Earnings call transcript: Norfolk Southern Q3 2025 results show mixed performance

Norfolk Southern Corporation reported its Q3 2025 earnings, revealing a mixed performance with earnings per share (EPS) of $3.30, slightly surpassing the forecast of $3.20. However, revenue slightly missed expectations, coming in at $3.10 billion against a forecast of $3.11 billion. The company’s stock saw a 2.82% decline in after-hours trading, closing at $280.50, compared to $288.63 before the announcement. This reaction reflects investor concerns over revenue shortfalls despite the EPS beat.

Key Takeaways

• EPS of $3.30 exceeded expectations, forecast was $3.20.
• Revenue slightly missed, reported at $3.10 billion against $3.11 billion forecast.
• Stock dropped 2.82% in after-hours trading post-announcement.
• Intermodal market facing challenges, impacting volumes.
• Efficiency targets raised to $600 million for 2025.

Company Performance

Norfolk Southern demonstrated resilience in Q3 2025, with a slight increase in revenue year-over-year by 2%. The company improved its operational efficiency, achieving a 5% gain in fuel efficiency and a 3% increase in train speed. However, the intermodal market’s challenges, including an oversupply of truck capacity and weak coal export prices, have pressured volumes.

Financial Highlights

• Revenue: $3.10 billion, up 2% year-over-year.
• EPS: $3.30, surpassing the forecast of $3.20.
• Adjusted operating ratio: 63.3%.
• Gross ton miles increased by 4%.

Earnings vs. Forecast

Norfolk Southern’s EPS of $3.30 beat the forecast by $0.10, marking a positive surprise. However, revenue fell short by $10 million, leading to a negative surprise of 0.32%. The EPS beat reflects strong cost management and operational improvements, but the revenue miss highlights ongoing market challenges.

Market Reaction

Following the earnings announcement, Norfolk Southern’s stock declined by 2.82% in after-hours trading, indicating investor concerns over the revenue miss despite the EPS beat. The stock’s performance remains within its 52-week range, with a low of $201.63 and a high of $302.24. The decline aligns with broader market trends, where revenue misses often trigger negative sentiment.

Outlook & Guidance

The company has raised its 2025 efficiency target to $600 million cumulative, indicating a focus on cost management. Norfolk Southern anticipates Q4 costs between $2.0 and $2.1 billion and continues to face revenue challenges. The company is preparing for potential integration with Union Pacific, which may impact future performance.

Executive Commentary

CEO Mark George emphasized the company’s commitment to fighting for every available unit and dollar, stating, "We are going to fight like hell over every available unit and dollar." He also highlighted the importance of safety and service, saying, "Safety and service are of paramount importance." COO John Orr added, "Our customer-facing composite standards are extremely high," underscoring the company’s focus on maintaining quality.

Risks and Challenges

• Intermodal market challenges due to truck capacity oversupply.
• Weak coal export prices impacting revenue.
• Potential integration challenges with Union Pacific merger.
• Trade and tariff uncertainties affecting import demand.
• Pressure on maintaining operational efficiency amid market challenges.

Q&A

During the earnings call, analysts inquired about the company’s strategy for retaining customers amid merger uncertainties and its approach to cost management and productivity. Executives detailed plans to maintain customer relationships and improve operational efficiency despite market headwinds.

Full transcript - Norfolk Southern Corporation (NSC) Q3 2025:

Conference Operator: Good afternoon, ladies and gentlemen, and welcome to Norfolk Southern Third Quarter twenty twenty five Earnings Conference Call. At this time, all participant lines are in a listen only mode. Following the presentation, we will conduct a question and answer session. And I would like to turn the conference over to Luke Nichols, Senior Director, Investor Relations. Please go ahead.

Luke Nichols, Senior Director, Investor Relations, Norfolk Southern: Good afternoon, everyone. Please note that during today’s call, we will make certain forward looking statements within the meaning of the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995. These statements relate to future events or future performance of Norfolk Southern Corporation, which are subject to risks and uncertainties and may differ materially from actual results. Please refer to our annual and quarterly reports filed with the SEC for a full discussion of those risks and uncertainties we view as most important. Our presentation slides are available at norfolksouthern.com in the Investors section along with a reconciliation of any non GAAP measures used today to the comparable GAAP measures, including adjusted or non GAAP operating ratio.

Please note that all references to our prospective operating ratio during today’s call are being provided on an adjusted basis. Basis. Turning to Slide three, I’ll now turn the call over to Norfolk Southern’s President and Chief Executive Officer, Mark George.

Mark George, President and Chief Executive Officer, Norfolk Southern: Hey, good afternoon, and thank you for joining us. With me today are John Orr, our Chief Operating Officer Ed Elkins, our Chief Commercial Officer and Jason Zanpe, our Chief Financial Officer. We delivered another quarter that demonstrates the team’s ability to deliver a quality railroad. Throughout the year, we have highlighted our continued commitment to focus on what we can control, running a safe, efficient network, improving processes, delivering solutions for our customers’ most pressing needs and supporting our people. That remains the approach today of our 20,000 thoroughbreds who deserve thanks and credit for our performance.

On safety, our train accident and employee injury rates continue to improve. That’s the result of disciplined execution and continued emphasis on training. Safety is a core value and we will never compromise on it. On service, our network is running well. Terminal dwell and car velocity remains stable and we once again saw fuel efficiency gains, attaining a new quarterly record.

These improvements are integral to delivering reliable, high quality service for our customers and they position us to sustain performance over the long term. Safety and service together form the foundation of our ability to serve customers at the highest level. And what truly powers this progress is our people. Across the railroad, the Thoroughbred team shows up every day with focus and determination. We are committed to building the next generation of railroaders because careers in rail continue to be among the best in the country.

As we noted at recent conferences, the third quarter volume surges forecasted by partners didn’t materialize as expected and the truck market remains oversupplied. Ed will detail this. So while revenues were short of where we expected, the continued success on productivity was evident in the quarter. We also had a large land sale at the end of the quarter that helped neutralize other adverse impacts that Jason will cover. While not big in Q3, we started to see some of the revenue erosion from competitor reactions to the merger announcement.

We expect the impact to grow in the fourth quarter and continue to be a challenge over the near and medium term. As we make progress toward getting approval for the proposed merger with Union Pacific, our focus remains squarely on ensuring momentum on safety and service, while executing on our strategy and delivering for our customers. We’ve got a lot to be optimistic about. We’re on a good path and we’re doing what we can on the controllable side to prepare for growth. I’m proud of the progress we’ve made and I’m even more excited about what’s ahead.

With that, I’ll turn it over to John and the rest of our leadership team to walk through the quarter in more detail. John?

John Orr, Chief Operating Officer, Norfolk Southern: Thanks, Mark, and good afternoon, everyone. Turning to Slide five. I want to recognize the deliberate transformation Norfolk Southern has delivered in safety, service and cost structure from 2024 and throughout 2025. This progress reflects a culture of accountability and disciplined execution, powered by generational leadership investments that position us for long term success. We’re creating a network that is safer, more reliable and more efficient, shaping the future of rail and setting the standard for what rail service can and should be.

Our PSR two point zero transformation is delivering measurable outcomes that matter to every customer and stakeholder. For example, Amtrak host delays across Norfolk Southern improved 26% year over year, underscoring our progress and unwavering commitment to precision, reliability and the standards that define Norfolk Southern. In Q4, we’re going live with Clarity Camps, the next cornerstone of the Thoroughbred Academy. The curriculum elevates PSR two point zero business excellence. And importantly, as we transform safety and service standards, we’re simultaneously delivering productivity gains, creating a clear and steady direction across the organization.

All these efforts are aligned to our broader commitment to deliver meaningful expense controls, while operating a reliable and more resilient railroad. Relative to twenty twenty four’s full year results, our year to date safety figures demonstrate FRA personal injury ratio has improved 7.8% and our train accident ratio has improved 27.7%. Our team will never be satisfied with results. We always strive to improve on our best performance. That’s why my team and I are spending more time in the field this quarter, staying close to the work, staying close to our people and staying focused on what drives results.

Turning to Slide six. We achieved stronger service and volume growth this quarter, while operating with fewer assets and resources. That discipline is clearly reflected in our financial outcomes. GTMs increased 4% year over year, which were accurately delivered with 6% fewer qualified T and E. Our revolving zero based train service plan continues to drive cost control, precision and productivity.

Key highlights include a 19% reduction in regrews, a 12% decrease in intermodal train starts since the beginning of the year, alongside a sequential improvement in intermodal service composite and a 5.5% merchandise carload growth. Turning to Slide seven. These results reflect decisive actions to balance quality service and efficiency. We’re on track to exceed our expense reduction and broader financial commitments. And we’re not stopping there.

The team is stretching for more, raising our efficiency targets to a 2026 cumulative goal in the range of $600,000,000 Operational metrics confirm the effectiveness of our fuel management strategy, which delivered an all time quarterly record of 1.01, a 5% year over year gain. This reflects both immediate savings and a durable path to greater efficiencies. Sequentially, train speed rose 3%, allowing us to store more locomotives while running a leaner, more reliable fleet. Turning to Slide eight. Rapid deployment of next level field technology is part of a broader strategy to transform inspection, reliability and overall performance.

In the photos, you can see a new state of the art wheel integrity system being installed near Burns Harbor, one of our busiest quarters. We’re advancing machine vision at speed across our network. In the quarter, we deployed a new inspection portal in Virginia, bringing the total now to eight. We positively identified over 40 wheel integrity defects. And we’ve launched six new algorithms with nine more already in development.

The data from these field technologies feed our war room that are staffed with craft employees, managers and senior executives, facilitating real time problem solving and cross functional collaboration. We’re leveraging digital tools, operational analytics and ecosystem level coordination to elevate our capabilities and operation and safety excellence. Wayside stops are down 6.7% year over year and 36% year to date, even as we inspect 5% more axles daily. This quarter reflects that our operational fundamentals are sound and are supporting a strong service offering. This is made possible by the commitment and resilience of our railroaders across the entire enterprise.

At Norfolk Southern, results matter and our people continue to deliver with confidence and momentum. With that, I’ll turn it to you Ed.

Ed Elkins, Chief Commercial Officer, Norfolk Southern: Thanks much, John. Now let’s go to slide 10, where you’ll see that we achieved 2% year over year growth in both revenue and RPU in the quarter. We see several dynamics at play in the business portfolio. We have strength within our merchandise markets, partially offset by meaningful declines in export coal markets. We see reduced fuel surcharge revenue and softer than expected intermodal volumes.

Overall, our volume for the third quarter finished flat despite gross ton mile growth of 4%. Let’s look inside of merchandise. Volume grew 6% from a year ago driven by our auto, chemical and metals and construction Revenue less fuel grew 7%, which underscores our pricing discipline and our volume performance. However, we had mixed headwinds from growth in commodities such as natural gas liquids, sand and scrap metal, which diluted our overall RPU performance. In intermodal, we’re navigating the complexity of ongoing trade and tariff uncertainty, persistently abundant highway truck capacity and outside factors including competitor responses to our merger announcement, which caused volumes to decrease two percent.

Intermodal revenue less fuel and RPU less fuel both grew reflecting the overall stable pricing environment right now. Now here I have to note that year over year comparisons benefited from an abnormally high volume of empty shipments ahead of the East Coast port disruptions last year. Let’s turn to coal where weakening seaborne coal prices drove RPU less fuel lower by 7% and this was the most significant revenue headwind for the quarter. We enjoyed stronger demand in our utility segment, but it didn’t offset the sustained weakness in export. This interaction has been playing out throughout the year and we expect it to persist.

Let’s go to slide 11 and talk about the market outlook. Like the third quarter, we continue to navigate a dynamic economic environment along with competitive cross currents. For our merchandise markets, we forecast vehicle production will be challenged in part due to recent disruptions at a key material supplier to our customers. We expect this will have a meaningful impact to production at several NS served automotive plants in the fourth quarter. At the same time, overall manufacturing activity remains mixed with output expected to grow despite the backdrop of trade and tariff uncertainty.

Strong fracking activity in the Marcellus Utica Basin is supporting demand in NGLs and sand in our merchandise markets. Looking into our intermodal markets, we expect softer import demand in the near term. This reflects the impact of tariff volatility and growing trade pressures. Warehousing capacity remains tight as inventory levels expanded at the beginning of the year ahead of tariffs and truck capacity remains oversupplied. Coal prices have remained pressured with significant uncertainty surrounding export trade.

And at the same time, we’re expecting utility demand to see continued support from growing electricity demand and lower existing coal stockpiles. Now, these dynamics should be considered against the backdrop of our recently announced merger, which has intensified competitor activity across the industry. And as a result, we anticipate volume pressure, particularly in our intermodal segment. And so we’re maintaining a cautious outlook for the remainder of 2025. Lastly, as always, we want to thank our customers for their continued partnership and business.

The entire NS team is aligned around delivering the service that our customers need every day, building trust as a vital partner in their supply chains. Now with that, I’ll hand it over to Jason to review our financial results.

Jason Zanpe, Chief Financial Officer, Norfolk Southern: Thanks, Ed. I’ll start with the reconciliation of our GAAP results to the adjusted numbers that I will speak to today on Slide 13. Total costs attributable to the Eastern Ohio incident were $13,000,000 which included $16,000,000 of recoveries under our property insurance policies. In addition, we recognized a $12,000,000 restructuring charge in the quarter as we continue to rationalize our technology projects. Finally, we also recorded $15,000,000 in merger related costs, consisting primarily of legal and professional services as well as employee retention accruals.

Adjusting for these items, the operating ratio for the quarter was 63.3%. And from a bottom line perspective, we earned $3.3 per share. Moving to Slide 14, you’ll find the comparison of our adjusted results versus last year and last quarter, both comparisons reflecting a 10 basis point improvement in the operating ratio and a sequential comparison basically even with the current quarter. On a year over year basis, revenue was up as Ed just discussed, but we were expecting approximately $75,000,000 more revenue as we had guided to within the second quarter materials. Continued macro headwinds, a surge that never materialized and competitor responses from the merger announcement that started to really ramp up at the end of the quarter, all were barriers to the attainment of that expectation.

Expenses were up 2% on a 4% increase in GTMs, but there are a lot of puts and takes within OpEx. And those year over year expense drivers are laid out on Slide 15. You’ll note that the quarter benefited from higher land sales, which were $65,000,000 more than last year. In fact, the entire variance was driven by one large sale that closed at the very end of the quarter. Another quarter of strong productivity gains also helped to mitigate both inflationary and volumetric pressures in addition to the absence of benefits recorded last year in the form of cancellation of stock awards and fuel recoveries.

I’d also point out that claims expense was elevated in the quarter despite the outstanding progress we’re delivering on our safety initiatives as we react to unfavorable developments on claims from several years ago in addition to claims inflation on a few incidents that we have experienced this year. So as I think about our 63.3% operating ratio for the quarter, clearly that was aided by outsized land sales. However, we were short on revenue from our latest guidance and we dealt with higher claims expense than what we had been experiencing. And as we move into the fourth quarter, revenue will continue to be challenged, but we are focused on what we can control and we expect to maintain our cost structure in the $2,000,000,000 to $2,100,000,000 range. I’ll hand it back to Mark to wrap it up.

Mark George, President and Chief Executive Officer, Norfolk Southern: Thanks, Jason. As you can see, there were a lot of moving parts in the quarter, but as a Thoroughbred team, we are successfully controlling the controllables. Looking ahead, macro environment remains uncertain and we acknowledge that over the next several quarters unpredictable demand and unique competitive dynamics will create some abnormal fluctuations in our top line. We are not standing still. Our recent Louisville announcement will create attractive volume growth as it builds out.

Additionally, once the merger closes, we can provide attractive solutions for our customers, unlocking faster, more reliable service, streamlined shipping experiences and expanded access across a unified coast to coast rail network. These improvements will strengthen our value proposition and help drive long term growth in our combined railroad through highway conversion. While the regulatory review process is ongoing, we remain laser focused on maintaining strong safety performance while running a fast and resilient network. That is delivering great service that our customers have now come to expect from us. Meanwhile, we will continue to maintain a sharp focus on optimizing our cost structure.

As you saw in John’s section, we are making excellent progress on the productivity front and are raising our twenty twenty five efficiency target to roughly $200,000,000 and this follows the nearly $300,000,000 we achieved in 2024. I am really proud of our team for the work they’ve done on this. And while revenue in this environment is proving difficult to guide, you can expect that our fourth quarter cost in absolute dollars will be in the 2,000,000,000 to $2,100,000,000 range. So with that, let’s open the call to questions. Operator?

Conference Operator: Thank you, sir. First, we will hear from Scott Group at Wolfe Research. Please go ahead, Scott.

Scott Group, Analyst, Wolfe Research: Hey, thanks. Afternoon. So Ed, if I heard right, I think you said a two point drag in Q3 from some business losses related to the merger. And it sounds like it gets worse going forward. Is this just intermodal?

Are you seeing it any other places? And ultimately, how much business do you think is at risk until we see merger closing?

Ed Elkins, Chief Commercial Officer, Norfolk Southern: Hey, thanks for the question, Scott. We saw that start to really manifest itself toward the tail end of the quarter, call it September. And so it’s going to manifest itself to wrap around a year over year. It’s a minority of certainly a minority of the business and it’s really focused geographically to this point in the Southeast. We’re working really hard to do two things.

Number one, to make sure that we’re providing a fantastic service for everybody that wants to use this. And number two, we’re really leveraging the network that we have, the route structure and the terminal structure to bring freight back to Norfolk Southern that may have left for whatever reason. And so I’m pretty confident that yes, while this is going to be a headwind for a while going forward, over the next couple of bid cycles, you’ll see it start to iterate itself back toward what I would call the high value, low cost solution, is Norfolk Southern for the beneficial cargo owners.

Mark George, President and Chief Executive Officer, Norfolk Southern: And that’s independent of a merger Scott.

: Yes. And

Scott Group, Analyst, Wolfe Research: then maybe just Jason, I think that the $2,000,000,000 to $2,100,000,000 of cost, it’s a relatively wide range on a quarterly basis. Any sort of more help in terms of where you think we could be in that range in Q4? I don’t know is maybe the right way to think about is excluding the gains was a 65.5% OR in Q3. Do you think that gets worse in Q4? Just any thoughts there?

Thank you.

: Yes. Thanks Scott. So when I

Jason Zanpe, Chief Financial Officer, Norfolk Southern: think about the expense profile going from third quarter to fourth quarter, as you mentioned, you’ve got to kind of normalize for those outsized land sales that we had in the third quarter. And then historically, as we move from third to fourth quarter, if you look at the five year average expenses are up about one percent point And that’s kind of really what brings us into that $2,000,000,000 to $2,100,000,000 range, so kind of moving with that seasonality. A couple of drivers that I’d point you to. We’ve talked about headcount in the past, guided you to the fourth quarter twenty twenty four exit rate, which is about 19,500. We’re a little bit below that in third quarter.

So that should step up a little bit as we move into the fourth. Depreciation expense always steps up as we move into the fourth quarter as we get more capital work done and get those projects in service. And then finally, we’ve talked a bit before about what we’ve done on a technology front and we’ve really gone to that managed services model. So you’ll see some higher purchase services expense in the fourth quarter that are being driven by that. Eventually you should see that come out of comp and ben, but it will definitely be a driver in the fourth quarter.

: Thanks Scott.

Scott Group, Analyst, Wolfe Research: Thank you guys. Appreciate it.

: Thank you.

Conference Operator: Next question will be from Brandon Oglenski at Barclays. Please go ahead, Brandon.

Luke Nichols, Senior Director, Investor Relations, Norfolk Southern0: Hi, good afternoon. Thanks for taking my question. Maybe it’s for Mark or John, but how do you guys think about managing the cost structure in this environment where maybe there’s some share loss and obviously some headwinds just given the trade environment, especially as you look out further, if the deal gets approved, then maybe you want to maintain some excess capacity as well. So how do you balance these different needs as you look out over the near term and medium term? Thank you.

Mark George, President and Chief Executive Officer, Norfolk Southern: Yes, great question, Brandon. I think you’re right. We’ve got to be really careful how we address this. I mean, as you see, we have been trading down a bit and driving some productivity with regard to moving 4% more GTMs this quarter, while we saw headcount kind of drift down 3%. So that’s a 7% spread.

We’re really happy with that outcome. And we’re seeing actually better service and better safety performance while we do it. So we’re going to be really careful here. And I think John, maybe you can talk a little bit about the next step of cost reduction. But the other element I’d point you to Brandon, we continue to focus on fuel efficiency, where we had a 5% gain year over year in fuel efficiency from all the initiatives that John’s put in place.

So we continue to get these mid single digit improvements in fuel efficiency. So labor productivity, fuel efficiency, we’ve been attacking purchase services, although we are making a deliberate shift to outsource some stuff in IT that will yield benefits in comp and bend. So that’s why it’s little bit of an odd quarter because you do see zero volume growth on the carload side, but there is actually GTM growth. So that does require resources. And also remember, 18% growth in autos, 18% growth in autos this quarter year over year, huge growth.

And that of course has some incremental volumetric costs that come with it that you’d see manifest in equipment rents. So those are the kind of things where it’s a complex P and L. We’re going to be really mindful of really trying to drive those areas for productivity and efficiency, while not undermining our ability to move volume at all. But John, chime in please.

John Orr, Chief Operating Officer, Norfolk Southern: Yes. Mark, you’re speaking like an operating Chief Operating Officer with all the detail, gives me the chance to talk a little high level. So I appreciate that. Let’s just start with the fundamentals. We’re moving more volume with more yield on our trains, slightly heavier trains with less crews and more overall fluidity.

So using that train speed that we’re generating to reduce our locomotive fleet, increase our car miles per day, decrease the number of cars it takes to create a load and doing all those fundamental things that show through to the customer and give Ed the chance to sell aggressively in whatever market he’s in at the time. So those fundamentals are very sound. We have restructured a number of things, including how we manage fuel, which is showing through in sequential fuel improvement and flowing through to the bottom line. But it doesn’t stop there. We’ve restructured how we hire people, the speed to and the quality to which they enter the workforce.

So that gives us the opportunity to be more responsive, even longer lead resources and assets. So we’re ready for those things. And we’ll continue to improve locomotive fluidity by revamping our train service plan. I’ll just say that our zero based plan version three has just come out. And year to date, we’ve reduced our annual crew starts by 14%.

Our shipments per crew start have improved by 11%. We’ve simplified our lean offerings and our blocking complexity. And as a result, we’re really energizing how we service that product and delivering it with more resilience and capability. So that’s what gives me confidence. So we’re going to not only stretch ourselves this year and the remainder of the year in that overall cost takeout and that financial improvement from an operating perspective and overall enterprise perspective, but even continuing that momentum into 2026 and stretching ourselves in the range of $600,000,000 cumulative takeout.

So it’s going to be hard work, which is in our DNA and we’re ready for it.

: Thank you. Thank you both.

Conference Operator: Thank you. Next question will be from Jonathan Chappell at Evercore ISI. Please go ahead Jonathan.

Luke Nichols, Senior Director, Investor Relations, Norfolk Southern0: Thank you. Good afternoon. Ed, you mentioned in your prepared remarks that the coal RPU was one of the single biggest impacts on revenue and you also said you expect the headwinds to persist. If we look at export benchmarks and even your Eastern period last week made it seem like the coal RPU pressure would stop at least sequentially, maybe you’re referring to year over year. Can you give us any sense to how much that may continue to step down from the third quarter level?

And when you think that that headwind may begin to stabilize?

Ed Elkins, Chief Commercial Officer, Norfolk Southern: I think you got that right. And thanks for the question, so I can clarify. I think the export benchmark is something like 175 right now. And I don’t necessarily anticipate any material degradation from that. So on a sequential basis maybe go sideways, which on a year over year basis is still double digit down.

Same is true on the utility side for export, probably going sideways, but still on a year over year basis double digit down. And I think that’s going to persist certainly through the quarter and maybe in early next year before it hopefully starts to climb out. There’s a lot of uncertainty around export coal when it comes to both the met and utility side, who’s going to get it or who’s going to take it and where it will come from. So we’re keeping a really close eye on that. Thank you.

Luke Nichols, Senior Director, Investor Relations, Norfolk Southern0: Great. So that revenue headwind and mostly volume, we should stop looking for RPU deterioration overall?

Ed Elkins, Chief Commercial Officer, Norfolk Southern: It will persist year over year. Yes. Year over year RPU deterioration will continue. Sequentially, it should be pretty stable. This quarter we did start to see volume degradation as a result of the poor pricing environment.

Luke Nichols, Senior Director, Investor Relations, Norfolk Southern0: Got it. Thanks a lot Ed.

Conference Operator: Thank you. Next question will be from Tom Wadewitz at UBS. Please go ahead, Tom.

: Yeah. Good afternoon. Wanted to ask a little more on the topic of the competitive responses. I guess, the kind of name that comes out and seems most prominent in intermodal would be J. B.

Hunt. And I just want to get a sense if you could help us think about to the extent that BN is going to exert some control here and push more business over to CSX. How much of the business do you think should sticky to Norfolk? I recall back quite a long time ago, had some corridor initiatives that I think are differentiated like the Crescent Corridor, just lines that maybe CSX isn’t going to serve markets as well. So I just want to see if you have some high level thoughts on what can make business with JB or intermodal in general sticky in terms of network differences?

And how much kind of risk is there of kind of BN forcing some business over to CSX? Thank you.

Mark George, President and Chief Executive Officer, Norfolk Southern: So, I think we talked about it before that more than half of our business with J. B. Hunt originates and terminates here in the East. And we continue to provide a really excellent service product to them and we feel comfortable and confident with that, retaining that business. I think for the balance and particularly in certain geographies perhaps in the Southeast, that’s really what’s at risk right now that Ed can go in and talk about.

But I just want to reemphasize that one thing. About two decades ago, we started investing hundreds of millions of dollars to build out our intermodal franchise. We built out that Premier Corridor and the Crescent Corridor, we built terminals and we have an unrivaled intermodal franchise in the East. And it’s a franchise that people want to be on because it provides the fastest route for the major markets, and with a terminal footprint where customers want it to be. So with time, cargo owners are going to want that business back on the NS, And we are going to work aggressively to help them get that cargo back on the NS.

So Ed, please chime in.

Ed Elkins, Chief Commercial Officer, Norfolk Southern: Well, gosh, think you’ve pretty much summarized it, but let me say this. There are a number of key lanes where Norfolk Southern offers exceptional value for customers that really can’t be replicated anywhere. There’s I would say this from experience, there’s a reason why we have the second largest intermodal franchise in North America and it’s because of the superior route structure that we’ve built out that Mark just referenced. And also a terminal network that gets you with your freight landed closer to the consumer than any other network out there. So there’s lots of things that can happen in terms of pushing freight around that what I would call be unnatural.

But over time, we’re very confident, John and I are that we put our heads together, make sure our service is exceptional the way it is now. We continue to partner with the right folks. We’re going be in good shape.

: So I guess one component of that as well is just that CSX has had this major construction project and debottlenecking with their Howard Street tunnel. And so that makes them a lot more efficient North South along the East. Is that like is that a significant competitive impact? Or do you think that’s not that’s kind of a impact on a modest portion of your domestic?

Ed Elkins, Chief Commercial Officer, Norfolk Southern: I can’t really comment on that project for them. Hope it makes them a lot more competitive with truck.

: Right. Okay. Thanks for the time.

Mark George, President and Chief Executive Officer, Norfolk Southern: Thank you, Tom.

Conference Operator: Next question will be from Brian Asenbeck at JPMorgan. Please go ahead, Brian.

: Hey, good afternoon. Thanks for taking the question. First, just a quick follow-up maybe for Ed. I think you mentioned that, that business and we’re talking about here, it would come back to the network even without the mergers. Maybe you

: can just

: elaborate exactly what would have to change if it’s better service or competing more on price. And then this may be for on the upside for John. When you think about fuel efficiency, we’ve always heard it was going to be a challenge at Norfolk because of length of haul and mix and bunch of other things, weight. But it looks like you’ve clearly broken through. Is that something you feel like you can get to sort of best in class levels with your peers?

Some more thoughts on that would be helpful. Thanks.

Ed Elkins, Chief Commercial Officer, Norfolk Southern: I’ll go first before I forget the question. When I think about service from the West Coast into the Southeast, I think about UP and NS utilizing the Meridian Speedway as the fastest shortest route between those two regions, period. There’s not a better ride out there when it comes to that kind of freight for intermodal. So that’s one thing. The second thing is the exceptional amount of terminal capacity that we have and expertise to back it up both in the Carolinas, Florida as well as in Georgia.

That’s just going be a force multiplier and has been. So we’re confident that over time cargo owners are going to make the right decision about where their freights routed. I’ll hand it off to you John.

John Orr, Chief Operating Officer, Norfolk Southern: Well, I’m glad you’re noting the hard work the team has done on fuel. And I won’t comment on what the art of the possible may have been thought through back then, but I’ll tell you right now And as we go forward, it’s a big part of a strategy that includes all of our strategic sourcing and logistics approach, including the assessment of distribution, use and consumption of the product like fuel. And the current efficiency represents significant dollar value. And if you look at the mosaic of measures that we present to you all, we’re balancing speed, locomotive productivity, the fuel burn. We’re looking at it not how fast can we go just to get faster and to get to point A to point B quicker.

We will, if that means we can use a crew at the end of that trip to use them within the yard and save money somewhere else. But as we as we work through fuel consumption, we wanna make sure that how we how we manage our fuel resources is aligned to what our train service plan is. And we’re always looking at that service plan. We’re taking more detailed approach on each element of it. What resources we need, how much fuel we need to move the tonnage, how soon we need to get to a customer.

So on a product level view, we’re satisfying the contractual obligations and elevating our service metrics and how they face the customer. And we’re taking that the nice thing is we’re taking that approach in mechanical, how we service our locomotives, how we maintain our parts inventory, how we’re putting stress on our engineering team through Ed Boyle and his great leadership in managing ties, plates, rail, ballast, all of those things. So across all of those things, whether it’s fuel and operational resources, we’re taking a really hard line approach on it. So I think we’ve got room to grow on fuel. I don’t have any end insight to the value we can create managing all of those components.

But I can tell you it’s the tip of the iceberg as we move forward against all our enterprise resources.

Mark George, President and Chief Executive Officer, Norfolk Southern: And I would just add one other thing, Brian is, when I look back six years ago when I came in, we had roughly high teens percent of our locomotive fleet that was AC. And through those investments that we’ve been making every year systematically to upgrade our locomotive fleet from DC to AC, we’re now approaching 80% AC. So that is definitely helping provide more runway for the future that John is extracting using the methods that he’s talking about. So that definitely is a driver as well. Right?

John Orr, Chief Operating Officer, Norfolk Southern: Yeah. And that gives us that gives us the, you know, just The runway. I just look at 02/2019, which was one of the bellwether, you know, years from a financial Mhmm. And service perspective. And right now, we’re we’re running year to date 23% less horsepower per ton.

When you have that discipline in managing locomotives, the utilization of your power, your crews, you’re reducing your stops, you’re creating more fluidity, it shows up in fuel and shows up in so many other p and l items. So you’re right, Mark. Those investments, those wise investments are paying dividends.

Mark George, President and Chief Executive Officer, Norfolk Southern: But the discipline you’re bringing now for the things you’re just talking about is really what’s accelerating the benefits and providing more runway into the future. So congratulations on that.

John Orr, Chief Operating Officer, Norfolk Southern: Team effort, for sure.

Mark George, President and Chief Executive Officer, Norfolk Southern: Thanks, Brian.

Conference Operator: Ladies and gentlemen, out of consideration to other callers on the line today as well as time allotted, we ask that you please limit yourself to one question. Thank you. Next, we will hear from Chris Wetherbee at Wells Fargo. Please go ahead, Chris.

Luke Nichols, Senior Director, Investor Relations, Norfolk Southern1: Hey, thanks. Good afternoon, guys. I guess, I wanted to sort of ask you about what you think is possible from an OR improvement perspective, particularly as we’re thinking about 2026. So, you came into this year, I think there was a revenue target around 3% with 150 basis points of productivity and then 150 basis points of OR. Obviously, the revenue side has been more challenging because of volume.

We’ll see how much OR you get this year. But I guess maybe the question as we go into next year, how much sort of OR opportunity do you think there is that you can control? And maybe how much is more revenue dependent? So obviously, it’s uncertain environment out there. I want to get a sense of out of the 600,000,000 of productivity, how much do you think can be translated from an operating ratio perspective as we think about next year?

Mark George, President and Chief Executive Officer, Norfolk Southern: Chris, thanks for the question. Look, think what we’re going to do, which is very similar to what we’re doing this year, is we’re going to focus really hard on the controllables, in particular those elements on the cost side. So we’re going to maintain a lot of discipline on our employment levels and try to drive labor productivity for sure. We’re going to focus on the fuel efficiency and every single line item in the P and L that we can control. Obviously, we get things like claims that surprise us.

And Jason’s talked a little bit about that and can talk to you some more about that, some of the social inflation we’re seeing. But there’s a lot we can control. And that’s where we’re going to put our focus. On the revenue, obviously, we’ve got some headwinds and mathematically that’s going to probably put some short term pressure on the OR that we’re going to have to deal with. Ed and his team are doing a great job fighting every way they can to preserve every single unit that’s out there and try to grow every single unit with the value offering that we have, thanks to the great service John’s providing.

So we’re going to do that. But I think at the end of the day, the OR is going to be an output of elements. Those Jason, do you want to add anything?

Jason Zanpe, Chief Financial Officer, Norfolk Southern: Yeah. And I would just say, it’s really, if you look at our kind of our cost profile over the last couple of years and think about the inflation that we’ve taken on and the volumetric expenses, really and thanks to what John and the team have done from a productivity standpoint, harvesting almost $500,000,000 of productivity. That’s what’s enabled us to kind of keep that cost profile flat over these last couple of years. So I think you hit it right on Mark as we move into next year. I did just want to for a second talk about claims, because you had mentioned it Mark.

But John, you can maybe jump in and talk a little bit more about what you guys are accomplishing from a safety perspective, which I think is really remarkable progress. But on the cost side, claims is always very volatile and we see that quarter to quarter. But what we’re seeing right now is the resolution of some older claims. And while the frequency is going down, we’re experiencing higher cost per incident to close out those claims. So over recent years and quarters, we’ve seen pressure on that claims line as both the insurance rates increase, but also we’re facing the same type of social inflation that you’re seeing across the transportation sector.

But John, maybe a little color on what you guys are doing to mitigate the number of incidents.

John Orr, Chief Operating Officer, Norfolk Southern: Yes. And we’ve said it, our safety from injury and accident perspective are taking on a really strong momentum. And we’re continuing to invest in our safety camps. I’ve mentioned it before on these calls, our Thoroughbred Academy has got a component of safety and safety leadership. We’ve processed over 2,500 leaders through that program who have now had a more capable way of approaching our workforce, building the environment skills that are necessary.

And you you couple that with the investments we’ve made in technology and the, you know, a great story. We had a we had a broken wheel derailment with a train that had come on us for one mile. And we, as a as a leadership team, said there’s gotta be a better way. And very rapidly through the work we do with with Georgia Tech and our portal systems, we created a wheel detection device that taught that gives us identifies wheel integrity on all of our trains that pass through those portals. It was so effective that we made a suitcase version, a mobile version, and we’re putting it into the ingress and egress of our hump yards and other high density corridors to give us a good view to insulate ourselves from something that that is not ours.

Most of it is on foreign foreign cars. And it’s it’s been really effective so far. We’ve I I would say, using my own language, that we prevented over 40 derailments by the detection that we’ve had with these wheel inspection devices that didn’t exist a year ago. That ability to take ideas, understand the business, convert them into actionable items, and then put them into field use at scale is a testament to the commitment we’ve got on safety and how we can we can really influence line items that you’re talking about and solve them at the root cause.

Mark George, President and Chief Executive Officer, Norfolk Southern: And Chris, I just want to come back to one other thing as we look to ’26. So obviously, we’re going to work on controlling the controllables on the cost side. But of paramount importance in 2026 is for us as an enterprise to continue this quest toward improving and preserving a very safe railroad. We cannot have a misstep. Similar to that, we have to maintain outstanding service for our customers.

We cannot step back from that. Those are the two most important things. We’re going to control costs, but those two things are paramount importance. And I would say the other thing is really the preservation of employment and retention, because we have to go into this merger with talent to ensure that it succeeds. So that’s where our focus is.

And like I said, we’re going to fight like hell for every unit and every dollar that’s out there. But let’s not lose focus on the safety and service elements, which are high, high priorities for us. Thank you.

Conference Operator: Next question is from Risha Harnain at Deutsche Bank.

Luke Nichols, Senior Director, Investor Relations, Norfolk Southern2: Hey, good afternoon, everyone. So I’m sorry to beat a dead horse, but I also wanted to talk about the revenue erosion you expect from competitor reactions. First, I wanted to confirm that this was ring fence to intermodal. And then I guess, what is really hindering your ability to compete? I know you enhanced your partnerships with UNP in the interim, for example.

Mark, you just reminded us today about the hundreds of millions of dollars invested in intermodal over the past two decades to make for a very strong product. So I guess I’m just confused on why you would be challenged just because you’re pursuing a merger? And then is your competitor winning on price? Or is it something else? I mean, said it’s not Howard Street.

So maybe just elaborate a little bit more there. Thank you so much.

Ed Elkins, Chief Commercial Officer, Norfolk Southern: That was a great question. Ed? Sure. Well, let me start with your first question, which is yes, it is confined to intermodal and specifically to domestic non premium intermodal. And I can’t talk about or address why other entities contracts may or may not allow for certain things to occur.

But I can tell you that we’re competing vigorously both from a price perspective in a market that’s been down for forty months, but also from a service perspective. And John and I are laser focused on the route coming out of LA across Shreveport, Meridian Speedway and into the Southeast. And we have a great team operating our two terminals in Atlanta, our one terminal in Charlotte, our other terminal in Greensboro and the one in Jacksonville that are not only poised to handle the freight we’re getting today, but can accept more frankly. So that’s the landscape. And again, like I said, I think over the next couple of bid cycles as those beneficial cargo owners look at the value that they’re receiving from the service that they are getting from whoever they’re getting it from, we’re going to offer a very compelling case for them to come back to a network that makes the most sense for them.

John, do you have anything to add there?

John Orr, Chief Operating Officer, Norfolk Southern: I would just emphasize that our customer facing composite standards are extremely high. We’re committed to delivering them. And we’ve got resources, we’ve got assets, and we’ve got a corridor that’s poised and ready for growth. And we are going to deliver regardless.

Ed Elkins, Chief Commercial Officer, Norfolk Southern: Yep. For every customer that is able to use Norfolk Southern, we’re open for business.

Mark George, President and Chief Executive Officer, Norfolk Southern: And look, again, I’ll get back to the fact that when we control the relationship entirely with our customer base in our region, we’re doing great. But when it’s an interline arrangement and the contract may not be specifically through us that’s where we’re seeing some of these challenges. So this is really kind of interline That’s where we’re seeing it.

Ed Elkins, Chief Commercial Officer, Norfolk Southern: Appreciate the question and allowing us to elaborate.

Mark George, President and Chief Executive Officer, Norfolk Southern: Thank you.

Conference Operator: Next question will be from David Vernon at Bernstein. Please go ahead, David.

: Hey, guys. Thanks for taking the question. I guess, Ed, sticking on this topic, can you put a finer number on kind of what the quarterly run rate should be down assuming nothing else changed in the business from where we’re exiting kind of three q just to help us kind of better understand what’s in that model. And it sounds like you’re saying you guys can go market that against that service and and maybe get some of that traffic over over time. You know, what’s the risk that this, gets worse, right?

I mean, it sounds like you’re saying you’re going to go back and try to go directly to BCOs presumably with another IMC to pull back some of that volume. Is there do you get worried at all that maybe there’s another shoe to drop as far as kind of the volume that’s been lost? Thank you.

Ed Elkins, Chief Commercial Officer, Norfolk Southern: It’s a lot like my golf game. It could always be worse. But I would say this, we’re working really close with all of our partners, including ones that may be affected with this to make sure that we’re offering exceptional value for them in places where we can do that. And there are places across our network that I would argue we offer services that really no other railroad can replicate. Quantifying it’s probably a little bit difficult.

You saw what the effect kind of was really on a portion of a quarter. So we’ll see from here. And again, it’s not like we’re in a super healthy truck freight environment where there’s a lot of lift right now. So the whole world is struggling when it comes to freight. This is one other one more headwind being applied to the portfolio, but we’re very confident the service world.

We should reiterate, it’s

Mark George, President and Chief Executive Officer, Norfolk Southern: in the third quarter, it wasn’t the majority of the challenge in intermodal, was on the margins. This will build in the fourth quarter and into the first quarter and that’s where it will take us you know, like you said a couple of big cycles, we should end up getting it

Luke Nichols, Senior Director, Investor Relations, Norfolk Southern3: back. Mhmm.

Mark George, President and Chief Executive Officer, Norfolk Southern: But we’re going to feel the pain here in the next handful of quarters.

: Yep.

Mark George, President and Chief Executive Officer, Norfolk Southern: Next. Thank you.

Conference Operator: Next question will be from Stephanie Moore at Jefferies. Please go ahead,

Luke Nichols, Senior Director, Investor Relations, Norfolk Southern4: Great. Good afternoon. Thank you. Maybe talking a bit about your plans currently or your strategies to mitigate potentially any integration risks that we should see, with integration of the two networks? You know, clearly, you’ve made tremendous efforts from a service standpoint over the last several years, and UMP, as we all saw earlier today, also had a really strong point.

So, you know, wanted to just talk again here your view how to early on, you know, mitigate any of that integration risk or network disruption that, you know, could come as a result of the merger. Thank you.

Mark George, President and Chief Executive Officer, Norfolk Southern: Yeah, I think that’s one thing Jim and I are very, very aligned and clear on, is that we cannot afford to have any integration pick up or challenge. So we’re going to take our time and do this the right way. We’re going to learn from the lessons of the past, and we’re going to study that carefully. And we’re going to kind of do a lot of benchmarking and leverage the talent we have on both teams to start planning when that’s appropriate, and observing what it is we can do from a systems perspective. And then even from technical perspective, we’re do going this very, very deliberately.

It’s an ultra high priority for us when we do bring these companies together to ensure that the integration is done right. John?

John Orr, Chief Operating Officer, Norfolk Southern: Yeah, Mark, I’ve been through these potential mergers before, and I’ll let those results speak for themselves. But merger or new merger, leadership matters and since early two thousand and four and throughout 2025, this team has successfully delivered our PSR two point zero transformation, which has been building the momentum and producing irrefutable value. And we’ve had to navigate complexity, ambiguity and even adversity. It works in all business environments and we’re going to continue to invest in our generational leaders, elevate our service. We’re gonna continue to stress the plan, remove waste and deliver more volume with fewer people, fewer locomotives, fewer cars and less fuel.

So really, it comes down to the fundamentals. As I said in my prepared remarks, the fundamentals are sound. And from that stability, when’s the opportunity for the development of an integration plan?

Mark George, President and Chief Executive Officer, Norfolk Southern: Yeah, I think again it gets back to my response to Chris. We’ve got to go into this merger both of us really operating well. And that will certainly ensure a good foundation for integration. And right now, we’re both in strong positions in the way our safety and our service metrics are yielding. And that is important to maintain because once we come together, we’re coming together from a foundation of strength, we can integrate a lot easier.

Thank you, Steph.

Conference Operator: Next question will be from Bascome Majors at Susquehanna. Please go ahead.

Luke Nichols, Senior Director, Investor Relations, Norfolk Southern3: Good evening. As you think about the competitive response, what conviction do you have that some of what’s happening in intermodal doesn’t bleed into the carload side of the business? And maybe aligned with that, three months in post announcement, like what conversations are you having with your large industrial carload customers? And do those skew optimistic or cautious? Thank you.

Ed Elkins, Chief Commercial Officer, Norfolk Southern: I appreciate the question, Bascome. I would categorize it in a couple of different ways. Number one, we’ve built a firm runway of success here when it comes to our carload service. And of course that’s the number one thing our customers are looking for on that side. They want that conveyor belt that moves at the same speed all the time with little variation.

And John and his team have done a really good job of building that resiliency back into it. Number two, and I think this is kind of tooting our own horn but I can’t help it. We’re known for being a relationship business. We are a relationship company and we’ve built strong partnerships across the board with our big industrial customers. They know us, we know them and I can say hi to them on this call.

They know us and they know the way that we do business. And I will tell you that they are curious of course to learn more about what’s going to happen in the future, but they’re confident that with us being a part of the equation that they’re in good hands, so to speak. Now in terms of any other erosion, it’s a competitive landscape. We’ll see what happens. We’re competing every day to try to get more so as everyone else.

We’ll see where that part goes. But I think that combination of relationships and good service is very good defense for us.

: Thank you, Bastien.

Conference Operator: Next question will be from Jordan Alliger at Goldman Sachs. Please go ahead,

John Orr, Chief Operating Officer, Norfolk Southern: Yeah, hi. Just wanted to you gave some good color around the coal yields intermodal. But maybe thinking through sort of like total yields or revenue per carload as we look ahead to the fourth quarter, maybe talk about some of the puts and takes overall whether it be core price, mix, etcetera. Thank you.

Ed Elkins, Chief Commercial Officer, Norfolk Southern: Appreciate it. I’m very pleased with where we’ve landed with our price plan this year so far and I fully expect that to continue for the rest of the year. So our pricing plan is intact. And I would say that we’re in good shape there particularly versus inflation. When I look at the mix piece, we’re going to see more utility, we’ll probably see a little bit less on the export side and then you got erosion in the RPU for the coal piece because of that seaborne price.

That’s going be a little bit of a mixed headwind. On the merchandise side, we’ve already highlighted that natural gas liquids, sand, even some metals markets in terms of scrap, that’s diluted the RPU some. But I will tell you that probably the biggest challenge we’re going to have from where we’ve come from might be on the automotive side where we’ve seen that one big supplier to one of our big customers have an issue. And so we expect that there’ll be a little bit of wind taken out of the automotive side, so to speak, when it comes to the volume piece. And that’s to go along with everything else.

Hope that helps.

Mark George, President and Chief Executive Officer, Norfolk Southern: All right. Thank you.

Conference Operator: And at this time, ladies and gentlemen, I’d like to turn the call back over to Mark George.

Mark George, President and Chief Executive Officer, Norfolk Southern: Okay, everyone. Really appreciate you dialing in this evening. Just to summarize, we’re running a really good railroad right now despite the uncertain macro environment that’s ahead and obviously the increasing competitive pressures. So, you know, our top line may be volatile going forward, but we are absolutely committed to safety, to service and maintaining our cost structure. And we are going to fight like hell over every available unit and dollar, rest assured.

There’s a lot of opportunity on the horizon with our proposed merger with UP, and that’s going to yield huge benefits to our customers as well as our country. So we thank you for your time this evening and take care.

Conference Operator: Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. And at this time, we do ask that you please disconnect your lines.

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