CSX (CSX) Q2 2026 earnings call transcript

Thank you, Audra. Good afternoon, everyone. We are very pleased to have you join our 2nd Quarter 2026 earnings call. Joining me from the CSX leadership team are Steve Angel, President and Chief Executive Officer, Mike Quarry, EVP and Chief Operating Officer, Kevin Boone, EVP and Chief Financial Officer, and Mary Claire Kenny, Senior Vice President and Chief Commercial Officer. In the presentation that accompanies this call, which is available on our website, you will find slides with our forward-looking and our non-gap disclosures. We encourage you to review them. And with that, I'm very happy to turn the call over to Mr. Steve Angel.

Good afternoon. Thank you for joining our earnings call. This quarter CSX continued to make progress toward our goal of best-in-class performance. Stronger demand led to volume growth across our business, and we managed this growth while delivering strong safety and productivity outcomes.

These results reflect the hard work and dedication of our railroaters as they serve our customers safely and reliably. For a quarter, volume increased 6% and our revenue increased 10%, reaching a new quarterly record. At the same time, we improved operating efficiency and maintained strong cost discipline, driving substantial margin expansion and double-digit growth in operating income and earnings per share.

We are proud of our accomplishments so far this year, but our objective is to build an organization that can consistently deliver strong performance over the long term. There are many areas across the business where we can improve performance, and network fluidity and service are among them. Plans are in place to address opportunities for improvement, and we expect to see steady progress throughout the quarter while maintaining our focus on profitable growth.

Our solid volume growth this quarter reflects the benefits of our commercial initiatives, network investments, and the execution of our team across the railroad.

Our priority is achieving profitable growth, not gaining market share for its own sake. I believe that industries that become too focused on market share eventually drive out profitability. At CSX, what's most important is that the business we add increases operating income, expands margins, and delivers good returns on invested capital.

Mike?

Thank you very much, Stephen. Good afternoon, everyone. The railroad made solid progress in safety and productivity this quarter, as shown on slide 5. Our team continued its consistent and disciplined approach to managing risk and controlling cost, even as the amount of volume we handle grew substantially. The strength of our safety culture is the foundation for everything we do at CSX, and our year over year safety performance was impressive in the second quarter.

Our FRA injury rate improved by 19% compared to last year, even as our base of total people hours declined by 7%. And our trade and accident rate improved by 30%. We see opportunities to build on these results through continued focus on risk awareness, field level engagement, and applied technology as we pursue best in class performance. We managed stronger than expected growth in the second quarter, with volumes increasing 6% year over year, handling this growth while experiencing seasonal reductions in employee availability, created tightness in certain areas of the network. And while our average velocity improved 3% compared to the prior year, we also saw an increase in dwell.

We're taking clear steps to improve the consistent availability of our crews, and with the effective management of resources, we expect sequential improvement in our service metrics.

Network productivity continued to increase this quarter. The metrics on the right side of this slide highlight the specific gains our team delivered. Our fuel efficiency improved a year over year for the fourth straight quarter as we improved locomotive utilization and continued to maximize the use of trip optimizer. We increased the number of GTMs we generated per unit of horsepower for the sixth quarter in a row.

Our employees were more productive, and we moved more tonnets per train compared to a year ago. Overall, our team stepped up as customers brought more business to CSX. We ran safely and efficiently, and I expect fluidity to improve as a year progresses. Kevin's now going to review our financial results, and over to you, Kevin.

All right. Thank you, Mike. Good afternoon. As both Mike and Steve noted, the CSX team delivered another strong quarter, including higher volume, record revenue, and lower non-fuel expense. These results reflect continued partnership across the business to improve safety and drive cost efficiencies while meeting increased demand from our customers. Total revenue increased 10%, benefiting from higher fuel surcharge combined with both volume, growth, and higher pricing across our merchandise, intermodal, and coal markets.

Total expenses increased by 6%, with a 2% reduction in non-fuel expenses. Putting it all together, operating income increased by 17%, with operating margins improving 240 basis points, despite 160 basis points of fuel price headwinds. This strong performance drove earnings per share growth of 23% in the quarter.

Let's now turn to the next slide for a closer look at expenses. Total second quarter expenses increased by $138 million compared to the prior year. This includes an increase of $177 million for fuel, driven by higher diesel prices, net of savings from our record setting quarter fuel efficiency. The labor cost increased by $40 million, with a nearly 90 million combined impact from higher incentive compensation and inflation.

These headwinds were mostly all set by savings from a 6% lower headcount, with declines across both management and craft employees.

G&E headcount will increase modestly in the coming months to support our service product with improved demand, while we expect to leverage process improvements in technology to absorb attrition in other areas of the business. PS&O expenses were lower again in the second quarter, with efficiency savings across each of our operating departments, as well as our G&E and technology functions.

Discretionary costs remain under intense review, and managers across the company are being empowered with tools and visibility to take action on wasteful spending and other cost opportunities. For example, spend on third-party services across our operations team was lower by $23 million in the quarter, benefiting from better utilization of our internal maintenance functions and detailed reviews of contractor activity.

That discipline also applies to our corporate functions, with savings and external technology labor, corporate communication support, and legal fees. The business also demonstrated an inability to efficiently absorb higher volumes, with a 12% reduction in our intermodal terminal costs per lift.

Moving to the third quarter, incentive compensation expense will step lower sequentially, largely all set by the 3.75% union wage increase. And within PS&O, we expect fewer property gains and insurance recoveries, as well as higher costs for locomotive overhauls in the second half relative to the first. As Steve noted, we are focused on our service product while embedding a culture of continuous improvement.

Our accomplishments here date put us in a position to invest in initiatives that drive further productivity in 2027 and beyond. With that, I'll turn it over to Mary Claire to review our revenue results.

Thank you, Kevin, and good afternoon, everyone. Before I get into the results, I want to recognize the hard work of our commercial and operation teams who worked closely together to handle volumes that exceeded our expectations.

Heading into the second quarter, we saw favorable trends emerging in select markets. What started as a narrow, supply-driven improvement in market conditions broadened through the spring, resulting in strong volume growth across the business. Customers are increasingly turning to rail for their supply chain needs, and we are focused on earning their business through competitive service offerings and reliable execution.

Turning to slide 10, I'll walk you through second quarter volume and revenue performance. Overall, total volume was up 6% in the quarter, revenue was up 10%, and revenue per unit was up 4%. Total revenue per unit excluding fuel declined 1% compared to the prior year due to mix, as intermodal grew at more than double the rate of other business units.

In merchandise, volume was up 4% year over year, while revenue grew 8%. Merchandise RPU excluding fuel was 1% higher, as solid pricing helped offset negative mix, including fuel, RPU was up 4% year over year. Strength was broad based across merchandise, with 6 of our 7 business units growing or holding flat year over year. Chemicals volume increased 8% compared to last year, supported by plastics exports and demand for waste by rail.

Metals and equipment delivered at stand-out quarter, with 14% revenue growth on 3% higher volume, driven by increased customer production and new plate mills, and favorable mix from higher military and equipment moves.

Forest product volume was flat year over year, a significant improvement from the first quarter, as conversions increased on tighter truck capacity and higher fuel costs.

Intermodal continues to build momentum, and with the largest contributor to unit growth this quarter, with revenue up 26% on 9% higher volume, and RPU up 16% year over year, driven by fuel surcharge. Our diverse domestic business drove our volume growth, as new service offerings continue to ramp, and truck-to-rail conversions have accelerated.

Faster service and expanded network capacity enabled by the Howard Street Tunnel have positioned us well to capture this business.

Finally, coal revenue grew 9% on 4% higher volume. Coal RPU increased 4%, primarily due to strong domestic contract renewals, as Hampton Roads benchmark prices were relatively stable during the quarter. Export tonnage increased 12% year over year, driven by mine restarts, and a best-ever four-month stretch of tonnage through Curtis Bay.

Domestic tonnage declined 2% as lower natural gas prices and normalized customer inventories, modestly tempered otherwise healthy demand. As we look to the second half of the year, our commercial initiatives continue to create opportunities for us to grow the business, including new service offerings, the ramp-up of industrial development projects, and investments in our Transload and Terminal network. Our opportunities to convert business to the railroad continue to grow, as tighter trucks apply and higher rates are highlighting the value proposition of rail. On the merchandise side, this is most prominent in forest products, waste, and metal.

We also expect strength and conversions to support domestic intermodal volume. Study construction activity continues to support minerals and metals, and investment tied to power infrastructure and data center build-out is driving demand in domestic coal, track sand, and heavy equipment. Agricultural exports are another area of strength, with record U. S. corn shipments through Chesapeake continue to continue through year end.

That said, we do see the potential for momentum to slow in some markets. Following a quarter of strong production in automotive, normalized inventories and summer shutdowns are leading to a softer start to the second half, ahead of new model launches in the fourth quarter. In chemicals, we expect plastics volumes to moderate, following pull forward activity in the first half.

Meanwhile, coal fundamentals remain strong. Power demand and recent plant life extensions will support domestic utility burn. New business winds are driving growth in domestic steel and industrial markets, and export volumes are expected to remain steady, benefiting from improved mind supply.

Finally, on the outlook for revenue per unit, underlying core pricing remains at or above our plan. With most of our contract renewals for the year already complete, we expect fuel and mix to be the primary drivers of our PU in the second half, as any flow through from truck rate pricing to yield typically takes time to materialize.

Overall, trends for the back half of the year remain encouraging, and we're focused on converting those opportunities into long-term growth for the railroads. With that, I'll turn it back over to Steve.

Thank you, Mary Claire. Now we'll review our updated guidance for 2026 on slide 13. Based on our results year to date and our expectations for the balance of the year, we are adjusting our 2026 outlook higher. We now expect four-year revenue growth in the mid to high single digits, operating margin expansion of greater than 350 basis points, and free cash flow growth of greater than 80%. Our outlook for capital spending remains unchanged at less than 2.4 billion.

The updated outlook reflects strong volume growth, improved financial performance, and the continued focus on productivity and cost control that you've heard about in today's call. We continue to see opportunities to strengthen service execution, improve productivity, and drive long-term efficiency across the railroad.

Those efforts remain central to our goal of delivering sustainable improvement over time. Finally, I want to thank our railroaters for their hard work and dedication this quarter. These results were made possible by their commitment to safety, integrity, and serving our customers efficiently.

Matthew will now open it up for questions.

Thank you, Steve. We will now proceed with the question and answer session. To ensure that we maximize everyone's opportunities to participate, we ask that you please limit yourselves to one and only one question. Audra, we are ready to begin.

Thanks. Thanks for the question. So, yes, if we think about pricing, we've said earlier this year and we reaffirm it today that, you know, we expect our same store sales price seems to be stronger this year than it was last year. I think as I think about our merchandise portfolio, the team recognizes, you know, the value of the service that we provide. And, you know, they're leaning in having conversations with customers and continuing to accelerate price.

I think, you know, there's a lot of obviously conversation out there in terms of truck market. We did see truck capacity tightened. I say in particularly over the course of the last couple of months with regulatory enforcement.

I'd say on the inner modal side, we're near the tail end of the domestic and our modal bid season for 2026. And I'm not, I'm not going to get into 2027 at this point. But I would say we have seen pricing accelerate in our domestic spot segment, which is a smaller portion of our business. But we've also seen it on some of our recent rail asset contract renewal.

The team is constantly evaluating, you know, what market conditions look like. And, like I said, they recognize the importance of ensuring we're getting the value for the service we provide. I do think it's important on the inner modal side to remember that not all areas of that business have the same market dynamics. For example, I tell you international, I think I've mentioned this before is heavily concentrated.

It's competitive and it's primarily contracted under long term deals. So that is not as highly coordinated to the truck market as you might see on domestic.

Kevin, why don't you take that one? Yeah, you know, I would say expenses and efficiencies are never low hanging.

There's a lot of work that goes into the efforts. Obviously coming into the year, we had a plan and we're delivering on that plan, which I'm encouraged about. And we I could say we looked outward first, you know, we're looking at all of our contractors, everything that we pay outside of the company first. And quite frankly, Mike in this team have come to the table with ideas on insourcing and we found opportunities and source activity and use our employees to do that work. And that's materializing the savings as well. And we see other opportunities there. The pipeline is robust. We're in the currently in the process of building out our 2027 plan and efficiencies, bringing the whole team together.

We obviously have targets that we're setting ourselves internally and goals there. I would say we're about halfway through that process and moving on, you know, probably a lot earlier than we normally would in any other year that I've seen. And it's really about creating the muscle. It's about creating, you know, the accountability throughout the organization ownership, you know, common goals. And, you know, from a finance perspective, it's about us providing the tools and the visibility for Mike and his team and others to really go out and get those costs and understand where where those cost opportunities are. So a lot of collaboration. We're excited. We're reviewing those tomorrow. Again, our status update and more to come on that.

I'm sure they have some competition with truck market. Like, do you think merchandise price should be accelerating as well with intermodal? And so maybe, you know, to an aggregate basis, you said that we think same store pricing better in 26 and 25. I don't, maybe it's too early to ask this, but would you think we see another acceleration in overall same store price in 27?

Yeah, thanks, Kat. So I would say, yes, I'll reiterate this year better than last year. I would say, you know, we're constantly looking at the markets and having discussions with customers. They want us to reinvest in the business. They understand inflation. I would tell you, we have seen improvement in several markets as we've gone throughout the course of the year, but too early to get into 27 at this point.

But you know, you're correct. Our service metrics aren't where we want them to be. Our locations volume was up 6% across the network and hiring some individual locations while the head count was lower than last year, but we managed through that by being safer, more efficient. And we increased our average tonnage per merchandise train by 5%. And we improved our workforce productivity. And while we were doing that, it added pressure, obviously to our service metrics. And I tell you, that's our area of opportunity and we're extremely focused on it. And it's not a structural service issue and certainly not to minimize the importance of it, but we were very productive and just not as food as we needed to be.

So the forward work is pretty straightforward for us. Food network provides reliable service at the cost that we need. And this isn't really about choosing one or the other. It's about meeting our customers needs effectively and productively. You know, we're going to keep improving on the safety and productivity gains we earned, but our goal is to create the capacity where the demand profile requires it. So that's going to include a little modest increase in our team. You had count to support that service product. However, we expect the productivity to increase.

And again, we're being deliberate about it. We aren't going to over correct and reduce the productivity. The team has really worked hard to earn. We're focused on creating the consistency that our customers need and deserve. So the bottom line that the quarter short showed that we can handle stronger volumes and do it safely and efficiently. And while we count on those two things to continuously improve, our next step is really to convert that into more consistent fluidity and service. And that's going to prepare us for productive growth. So that's what we're focused on. And I see us sequentially improving our operating and service metrics, no doubt about it.

But over to you, Mary Claire. Yeah, and I just add that, you know, the team's obviously staying very close with customers and with our operating team. Like, and I spend a lot of time together. Our team spent a lot of time together and we're constantly reviewing service. We're talking through if we see an area that is an opportunity. How do we work here together and then making sure we're staying close to the customer?

Thanks. Yeah, just to clarify, on the margin side, it does include, obviously, the results that we reported in the first half, including some of the real estate gains, as you mentioned, it wasn't 93 million in the quarter.

It was much less than that in the second quarter, but in the first half of the year, it was about that amount.

But let me take that. This is Steve. So we, any kind of head count increases very modest. And one thing that happened, I think, I think Mike covered it is, you know, the summer months are where we have a lot of vacations. And all those people in those people have really come back. So it's concentrated in just a few months. And that's right at the same time that we saw that acceleration in demand. So we kind of got caught a little bit there. But those people are back at work and, you know, any creases we're contemplating will be very modest. It will be in good shape going forward. And in fact, as you look at our service metrics today, they're definitely improving.

Given some of those cost things that you've just noted, maybe some of the hiring fuel volatility again, would you expect to see a kind of normal seasonal trend as we go through the second half of this year?

Or, you know, some of the maybe the lower hanging fruit or the heavy lifting has already been done in the first half?

No, I wouldn't say that. I think we have a lot of good initiatives that we're going to continue to carry through on the PS&O side. I think you're spot on on the labor side. The incentive comp largely will offset some of the labor increases that we have in starting in July 1 with our union labor workforce. But otherwise, you know, I think you'll see typically some of the same seasonality. I think typically you'll see third quarter, maybe a little lower than second quarter. Really, the big factor here on the margin side will be the fuel. You know, we've seen a lot of volatility in the fuel price. Certainly, we face the fuel lag in the second quarter of the year and that should go away.

But all bets are off on where the fuel could go. We saw a pretty dramatic increase this past week. But all else equal, I think we'll see some benefit quarter over quarter. And that's probably going to help our margin story a little bit as well as we move from second quarter to third quarter. So probably a little bit better than the typical seasonality when we see a little bit deterioration from an operating income perspective from second to third quarter.

Yeah, I think so. We're not going to put out a number associated with pricing, but what I would tell you is the team is closely looking at it. I think in several markets, the fundamentals have changed over the course of the last several months. And so it's something that we watch closely. We have a highly skilled team on the marketing side. They understand their markets.

They're constantly having conversations with customers and, you know, we're going to make sure that we continue to price at the value of the service and make sure that as people are looking to bring more to rail, we're taking that into account.

I would say right now, you know, we called out a couple of areas that we're watching. So merchandise and intermodal improved in the second quarter. I'd say if we think about the balance of year, the tighter truck capacity should create some additional opportunities on domestic intermodal. We take that into account as we think about balance of year and in certain areas of our merchandise portfolio. I'd say we saw probably the strongest acceleration due to truck conversion in the forest product segment in Q2 versus where we were in Q1.

You know, when I think about where, you know, we're thinking about the future. There's two areas in merchandise that were a little stronger in the second quarter than we anticipated that we're keeping our eye on. And I mentioned in the prepared remarks is chemicals and it's automotive. That's on the chemical side with the war in Iran. We saw an uptick in plastics as people were looking to pull ahead.

Inventory is now we're keeping a close eye on those. They could moderate as we get into the back half. And so that's an area we're keeping focus up against. And then on the automotive side, you know, overall automotive demand really hasn't improved. So the current outlook for a North American light vehicle production is still to be down just under 2% for the year. It was lower first quarter. It accelerated some in the second quarter. But we're watching those trends coming out of shutdown.

Some inventories are high and so we're keeping an eye on that. So that could decelerate a bit. But I think as we think about the rest of the markets, you know, there's better fundamentals we see out there now than where we saw, you know, starting out this year.

You know, when growth comes on, sometimes you find some pinch points that you weren't getting over there before. And is there any other things about it at all?

Thanks for the question, Walter. No, in terms of structural issues, no, we're always looking at our capacity and actually we're working very hard to define and make better our capacity modeling. But in terms of the network itself, we showed with the volume we brought with the exception of some locations where we were very tight on crews, we can handle it and we can handle more. So we'll continue to see to look at our demand profile and work hard to find out the capacity that we have and obviously exert everything we can out of it. But in terms of structural, no, we're in good shape going forward and that's how we see it.

Yeah, thank you. So I'd say when we think about domestic and remodal this year and longer term, we see opportunity out there. And then we go back to even a couple of years ago when we talked publicly about where we saw domestic and remodal. There's a good amount of traffic that moves over the highway that is suitable for intermodal conversion.

Certainly we're coming out of a pretty soft truck market. It's tightened pretty significantly over the course of the last several months. And we're having a lot of conversations with customers. I tell you the investments we've made in our infrastructure have allowed us to capitalize on opportunities. Probably, you know, pretty quickly over the course of the last few months.

I'm closely watching as the team goes out there and sells against Tower Street tunnel and the new connectivity that we've put in place, what that looks like on a weekly basis. We've talked about over the last couple of calls, some of the new services that we've put in place, including the partnership with CPKC on SMX. And when I look at, you know, SMX and Howard Street tunnel over the course of the last few weeks, really over the course of the last couple of months, we've seen growth week over week.

In both of those areas. And then as I look at the last couple of weeks, you know, it's adding about to a couple of points, I would say, in terms of domestic intermodal growth. And so we see additional opportunity there. How are streets pretty still pretty early for our customers? And it was later in the bid cycle when that was unlocked this year.

So as we go into the back end of this year, we go into next year, we see additional opportunity. I think as we think about, you know, placing as a hot topic today, as we think about that and going forward, you know, we're constantly watching the market, evaluating the market, not everything comes up at the same time. I talked earlier about the busy season associated with domestic intermodal and that comes into play in terms of capacity. It's a constant conversation with Mike and his team. I'd say as I think about our intermodal train, you know, they're out there running today. There's capacity on many of our trains. And so it gives us the ability to bring on business pretty quickly within that area and still be able to support it from our reliability and a consistency perspective for our customers.

I think there's good opportunity for intermodal conversion. We have a wholesale channel of sale. We work with our channel partners. We have lots of conversations with them. We also have a BCO national accounts team that talks directly with shepherds. And so we're constantly working with them, evaluating what they're moving over the road, looking at their truck load files and advising them on what are the best lanes that are suitable for intermodal conversion. And so we do continue to see opportunities there and with a tighter truck market, the value proposition that animal will provide. I think, you know, it's really strong and it will be an area of opportunity as we proceed through this year and to next.

When I think about the broader markets, I mentioned a couple in terms of automotive and plastics. What I would say is, you know, talking a little bit about forest products, you know, that's an area coming into this year. We saw the biggest headwind. I want to say that the demand is necessarily strengthen, but the supply really has. And so we do continue to see opportunities within that area as we think about tighter truck capacity out there. And then we've said many times this year about several of the other areas, the business more tied to infrastructure. So think about metals going into data centers, infrastructure investment, you know, your plate, your rebar that we continue to see strength there, expect that to to maintain and same with the minerals perspective.

So a lot of funding with IJ a lot of investment investment continuing in that area. And so we don't we don't see a material change in that going forward. We're positive about that.

I'd say that it's a very small portion of our business. So it's a small element of our domestic intermodal side, but it's, you know, it's an area that we've seen acceleration recently in terms of SMX and CPKC. I mentioned we've continued to see growth. We saw we saw good volumes as we started the program a little over a year ago. We've been very happy as we come into this year with the acceleration that we've seen already. And like I said, similar to Howard Street tunnel, there's something that is building upon itself and we're seeing growth weekend and week out. We think as we've improved the service in recent months and we've added additional lanes of service to SMX as we get into the back half of this year and start into next year's bid season, we're going to continue to see additional growth in that area.

Thank you. Yeah, I think, you know, I mentioned that fuel was the driver on intermodal RPU in this past quarter. I would say as we think about the future, I mean, truck, the truck market has just recently tightened. And so, you know, when we think about our bid season, it's not different than what you hear from some of the other large trucking companies out there, ones that reported recently and ones that will report.

You know, the bid season kicks off towards the end of the year and we start seeing pricing then and it's coming up to the kind of tail end of it right now. And so I would say the market dynamics have shifted as we've been in bid season for domestic intermodal this year. As we think about the future, there's some business we can reprice each year. There's some that is in multi-year agreements that have specific things tied to it. And so, you know, we're going to lean in as I've mentioned, but I think that's about as far as we're going to go at this point on domestic intermodal pricing.

Yeah, I mean, when I do the math, quite frankly, our incremental margins were very, very strong when you excel fuel for your overall expenses to be down 2%. And, you know, in the growth that we achieved in the quarter, that's, you know, the incremental margins I'm quite pleased with if you do that math. So, you know, as we move forward, this is a model that has a lot of fixed costs. And as we bring volume on it, and it's got to be profitable in its ports, obviously our reinvestments in our railroad, we expect to generate powerful incremental margins. And so I think you did see that in second quarter if you do the math and look at the fuel impact that occurred.

And moving forward, obviously that net fuel impact will be less going forward. So won't be as quite of a headwind as we saw in the second quarter, but C line of sight, so strong, powerful, incremental margins. It's a cost discipline. Obviously, as we build take on the volume, not all volume is created equal to your point. So we're looking for volume that supports our reinvestments and returns an invested capital as a real focus for this team.

You know, relative to what you were thinking when you came in and accepted this role, you know, where do you still think there is a lot of opportunity to do things differently. And an old economy established industry and where maybe have you sort of given up where there's too much friction or just processes that are too ingrained to really change? Thank you.

Well, I would say as a 10 month veteran, I'm encouraged about the progress we've made and really what we have ahead of us. And I always think of it in terms of, you know, there's opportunity to improve everything. And I've always found that to be true. And, you know, in operations, I think it's probably a never ending endeavor to continue to improve operations. And, you know, my core is a 40 year veteran. He knows all about it. And I'm always amazed how much he knows about the railroad railroads and how to operate the railroads. And, you know, there's always going to be an opportunity to improve that. And, you know, we talked about that a little bit today.

Some of the things we're doing to improve pricing, you know, Mary Claire was had to answer about 18 pricing questions today. And, but I really think, you know, that's a muscle we're building. I think we're getting better every day at that, you know, building price management capabilities. She's all over it. This is an area where AI can really do some good with good price analytical tools so we can get a little better at that. I always think about pricing in terms of, you know, making sure that we, you know, understand the value we're providing the customer. What is the value we're providing?

What is their next best alternative? Are we earning good returns? You know, do we have the capacity to serve? And all that goes into those decisions and you make those decisions surgically. You know, it's not a blanket, you know, we're going to do X percent price across this segment of the market. You know, those are all surgical decisions. And of course, we want profitable business. We want good returns on on capital, as Kevin said, and continue to reinvest the business. I think on the productivity side, Kevin talked a lot about that. Mike did two to some degree, and I think there's a lot of opportunity on the productivity side. I think, you know, we obviously the team responded great, you know, so far this year.

But as we look at, you know, we're talking about 20. And he's probably working on 27. We'll be talking about benefits that will carry forward to 28. So, you know, it's really all about, you know, building that productivity muscle. And I think that's, you know, that's an opportunity for improvement. But, you know, all businesses, you know, great businesses have opportunities for improvement, and we're no different than anyone else.