic on the aggregate side, but we still see a very strong market there. Pipe on the metal side has been very strong. You can imagine LNG export projects, all those things with what's happening in the energy world. We're seeing a lot more activity in that area. The metals market is pretty solid. Tariffs, all those impact those markets. And then domestic coal, you know, fairly strong. Winter will go into the summer, expect that to be. Doing well. So across the board, you know, there's a volatile market out there, a volatile world. So you don't want to get ahead of yourself. So we're going to control the things that we can control and continue to focus on those things. And there's existential things that are out of our control, like energy, energy prices and those things. But it is something that, you know, at least in the near term, we see some positive trends for us.

Okay. And then let's talk about core revenues, right? So revenue per car were slightly negative in the first quarter, turned positive to low single digits in 2Q, I think was your comment. But now with fuel kind of up, maybe talk about the... Contribution of fuel versus core pricing.

Yeah, you know, we didn't actually give, you know, Matthew reminded me, we didn't actually guide yield into the second quarter. But obviously, from a fuel surcharge perspective, we will see some favorability versus where we were in the first quarter. And there'll be a slight fuel lag. Remember, on the merchandise side, two month lag that we'll experience. So this should be the last quarter where we see a significant fuel lag unless we get, you know, $150 oil and nobody wants that. But what Mary Claire said is that we expect better core pricing this year versus last year, and I mentioned that in my opening comments. It's a big focus of the team for us. We've had a highly inflationary environment over the last few years, and we want to make sure we're recovering that inflation through price.

So, you target, I guess let's take that, right? So, if core pricing is doing well, volumes are trending a little bit ahead. You target operating margin gains at the top of your 200 to 300 basis point annual target, despite pressure from higher surcharges. Maybe talk about what's leading that update, focus on costs.

Yeah, we had really great performance on PSNO and, you know, really across the board, a lot of focus across the organization and a lot of... A lot of people involved in some of those efforts, you know, a lot of focus on the energy cost. Mike put up a record fuel efficiency number in the record for first quarter, and from a fuel efficiency standpoint, we continue to see favorability there from a fuel efficiency, and there's fuel efficiency outside of locomotives. We have a lot of emphasis on our vehicle fleet out there, over 300 vehicles, trucks, and within the first quarter, we saw 20% less miles. As we focus on that fleet and the usage and utilization there. So, and now we're looking at the utility spend, right? We have a pretty significant utility spend. How do we get that down? So, it only magnifies the benefits when, you know. Energy costs are this high right now. And then, you know, I look around what Mike's been able to do and his team and Doug and Kerry and everybody around just looking at the workforce and finding opportunities to drive efficiencies on that end. I would say engineering, we're in the very early stages. We did have some leadership changes there that I think we're all excited about and what can happen on the engineering side and the value that can come. I think that's a multi-year journey, particularly around the capital, as I talked about earlier, but a lot of efficiency opportunities around how we spend dollars in that organization. And then technology is, with everything that's happening in the world and a lot of discussions, we're trying to prioritize the things that can have the most value near term. From an AI perspective and all those tools, but when you think about a network where there's a lot of unsupervised, you know, people out there working, the more tools you can to manage a network, the better we're off we're going to be. And, you know, if we can centralize some of that decision making and make the best decision for the network, those are huge. The benefits are. Very, very, very, very good. And then we're using AI on the pricing side as well and, you know, using those tools. And I know Mary Claire is working on a project. So here in early signs are very encouraging on giving us more visibility on pricing and how we go to market and being more thoughtful around that. So a lot of different categories. I think from my perspective is how do we prioritize the ones that can deliver the most value? Where is technology going? What should we be doing now with what AI can do today? And what should we do next year? Because every month you wake up and there's a new model that can do more. All those things we're trying to figure out. But it's an exciting time. Technology will unlock a lot of the future, I think, benefits that we can experience across almost every part of our business, and I don't think there's an industry that's more ripe for using some of these tools to really manage a network that's very complex.

Let me bring that in near term for a second, right? So that was kind of a good view on kind of the potential long for the year and maybe even beyond. But you typically generate 410 basis points of margin improvement from first quarter to second quarter, you know, given the robust performance in the first quarter, which was beyond targets. You know, are we looking at half that level? Can you come close to normal? Is there a guide that you've talked to in terms of relative to historical performance where you'd pan out?

Yeah, I wouldn't, you know, I think we covered this a little bit on Ernie's call, but we did have a very good first quarter. We continue to believe we'll build some of that momentum. Obviously, higher fuel prices from a margins perspective, that will start to flow through and that. Obviously, we're going to do everything we can to offset with efficiencies on fuel, but that can have a negative pressure on your margins optically there. And then we've talked about some of the other costs. Incentive comp will go up a little bit sequentially after delivering a pretty positive first quarter. And then we talked about these other costs related to the transaction. And unfortunately, we're having to pay advisors, consultants, other things to obviously give us the best perspective and a lot of smart people working on the transaction that's pending out there in the market today. So those things are nuances. We always expect second and third quarter to be our best quarters from a margin perspective. That doesn't change. That should continue. But from a sequential basis, there's a few things that we pointed out. That will hit 2Q results or level of improvement.

That's right.

Okay.

Service levels, you opened up kind of talking about how well things are running. I mean, seem to be generating pretty robust levels, velocities up 10% year over year, dwell down 6%. How directly as CFO do you see that translating into cost savings?

You know, I think, you know, I obviously got the experience in 17, 18, 19, as we ran better, the costs that just naturally drop out when you have less recruits, when you have. You know, you're using, you're utilizing your workforce much more efficiently, costs just naturally come out of that. There's, and, you know, across mechanical, even engineering, you just see costs fall out as you're running a better network. And so that will continue. We have very discrete items that we're going after. And I talked on the first quarter call, there's over 100 kind of initiatives that we have across the organization to drive cost improvement. And, you know, we're really checking a lot of those boxes today. And, you know, the other one that, you know, it's hard to measure, it's hard to put a dollar value up against it, but I know it's there, is as you run a better network overall. Cost does naturally have an ability to fall out. So the better Mike and his team perform, you'll see that cost performance come out.

Yeah. You mentioned in your last answer on the cost, AI and the potential, and also you mentioned it a couple times on coal demand and things. So maybe talk about, you know, we saw the importance of technology in the CPKC merger a year ago in the summer. How are you using AI to lower costs? You kind of threw out a couple of things. Maybe are there specific projects you would highlight so we can understand the scale and speed that you're deploying?

Yeah, I think, you know, one of the ones that Mike's particularly excited about right now is crew management, right? Managing that workforce, they're our most valuable asset, and making sure that we have the people in place to run the trains on time, all those things. Our important aspects, and there's a lot of data involved in that and understanding how the workforce is trending, you know, retirements, all those things that AI is just really ripe for. And so you can put a lot of data in there and you can get a lot of insights, you know, using Excel for that is not always the ideal tool. And so. I know Mike's probably working on it right now as we speak, but he's been pretty amazed at what the early signs and the visibility that he's gaining from using some of these tools out there in the market. And the other area, it sounds like a small, but it's actually a larger cost area for us, is how we monitor our vehicles, our vehicle fleet that I talked about earlier. We have GPS devices on there. We're really using data tools on how we maintain them. You know, we're spending, last year we spent over $13,000 per truck in maintaining and maintenance. It's a crazy number to me. How are we looking at that? Are we selecting the right vendors? Are we holding the vendors that, are we not getting ripped off? I can tell you we're getting ripped off on an oil change every once in a while. A lot of oil changes. How are we putting more tools around that that we can hold, you know, our vendors accountable? How we can hold our employees accountable for how they drive? When we first started monitoring vehicles, We had a lot of people that are driving 90 miles an hour and over. And last week we had zero. That wear and tear on the cars, but more importantly, safety, right? From a safety perspective, these things are good. And, you know, you can go after it. You can talk about it. I've seen us do this before where you go after a cost area and you talk a lot about it, and then you move on the next one, and then the costs creep back into the system, and that's the important thing that we're building these tools and this process that you don't have that those costs come back into the system. So those are two areas where we're using a lot of data, and I would say AI capability to monitor, you know, those processes and give us more insights as a leadership team and how we manage those calls.

The headcount's at just shy of 23,000. Thoughts on headcount through the year? Is it flattish despite the mid-single-digit volumes?

Yeah, I think we see opportunities. We do have some people in training, and we'll continue to replenish where we have upside in demand. But where you're seeing a lot of demand occur right now is in our manifest. So, you know, we have capacity on our trains. When you look at our train length today, Mike would tell you, almost across the board, we have the ability to grow. And so if you see, you know, some of our chemical customers go from 10 shipments a day to 12, 14, 15, you know, that's pretty easy for us to handle as a network. Well, it's easy for me to say. The ops folks probably would tell you it's not that easy, but it's easier, you know, still the same switch, still going out there, you know, getting that volume. So that's where we see the upside versus where we were today. And so that fits nicely into the network when we think about it. But I'll say on the intermodal side, it's been Carrie and her team have been phenomenal handling the additional volume that's come through our network. And obviously, with the Howard Street Tunnel opening up, we just ran a double-stack train last week. In that market, we're incredibly excited about what we can do there. We had previously outlined 75,000 to 125,000 additional loads. That will take, you know, Mary Claire will tell you, that will take. Two to three cycles in terms of bid cycles to deliver that kind of growth, but we're optimistic, and we've already seen initial wins in that area. And then you had Nadeem here a little bit earlier in SMX, right? That's another area on the intermodal side where we see a lot of opportunity to grow as they market Mexico into the southeast. That service is second to none in terms of speed and all the investments we made from a train speed and efficiency there. So we're excited about that. So a lot of growth opportunities kind of across our network right now.

What was the number of intermodal loads from the tunnel? Was 75 or?

75,125. Two, a range. Okay. Yeah, kind of given a range. And it also gives us the capability and we have a unique position in Baltimore at the port. And there's a lot of investments happening there, so you'll see. You know, from Baltimore to Chicago is the fastest route today. So we have a lot of customers that are excited about utilizing that ability and capacity.

So let me step back and, I guess, go back to CSX's misconception. I know coal has changed dramatically and some other things, but CSX used to run 7.5 million car loads about 20 years ago on an annual basis. We're targeting about 6.5 million this year. So I get call declines, PSR, elimination of equipment. Employees are down 25% from the peak, yet up 20% from the lows. How do you think about capacity availability on CSX's network in today's market, given the stuff that Mike has done, and where do you expect the flows to come from?

Yeah, you know, I think, you know, Mike would tell you, I know Mike would tell you that we have room to grow almost across every corridor that we have. And we continue to make investments in some yards that are low cost investments that continue to bring out capacity there. You know, you talk about a lot of the car loads that are down are the coal side, but we are seeing opportunities. And across almost every market, when you think about what's happened during that time period, we had to, you know, continue to have the industrial, you had offshoring on the industrial economy. I think that we're really optimistic. You know, Steve's got a lot of perspective from his previous life on the industrial gas side. And I mentioned it before, you know, I think we're hearing from customers, there's no better place to invest. Now, policy wise, and other things, we got to get out our own way and create a little more certainty, right? The worst thing. For investments is having uncertainty, but tax policy is very, very positive right now from being able to fully depreciate structures on your CapEx. You also have. The energy supply and everybody's looking for energy. You know, when we talk to, we have a great industrial development program. When we talk to customers, it's energy's first, second, and third on the list in terms of making sure that that's available. And we have opportunities across our network for that. So when I think about the trends that have occurred over the last several decades, you've had, you know, offshoring of our industrial base. You've had coal declines. I'm optimistic that a lot of these secular headwinds that have faced the railroads, particularly our network, we're uniquely positioned. Southeast is where people want to develop a lot of the projects. Midwest, we have two of, I would say, two of the three largest growth areas in the U.S. in terms of industrial. Production, Texas being the other, which we obviously don't have a position there, but we're uniquely positioned to take advantage of it. And we happen to have two-thirds of the most valuable consumers in the world on our network. So all the products want to go to where we have our railroad going. So those are opportunities for us to take advantage of. I think we have a lot of opportunities there. We've got a great sales team. Well, I'm going to go after that, but I do think some of the secular headwinds that we've faced are changing.

Okay. So let's talk about some of the financials, right? So at three times leverage, I think, give or take, right at the end of the quarter, what's your target? And CapEx was down, well, I guess your CapEx target is 2.3 billion down 20% year over year, and now it's 16% of revenues. Is that the right run rate? So two questions, one on leverage, one on CapEx.

Yeah, let me take CapEx first. There is a lot of opportunity on CapEx to get a lot more efficient. I will continue to say this. Mike is a believer. We're all a believer within the organization. We've got to do it in a thoughtful way. How do we deploy capital? Safety is going to be always the primary focus. But, you know, the way we distribute capital, we made a lot of, I got to tell you, Doug's come in there, you know, shared a lot of perspective. We've had a lot of efficiencies that we've gained already, but we're going to be really thoughtful in the next three years and how we spend capital. And we want to, you know, the more efficient we get on maintenance capital, the more we can reinvest in growth and other areas and technology and other things that make us even more competitive and allow us to go out and deliver more growth through those investments. So this is a multi-year journey. I do think there's a lot of opportunity, just as much as there is on the OE side. I would say there's on a percentage basis, there's probably even more on the capital side. And then on the leverage side, you know, we had been on, I would say, three times is on the higher end of where we would like to be. Given our success this year and our guidance, you'll see that come down pretty substantially. So we've always said, you know, the credit rating agencies like you in that two and a half to 275 times, that's probably an area where we'll operate in over the long term. So we have some debt due later this year. We'll make a decision whether we just go ahead and pay that down or we'll be opportunistic given where the interest rates are and all those things and make that decision. But a lot of opportunities. The great part is as we drive CapEx lower, have those opportunities, our free cash flow conversion. We also took that guidance up, as you will see. We have a lot of opportunity to get in the near 100 percent is always my goal. Probably won't get quite to that level, but traditionally. You'll remember in the years prior, you had 50%, 60% cash conversion on net income. We expect that to be much higher going forward, and it's a big opportunity, and the quality of earnings goes up with that, and hopefully that argues for a higher multiple over time.

So you bought back just over $220 million in the first quarter, which was double fourth quarter's level, but below $750 million in the first quarter last year. What's the right run rate? Is it a $2 billion buyback run rate?

I think we'll be opportunistic in the market. You know, we're going to continue to be in the market every quarter. But you also want to have firepower when you have market dislocations that are out of your control and be able to step in those moments. And we've done a really good job over the year. You know, we were, we updated our board on our. Buy back history, you saw that we re-upped our authorization there. And so we'll continue down the same path that we delivered over the last few years. And when you look at our average share price that we repurchase our stock at, we've been highly successful.

So you mentioned in when I asked about the operating ratio, you mentioned kind of incentive comp ramping up in the second quarter. Have you put a dollar number on on that or cost dollar number on cost coming back into 2Q?

We haven't. You know, that's a little bit of a catch-up item, and then that'll normalize through the remainder of the year.

Okay. So if I were to try to sum up here, I guess volumes trending in mid-single digits, I don't know if that's a target for you for the full year or not, but that's kind of where you're trending now a little bit well ahead of our target. So southeast growth area in the U.S., you talked about core pricing staying strong. I think you said three to four. Did you give a number on that? On the core pricing? No. Okay, so core pricing, but above inflation, you said, right? Yeah, improved year over year. Improved year over year. Costs, you're working on the 100 projects still. Did you put a $100 million number on that too, or was that just 100 projects?

We didn't put $100 million. You would expect our efficiencies this year to be in excess of that.

Okay, so 100 projects that you're still working on. I'm looking now at 27 to see what the potential future projects are. CapEx, really a big focus on controlling the costs, getting that free cash flow up, leverage, target down to two and a half times. Anything else you want to kind of highlight in that?

No, you know, again, highly focused team. We're focused on delivering results. You know, one quarter doesn't make a year, so it's still a lot of work to do. But I'm excited about all the things that we have going on. And I'll just say that, you know, I've never seen such alignment at the top in terms of the team coming together, Whether it's Mike, You know, Michael Burns from our legal department, you know, just across the board, Riz, who just came on board, and obviously Steve and Mary Claire, just, you know, we have one common goal, and we're all working together, collaborating, challenging each other, and, but I want to drive results, and it's a good start. Awesome. Appreciate being here. All right, thank you.