SKN | BMO Raises CSX Target to $41 as Freight Cycle Recovery Gains Traction

Key Takeaways

• BMO Capital Markets lifted its price target on CSX Corporation to $41 from $38.

• The Market Perform rating was maintained, reflecting balanced upside potential.

• A $670 million fleet modernization agreement with Wabtec Corporation supports long-term efficiency gains.

BMO Capital has raised its price target on CSX Corporation to $41, citing continued momentum in the freight recovery cycle. While the firm maintained its Market Perform rating, it acknowledged that the transportation sector’s rally since late 2025 remains supported by improving freight fundamentals.

Freight Recovery Still in Progress

BMO’s broader sector commentary suggests that transportation stocks are advancing in line with the natural progression of the freight cycle, which peaked in 2022. The firm believes the industry remains in a recovery phase rather than nearing another peak.

As freight volumes gradually improve, rail operators like CSX could continue to benefit from operating leverage and incremental pricing stability. The view implies that recent gains are not purely speculative but grounded in cyclical normalization.

Strategic Fleet Modernization

CSX recently announced a $670 million agreement with Wabtec Corporation aimed at modernizing its locomotive fleet. The transaction includes 100 new Evolution Series locomotives, 50 modernized units, and integrated digital performance systems.

The Evolution Series units are expected to improve fuel efficiency, reliability, and pulling capacity, particularly for long-haul and heavy freight routes. Modernizing older D9 locomotives by converting them from DC to AC traction will extend service life and enhance compatibility with newer fleet technology.

Technology and Efficiency Gains

The upgraded locomotives will incorporate Trip Optimizer with Smart Horsepower per Ton, an EPA-certified system designed to automatically adjust performance settings to optimize fuel consumption. Such technology-driven enhancements are expected to support margin stability by lowering operating costs over time.

Deliveries of the new locomotives are set to begin this year, with modernized units scheduled for rollout beginning in 2027. The phased implementation provides visibility into capital deployment and operational improvement timelines.

Valuation Context

While BMO’s higher target reflects improved freight visibility, the maintained Market Perform rating signals measured optimism. The bank appears to view upside potential as aligned with broader sector recovery rather than indicative of breakout performance.

Rail operators typically exhibit strong operating leverage during recovery cycles, but capital intensity and macro sensitivity require careful monitoring.

Outlook

CSX’s trajectory will depend on sustained freight demand improvement, fuel cost management, and successful execution of fleet modernization initiatives.

If freight volumes continue to recover and efficiency gains materialize as planned, CSX could reinforce its competitive positioning within the North American rail landscape.

For confidential discussions regarding freight cycle positioning, rail infrastructure capital allocation, and portfolio exposure to transportation recovery dynamics, our senior advisory team is available for discreet consultation tailored to institutional and cross-border investment mandates.