Ryder at J.P. Morgan Industrials: Strategic Growth and Adaptation

On Wednesday, 12 March 2025, Ryder System Inc (NYSE: R) presented at the J.P. Morgan Industrials Conference 2025, outlining its strategic shift towards asset-light businesses and financial resilience. Ryder’s CEO, Robert Sanchez, highlighted the company’s balanced growth strategy, while addressing challenges posed by tariffs and market uncertainties.

Key Takeaways

• Ryder expects earnings per share of $13-$14 in 2025, driven by cost-saving initiatives and acquisitions.
• Norfolk Southern discussed winter storms’ impact on Q1 performance and strategies for volume recapture.
• Both companies emphasized adapting to tariffs and market uncertainties to enhance shareholder value.
• Ryder is focusing on technology and operational improvements through Ryder Ventures and truckload delivery optimization.
• Norfolk Southern is improving service and cost structures to remain competitive.

Financial Results

• Ryder’s revenue mix has shifted from 60% asset-intensive in 2018 to 40% currently.
• Earnings per share have doubled from under $6 in 2018 to $12 in 2024, with a target of $13-$14 in 2025.
• Targeted return on equity (ROE) increased from low teens to low 20s, expecting 17%-18% this year.
• Anticipates $350 million in additional earnings, $150 million from initiatives, and $200 million from freight market recovery.
• Plans to generate $10 billion in operating cash flow and used vehicle sales over three years.
• Debt capacity to increase by $3.5 billion, allowing $13.5 billion for investment.

Operational Updates

• Ryder is running scenarios related to tariffs, seeing increased U.S. manufacturing as beneficial.
• Potential tariff-induced truck price increases could slow purchases, balancing freight and trucks.
• The company is mitigating potential tariff impacts and preparing for EPA 2027 regulations.
• Reshoring of supply chains could take years, with a potential truck shortage in 2026-2027.
• Ryder is progressing with the Cardinal acquisition and exploring similar opportunities.
• Ryder Guide and Torque services enhance customer visibility and maintenance efficiency.

Future Outlook

• Ryder targets 2,000-4,000 unit growth, with $4.3 billion available for flexible deployment.
• Focus on organic growth, acquisitions, and shareholder returns through strategic investments.
• Norfolk Southern aims for at least $150 million in productivity savings and 3% revenue growth.
• Despite winter storm challenges, Norfolk Southern remains confident in full-year guidance.

Q&A Highlights

• Ryder discussed the positive impact of complexity on business outsourcing.
• Norfolk Southern addressed cargo theft concerns, enhancing rail security and speed.
• Both companies fielded numerous questions, affirming commitment to continuous improvement.

For a more detailed understanding, readers are encouraged to refer to the full transcript.

Full transcript - J.P. Morgan Industrials Conference 2025:

Brian Ossenbeck, JPMorgan Transport Logistics Cover, JPMorgan: Welcome back. We’re going to keep things rolling here with Ryder. I’m Brian Ossenbeck, a cover of transport logistics for JPMorgan. So we got Robert Sanchez, who’s the Chairman, President and CEO of the company.

He’s going to make some intro comments, got a few slides to go over to kind of set the stage and then we’ll go into Q and A. And as usual, if you got questions in the room, raise your hand and get my attention and we’ll get you a microphone. So we also have Kayleen and Christie from the team in the audience. But Robert, let me kick it over to you. And thanks again for coming.

Robert Sanchez, Chairman, President and CEO, Ryder: All right. Thank you, Brian. Before we get started, those of you that aren’t familiar with Rydell, I’m going to give you just a quick overview of what we do. We’re a $13,000,000,000 transportation logistics outsourcing business. We operate in North America with 93% of our revenues coming from The U.

S, which has become much more relevant over the last few weeks. We operate in three segments, Fleet Management Solutions, which is basically outsourcing of a truck. So if you need a fleet of trucks as a business, you need a fleet of trucks to move your product, you can buy your own trucks, do all your own maintenance and then figure out what to do with the vehicle at the end or you can outsource it to Ryder. We operate about 250,000 vehicles in that segment. And we have a dedicated transportation solutions business, which is the outsourcing of a truck and the driver.

So I can also outsource not just the truck, but the driver and outsource the whole private fleet to Ryder. That’s what the segment does. That represents about 20% of the revenues of the company. And then we have the supply chain solutions, which is the outsourcing of broader supply chain activity. Think about distribution centers, warehouses, traffic department where we’re managing freight that is not on a rider truck and could be on a third party’s truck, e commerce fulfillment where we have a network of warehouses and facilities where we fulfill e commerce transactions.

We have a last mile big and bulky final mile delivery business, where we’re delivering stuff that the typical parcel companies do not move. Think about furniture and office equipment, exercise equipment, that type of stuff, appliances. So broad supply chain activity, anything that require that is has to do with transportation logistics, typically Ryder can do for companies. The good news is that all that stuff has gotten more complicated to do over the last couple decades and complexity is our friend at Ryder. The more complicated things become, the more likely they are to be outsourced and that’s really given us an opportunity to grow a business that’s been around for over ninety years.

We’ve really been on a growth spurt now for the last probably fifteen. So this is a comparison in ’20 at the end of twenty nineteen, we pivoted our growth strategy to what we call our balanced growth strategy. And it had three components. Number one was we wanted to derisk the business. And by derisking the business primarily meant that we were we realized we were taking too much risk on our truck leases, which is in our fleet management business.

The residual assumptions we were making when we priced those leases turned out to be a little bit high compared to where used truck prices were coming in. We had been using a methodology of an average over a five year period to try to forecast what that vehicle would be sold in the used truck market six years out. And while the used truck market was in normal cycles, it worked pretty well. But as post the two nine fall off, the used truck market became much more volatile, higher highs and then lower lows and longer periods in a low and really impacted the earnings of the company. So what we did is we reduced our residual assumptions in our pricing for leases beginning at the end of twenty nineteen to what I would call bottom quartile, bottom quintile type levels, which meant we didn’t rely as much on that final sale of the used vehicle to get the returns that we expected on the lease.

So that was step one. We started that in 2019. We have a typical holding period of six years, so it takes us six years to get the whole portfolio of leases repriced, and this is our last year of really repricing most of those leases. That’s been part of the benefit. The other thing we wanted to do was improve the overall returns of this business.

We were targeting 60 to 100 basis point spreads historically in that business. We felt that for all the work that we do in maintaining these trucks throughout their life and the purchasing power that we have, the service that we bring to that customer, we could shoot for more. So we’d started targeting 100 to 150 basis points and have been achieving that. We’re now in the fifth year of the higher of the lower risk, higher return leases in the portfolio, which has given us an overall big earnings boost to the company. In addition to that, the third leg of the strategy was to accelerate the growth in our more asset light businesses.

That’s the dedicated transportation business and our supply chain solutions business. So this is the tale of the tape after five years, six years now of doing this. You can see the revenue mix back in 2018 before we started this. We were $8,500,000,000 with almost 60% of the revenues coming from our more asset intensive leasing business. Today, we’re $13,000,000,000 with only 40% coming from the more asset intensive leasing businesses and 60% coming from the more asset light supply chain and dedicated solutions.

Our earnings in 2018, which was a peak year in the freight market, was just under $6 a share. Last year, which we believe is a trough in the freight market, we were at $12 a share. So peak to trough, our earnings are double what they were before the transformation this year. In 2015, we’re expecting $13 to $14 a share as we’ve got initiatives that we’ll talk about in a minute that are helping to drive that. From a return on equity standpoint, we were historically achieving low, call it, low teens over the cycle return on equity.

As we started this journey, we started targeting mid teens over the cycle. We then raised that to high teens over the cycle. And last year, we’ve now raised our target ROE to low 20s over the cycle. We believe this year, we’ll achieve 17% to 18%, which again, we’re still coming off of a lull in the freight cycle. But as that freight cycle continues to move up, we feel pretty confident we can get that return on equity up in that low 20s level.

So big improvement there. And then obviously under operating cash flow, we see an increase there as the profitability of the business has improved. So as we as I talked about the $13 to $14 a share that we expect to do this year, the good news is that we’ve done a lot with this balanced growth strategy, but there’s more to come. And the more to come is really about $350,000,000 $150,000,000 of it is from initiatives that we’ve identified of additional things we could do. So one of them is this last leg of the repricing of the leases that are in our fleet management business that’s going to add another $20,000,000 We did an acquisition of a company called Cardinal in our dedicated business last year.

And the synergies of that we’ve identified as $40,000,000 to $60,000,000 We expect to get a good chunk of that this year. We’ve got good line of sight to that. And then finally, really around, I forgot to mention, maintenance costs. So that’s another piece that I didn’t mention, but one of the drivers of the improved profitability has been our ability to take cost out of our maintenance organization. We maintain 250,000 commercial vehicles, which means we spend about $1,300,000,000 maintaining trucks.

So we’ve been chipping away at process improvements and just getting better at that across our seven fifty locations. We’ve achieved over $100,000,000 in annual cost savings over the last four years and now have identified another $50,000,000 that we know we can achieve over the next few. So that’s also going to contribute to this $150,000,000 So we expect this year to have achieved about $100,000,000 of the $150,000,000 dollars in initiatives that we’ve got line of sight to. And there’s another piece to the $350,000,000 which is $200,000,000 The $200,000,000 is just as the freight market recovers, We expect to get our rental business, more cyclical parts of our business, our rental business and our used truck businesses back to more normalized levels. And those that alone could generate an additional $200,000,000 in earnings.

So that’s those are the drivers of the improvements in returns. This year, we’re only looking at about $15,000,000 of the 200,000,000 being achieved because we still think this will be a soft year in terms of the overall freight market. So that’s the tail of the tape for us in terms of earnings. Again, we’re not forecasting a significant improvement in the overall freight economy, maybe a little bit of a pickup in rental at the tail end of the year. But the majority of the earnings improvement that we are looking for this year is coming from initiatives.

So things that we have control over, the pricing of the equipment that the leases that we’re signing, the maintenance costs that we’re bringing out and the synergies that we see from our more recent acquisition. Another slide we’d like to talk about is really to show you the how the earnings power is increasing the capital capacity of Ryder. Obviously, we’re in the leasing business. We buy a lot of trucks. We borrow money in order to do that.

And as we generate more earnings, it increases our overall debt capacity. We’ve got target leverage of 250% to 300% debt to equity. And as we generate more earnings, that capacity keeps going up, gives us money to buy to use to buy more trucks or to invest in other parts of the business. This gives you an idea how that works. We’ve got about $10,000,000,000 over a three year period.

We got about $10,000,000,000 of operating cash flow and used vehicle sales proceeds that we expect to generate. That would increase our debt capacity by $3,500,000,000 I think about $13,500,000,000 over a three year period that we can use to invest in different things. The first call is going to be the replacement of lease trucks that expire, and that’s about just under $9,000,000,000 that we’ll spend on replacing lease trucks. We’ve got our dividend that we pay out, which over a three year period is about $400,000,000 That leaves us with $4,300,000,000 of what we call available for flexible deployment. So we can use that to invest in organic growth, primarily in our truck leasing and dedicated businesses.

And we also and we’re targeting 2,000 to 4,000 unit growth. So if you assume we’re hitting that level, that still leaves me with $2,300,000,000 to either invest in acquisitions or buybacks or other investments that we could return money to shareholders. So that’s kind of the model that we now have working, which we think is in a really good spot. We see this model really being able to continue to contribute and allows the flexibility to invest in organic growth, acquisitions and return money to shareholders. That’s it.

Brian Ossenbeck, JPMorgan Transport Logistics Cover, JPMorgan: All right, great. Thanks for the intro, Robert. So maybe we can just pick up kind of where you left off in terms of you’re not expecting a big recovery in the guidance, but what are you hearing in terms of conversations with customers, with prospective customers? Do you see any areas, whether it’s geography or a vertical, that’s a little more exciting as you start the year?

Robert Sanchez, Chairman, President and CEO, Ryder: Yes. We started the year with, I think, ended last year after the after we got the election behind us. I would say our customers prior to the election were in a wait and see mode or wait and see what happens with interest rates, what happens with Alexis. I’d say probably starting in the end of the first quarter last year, we started to see a slowdown in sales of our contractual businesses, our lease business, our dedicated and our supply chain. And it was primarily customers just not making decisions.

Pipeline kept growing because decisions kept getting put off. And I would tell you, once the election happened, I said, okay, we’re past this. Everything’s good. As we’ve gotten into this year now, we’re back in this wait and see now because of the tariffs and some of the other uncertainties around policy. So I would tell you customers are generally across the board in more of a wait and see mode again and not a lot of decisions being made yet.

I think everybody’s waiting to see what the rules are going to be going forward. I think there’s a desire by most customers to do something and to move forward with projects. But right now, we’re seeing just more of a wait and see.

Brian Ossenbeck, JPMorgan Transport Logistics Cover, JPMorgan: I think you’re roughly 93%, ninety four % U. S. Revenue base. But the other part with the cross border is you’ve invested and have a decent exposure to Mexico. Auto has always been a big part of what’s come down over the years in terms of exposure.

With all the noise in the back and forth, have you seen any pull forward or stop and starts on the cross border

Robert Sanchez, Chairman, President and CEO, Ryder: side? Yes, I would tell you not a lot. I think it’s interesting to see. These are most of the customers that we have in our supply chain business are large Fortune 500 type companies that have long term investments and different manufacturing capabilities, if you will. So there’s not a lot I think that can be done in the short term.

So we haven’t seen a lot on that side of it. I would tell you that as we’ve obviously, we’re running all our different scenarios like everybody else’s. For Ryder, there’s puts and takes. On the plus side, I would tell you more manufacturing coming to The U. S.

Is really good for us because we are 93% US. That’s where most of our capabilities are. We do have strong capabilities in Mexico primarily to support manufacturing that comes to The US and then also in Canada. So long term, I think that would be a good thing. The other positive would be, clearly, if tariffs are put in place and the cost of trucks, commercial trucks goes up, that’s going to slow down the purchase of trucks and maybe accelerate getting the freight recession behind us with more balance of freight and trucks.

On the negative side though, I think in the short term, if there’s an economic slowdown that could impact our rental business, it could impact our volumes for our supply chain businesses. And the extent of that is really hard to gauge. What I can tell you is in our supply chain, in our lease business, in our dedicated, it’s all contractual. So the volatility doesn’t impact us to the level that it might to somebody who’s got a more transactional business.

Brian Ossenbeck, JPMorgan Transport Logistics Cover, JPMorgan: So you’re one of the largest, not the largest buyer of commercial trucks in North America. So a lot of those come from Mexico or at least manufactured and parts going across the border. So we still don’t know, like I said, the rules of the game, but are you in discussions with OEMs, are they able to pre ship some of those to get them across? Is that something that they’re able to do? And is that something you guys are considering at this point?

Even you know you have some growth, so can you pre stage some of that?

Robert Sanchez, Chairman, President and CEO, Ryder: Yes. On the margin, there’s some stuff that we can do and that we’re doing for our customers. We do have the ability to pass those costs through, even on trucks that have been ordered. I don’t typically buy a truck until I have a signed lease. If I sign a lease, I order the truck and the tariff gets put in place after the lease is signed.

I do have the ability to still pass that through. And obviously, any new leases that we sign, we pass through. But we’re doing everything we can on our end to try to get as much of that production across. But again, especially with the on and off, on and off again approach, it’s been more challenging. We also don’t know what the price impact is going to be from the OEMs.

No one none of them have really quantified that yet.

Brian Ossenbeck, JPMorgan Transport Logistics Cover, JPMorgan: The other big part with the OEMs is the pre buy with EPA twenty twenty seven. So maybe you can walk through that in terms of how that would impact Ryder, what opportunities that would bring if you still think it’s going to happen in this deregulatory or potentially deregulatory environment?

Robert Sanchez, Chairman, President and CEO, Ryder: Yes. Look, I think the pre buy for Ryder historically has been an opportunity to sell more leases because companies have to make a decision, they pull forward decisions and we end up having slots available from the OEMs as such a big purchaser because it’s an opportunity to get more customers into leasing. So in the short term, it’s just locking in more leases. Doesn’t have as big an impact on the bottom line. Where I think it helps us more on the bottom line is longer term, when there is a change in technology that makes the new technology less attractive, either more expensive or less reliable, in this case, probably just more expensive, the older technology becomes more attractive.

That happened back in o seven, happened again in 2012 before 2012. So I think that could happen again. That tends to raise the the value of used trucks in the marketplace. So anything that was built before, that changed. So that would be a help for us if if that happened.

But now is it gonna happen or not? We don’t know. I think last month I said yes, I thought it would still happen because the OEMs have developed most of the technology. Maybe it’ll happen with some modifications where maybe you don’t have all of the components that were originally in the 2027 technology change or some of the technology change already been developed will be included, but maybe some of the other components of that legislation won’t be.

Brian Ossenbeck, JPMorgan Transport Logistics Cover, JPMorgan: What are some of the other regulatory environments that you’re watching? I’m assuming California is still always one just given the size, but also given the carb rules. So they’ve pulled back the advanced Clean fleets, but you still have the Clean trucks. So given your footprint and your scale, how do those two potentially play out?

Robert Sanchez, Chairman, President and CEO, Ryder: Yes. The Advanced Clean truck is basically the OEMs are only allowed to sell a certain number of diesel units based on the number of electric vehicles that they sell, which as you know, electric vehicles have just been for commercial truck purposes been very, very difficult to move just because there’s not the economics don’t work yet for most of them. So we don’t know. We don’t know what the EPA is going to do in terms of some of the waivers that were passed that were given in the past. If those will still hold, if they don’t hold that could maybe impact Advanced Clean Truck, I don’t know.

But we’re managing through that. We’ve it’s limited the number of trucks that we could buy in California, which is hurting, I think, some of our customers out there. But again, I said everything we do is getting more complex and that’s an example of complexity. Right. We pass through the cost.

We’re pass through the cost to them and then really work with them to make sure they can get the

Brian Ossenbeck, JPMorgan Transport Logistics Cover, JPMorgan: separate markets. But are you seeing something similar? Obviously, that market has been down for a while now with the rest of the freight market. And I don’t think you guys have high expectations for that in the guidance this year.

Robert Sanchez, Chairman, President and CEO, Ryder: Yes. And I think there was a so we’ve been seeing a kind of bumping along the bottom, actually slightly down each quarter, low single digits. I think there was ACT had a preliminary January number that looked up, but then the real number, the final number, I think, came in up 1% or something. So I think the bumping along the bottom is still probably a good description.

Brian Ossenbeck, JPMorgan Transport Logistics Cover, JPMorgan: Can you talk a little bit more about the cycles because we have like the financial crisis, not a lot of trucks get built and then six or seven years later, the prices go up because before you don’t have that production gap starts to show up. So twenty twenty, five years ago now, hard to believe, but I would assume that something similar would happen in the business. Are we only a couple of years away from potentially seeing something history repeat itself?

Robert Sanchez, Chairman, President and CEO, Ryder: Yes. Our holding period is typically going to be six by the time it gets to used truck market, six, seven years on some of these things. So we’re still maybe a year or two out of that. But yes, at some point, you should see a shortage of there weren’t enough babies born, there weren’t enough trucks built six, seven years ago and then we’ll see that. But that’ll probably be that might be twenty twenty six, twenty twenty seven.

As you know, there’s a lot going on there too.

Brian Ossenbeck, JPMorgan Transport Logistics Cover, JPMorgan: Right. Well, we do one of the other things I want to ask about in terms of the we hear a lot about that’s maybe a little bit longer lead time than we might expect is just the near shoring, reshoring with supply chains and with outsourcing and coming back to The U. S. Hopefully or North America more broadly. In your experience, is that like a three to four year time frame?

Is it a four to five year time frame? So if we do get some certainty on tariffs and everything else with that in the policy perspective, like when will we expect to see some of those supply chains come back and be online, I guess?

Robert Sanchez, Chairman, President and CEO, Ryder: The more recent example that I think was post COVID when especially the auto sector, there was a move of suppliers closer to where the assembly is taking place and it’s also a move away from China. And I think as I look at that, that probably took a couple of years for these suppliers and Tier one, Tier two suppliers is to be able to reposition their manufacturing in different countries. I would expect that’s probably a similar timeline here because I think they were doing as quickly as they could. So you’re probably looking at by the time that they actually get it all done in operations, probably a couple of year process.

Brian Ossenbeck, JPMorgan Transport Logistics Cover, JPMorgan: So one of the things we’re hearing more about just industry wide, not right or any company specific, but just the concept cargo theft becoming a bit more at least visible. It’s always been there, it’s always been challenged, but now we’re seeing more, I guess, organization related to that. But with your supply chain outsourcing visibility, how does that affect riders and opportunity? Are you seeing similar requests for shippers when it comes to just what seems to be a bigger and bigger problem? And we hear about it more from shippers now as well.

Just the

Robert Sanchez, Chairman, President and CEO, Ryder: Yes. Well, safety and security is one of the services that we bring to the table. So it is an opportunity for us to companies that are strong with that. We certainly bring best practices to it. But we haven’t seen a big increase across our fleet.

On the leasing side, our customers are responsible for that. So clear on that, our customers are just leasing the truck from us and then they handle whatever has to do with whatever they’re moving, they’re moving with their own drivers. So when it comes to the stuff that we do, that’s a service that we that’s part of the service that we provide is making sure our customers our drivers are trained on how to try to avoid these types of situations. And again, has it been a big impact on our fleets?

Brian Ossenbeck, JPMorgan Transport Logistics Cover, JPMorgan: So one thing we stood out to us when you look at the guidance you’re talking about a little bit earlier, there’s

John Orr, COO, Norfolk Southern: not

Brian Ossenbeck, JPMorgan Transport Logistics Cover, JPMorgan: a lot of cyclical recovery in there. I know we’ve heard this back half recovery from the freight market for the last couple of years, same for this year. But you got a lot of visibility, I would assume, with the initiatives that are coming. So is the cycle, if it happens, just all upside? Do you have a lot of visibility to these initiatives?

Are there ones you can add on to that? Like it seems like you’re in a pretty good spot for this

Robert Sanchez, Chairman, President and CEO, Ryder: year. We feel like we’re in a good spot. I mean, if you think about our year over year on the top end of our range, we’re saying we’re going to go from $12 a share to $14 a share on the top end. That equates to about $100,000,000 of earnings before tax. $70,000,000 of it is initiatives.

So it’s the combination of those things I talked about. The synergies from our recent acquisition, we’ve got really good line of sight. The repricing of our leases that were in the final legs of doing that, so we’ve shown that we can get that. And then the maintenance initiatives that we also feel pretty good about. So we feel good about that $70,000,000 We got $15,000,000 only from rental recovery.

And it’s a we’ve got a recovery a somewhat of a recovery in the back half of the year, not a significant one, partially offset by used vehicle gains still being down year over year because we’re not assuming a lot happens on the used truck pricing yet. So that represents about $15,000,000 Then the other $15,000,000 is really cost management, cost takeouts. We have a zero based budgeting process that we’ve run for seven, eight years, and we always leverage that each year to try to find more cost takeouts when we need them.

Brian Ossenbeck, JPMorgan Transport Logistics Cover, JPMorgan: Can you talk a little bit more about the Cardinal acquisition, maybe how it started, how it’s going? It’s what former Ryder folks there. So I’m assuming you knew them for a little while. But how’s that? It sounds like it’s going pretty well so far.

Robert Sanchez, Chairman, President and CEO, Ryder: It’s going very well. Ryder’s dedicated operation is what we call more customized or specialized dedicated. That means that it’s not typically just a driver who’s driving into a dock door and loading a dry van trailer. It’s going to require the driver to do more than just drive the truck. When they get there, they have to do there’s special handling required or special types of equipment.

So think about steel companies where you’re driving a flatbed with a bunch of steel behind it, you got to deliver that steel. That’s one of the things that we do very well. Delivering to a retail store that is in a mall, So not in a not a big box that you can just pull in. You got a driver has to get out and move some totes into. Those are the types of dedicated operations that we run.

Cardinal had a very similar profile of customer that aligned really well with Ryder’s customer base. So that has been a really easy I wouldn’t say easy, but it’s been a favorable blend to bring those organizations together. Culturally, also, I think, a good fit. And then really, the synergies have been primarily from just the equipment. So Cardinal was going out buying their own trucks, doing maintenance through third parties.

You bring that through the rider network, there’s just savings and that we can buy the trucks better. We’ve got really optimized maintenance operations and we’re able to bring value there. And then obviously the consolidation of some of the back office and overhead is also helping us get those synergies.

Brian Ossenbeck, JPMorgan Transport Logistics Cover, JPMorgan: Is this something you can sort of scale? Are there cardinals around there, maybe out of the same size, but is this a pattern you can not do like one every year, but maybe one every other year in terms of like building out that structure maybe a little bit faster than doing it organically?

Robert Sanchez, Chairman, President and CEO, Ryder: Yes. We’d be interested in doing that as we’re always in the market looking. We find another again, we want to have it like Cardinal, well run company, good customer contracts. But we are in the market looking for other cardinals like that that we can bring in because it also gives us some density on freight, which is important for the you think about what’s the next $150,000,000 of initiatives that we would look for is now how do I optimize this dedicated business across customers. Because right now, we kind of operate most of them as stand alone customers providing service to that customer, but there are opportunities to leverage drivers, to leverage power, to leverage broader equipment.

And that’s an opportunity as we see as the next wave. And the more density we can get in a geography, the more opportunities we’re gonna have

Brian Ossenbeck, JPMorgan Transport Logistics Cover, JPMorgan: to do that. So that would excuse me, that would be the flex operating plan model. And so maybe we Yes, we

Robert Sanchez, Chairman, President and CEO, Ryder: talked a little bit about that.

Brian Ossenbeck, JPMorgan Transport Logistics Cover, JPMorgan: Yes, I think that was at the Investor Day in not too long ago. So is that just fitting more backhauls together, more density, more stops slip seating? Like how what are some of the concepts? Because like you said, it’s not quite like the dedicated that maybe most of us are familiar with.

Robert Sanchez, Chairman, President and CEO, Ryder: So yes, backhauls doing more backhauls. We always try to do that. But this is also having the visibility across accounts to be able to take a driver that might have some additional time still available and put them on a different account route, take equipment that may be sitting on one account for a certain period of time and put it on a different one. We don’t do a lot of that today. And I think Flex is really about that.

First doing it manually, but we also have a technology we’re developing that is going to help us do that on a more automated basis.

Brian Ossenbeck, JPMorgan Transport Logistics Cover, JPMorgan: If there’s any questions in the room, go ahead and raise your hand, thought we might have one. Down here in the front, please.

John Orr, COO, Norfolk Southern: You mentioned that your drivers do more than just pull up and say, Hey, take my stuff. Do you train them? How do you recruit? How do you manage the chronic truck driver shortage?

Robert Sanchez, Chairman, President and CEO, Ryder: Sure. That’s a great question. We have about 13,000 professional drivers who are employees of Ryder.

Jason Zampi, CFO, Norfolk Southern: We

Robert Sanchez, Chairman, President and CEO, Ryder: have, I would say, a vast driver recruiting organization fluctuates, but anywhere between 80 to 100 folks that are out there. So they’re in the markets. And so we can typically find drivers where private fleets can’t. We do have training programs that we put in. We don’t typically hire driver unless they’ve already driven somewhere for a period of time from a safety standpoint.

But what’s attractive about Ryder is that they’re working for a company. This is what we do for a living. It’s not a private fleet where you’re just sort of a support. They’re home every night because for the most part, I think 85, 90 percent of our routes are home every night. So you’re not over the road for long periods of time, which can be difficult on on the work life balance.

And you’re also at a company where you’ve got multiple options. So if you’re on one account, you’re doing a good job, but you want to either move to another part of the country, you want to do something different. We’ve got a lot of different accounts that do something a little different, gives you some variety in what you do. And obviously pay, we make sure that we’re paying well within the market for drivers. So our turnover is somewhere in that 30% to 40% typically, where if you look at the truckload carriers and over the roads folks, they got a much higher

Brian Ossenbeck, JPMorgan Transport Logistics Cover, JPMorgan: turnover. So a couple of minutes left, Robert. Maybe we can talk about technology. Broadly, within the company, some of the initiatives that you have focused on in the past has been visibility, connectivity, obviously productivity in general. But what are some of the top things you’re working on from a tech perspective in Ryder?

Robert Sanchez, Chairman, President and CEO, Ryder: So we purchased, I mentioned, a company called Baton about two years ago now. It was a startup that we had originally invested in through our Ryder Ventures organization. And it was a group that was working on optimizing truckload deliveries. And the more we got to know this group, we realized we thought, first of all, really smart group, doing really neat things, and we felt that that technology could be better applied to the rider network and all the freight and trucks that we have visibility to. So we’ve invested in them, built up that organization now that is really a technology lab for Ryder.

So they are working on visibility, not just visibility, which we have through rider share, but also how do I optimize now? How do I take all this freight that I have visibility to? And how do I do a better job of optimizing across dedicated, across our supply chain business? Ultimately, the vision is and this is way out there, but ultimately, the vision is to have a Ryder ecosystem where if you’re leasing a truck from Ryder, you can plug into the Ryder ecosystem and then you get the benefits of being able to see all the freight that we see and what might you might have opportunities for backhauls, you might have opportunities to move a load for somebody else. So they’re working on the backbone of that technology.

That’s probably phase three or four, I’m giving you, but phase one and two is just really given us taking that visibility and now looking for the opportunities to cross utilize equipment. On the fleet management side, we’ve got rider guide, which is our visibility for folks that just lease trucks from us. What are their trucks doing? Which trucks are idle? When do trucks need to come in for maintenance?

Which trucks are costing them more on a cost per mile basis? And that type of visibility we’ve got out there. And then we’ve also rolled out, it’s not a technology, but it’s a new service called Torque where we’re doing mobile maintenance. So the retail mobile maintenance. So this is for customers that aren’t interested in a full service lease necessarily.

They want to just, on a retail basis, have a truck show up at their location and do the maintenance for their trucks at their location. We’re finding that to be a pretty good business. We’ve done a few little acquisitions and rolling this thing up. We’d like to over time build a broader network that we could service trucks for that segment of the market. And again just being able to penetrate that segment of the market and with a mobile maintenance offering.

Brian Ossenbeck, JPMorgan Transport Logistics Cover, JPMorgan: Okay. Very good. Well, we are just about out of time, so we’ll end it there. But Robert, thanks very much for your time today. Really appreciate it.

Robert Sanchez, Chairman, President and CEO, Ryder: Thanks, Brian. Thanks for having us.

John Orr, COO, Norfolk Southern: Okay. Okay.

Jason Zampi, CFO, Norfolk Southern: Okay.

John Orr, COO, Norfolk Southern: Okay.

Brian Ossenbeck, JPMorgan Transport Logistics Cover, JPMorgan: Okay.

John Orr, COO, Norfolk Southern: Okay. Okay. Okay. Okay.

Brian Ossenbeck, JPMorgan Transport Logistics Cover, JPMorgan: Okay.

John Orr, COO, Norfolk Southern: Okay. Okay.

Jason Zampi, CFO, Norfolk Southern: Okay.

Robert Sanchez, Chairman, President and CEO, Ryder: Okay.

John Orr, COO, Norfolk Southern: Okay.

Brian Ossenbeck, JPMorgan Transport Logistics Cover, JPMorgan: You

Robert Sanchez, Chairman, President and CEO, Ryder: Okay.

John Orr, COO, Norfolk Southern: You you

Robert Sanchez, Chairman, President and CEO, Ryder: Okay.

Brian Ossenbeck, JPMorgan Transport Logistics Cover, JPMorgan: It’s different. Okay. So we’re going to keep things rolling here on the transports track of the Industrials Conference. So again, I’m Brian Austinbeck, cover of Transports and Logistics for JPMorgan. We’re going to talk with Norfolk Southern here.

We’ve got Jason Zampi, the CFO, John Orr, the COO. So thanks a lot guys for coming. Really appreciate your time today. Clearly, no shortage of things to talk about in railroading in the broader freight market in general, but, we’ve got a nice full room, so if there’s questions people want to throw in there, get my attention, we’ll get you a microphone as well. But maybe we’ll just start off a little bit kind of state of the railroad, how are things operating at this point in time?

Obviously, it’s a little bit of a challenging. There’s always weather, there’s always winter, but this one felt like it was a little bit abnormal. So how are things running at this point in time coming into what’s usually the most important month of the quarter for Freight in particular?

John Orr, COO, Norfolk Southern: Yes. Well, thanks, Brian, for having us. And it’s a pleasure to be here. And I’ll tell you, you’re right. Winter in 2025 had a different flavor than it normally has, especially in The United States.

At NS, we’ve had over 17 major storms that include polar vortexes. And most recently, we had a two inches rainfall that manifested into a 49 foot flood in West Virginia in our major corridor. And so what do you do about stuff like that? As a Canadian, you prepare for winter. Some of my team were giving me a little grief that, hey, you’re over preparing us.

We don’t get winter like that that you’re thinking about. But, you know, as luck would have it, we did. And for a short period, we had over 100 mile stretch after that flood that we had washouts and at risk where we had to take out the main line, put it back in and then the floods came again and we had to do it all over again. So we spent I believe in putting all the resources to getting restored. We restored ourselves twice over a period of four days.

And we’re back up and running to over 1,000,000,000 GTMs within a week. And so it’s that capability to respond, respond acutely, prepare, over prepare in a lot of cases and then be ready to engage. And that’s kind of the transition that we’ve been leading NS into overall, not just winter, but you saw it during the hurricanes last year. And you were we can’t just say we’re at the mercy of cold weather. We can’t just say that floods are going to shut us down.

We have to be able to drive as deep into issues as we possibly can, come out of them as fast as we can. And as the team matures and gets more capability and really gets confidence in speaking up to issues, we’re able to respond a lot more quickly. So I was just in Williamsburg or Williamson last week, really checking in on the people affected by the flood. And thankfully, nobody was killed in our area, but there were several fatalities on both sides of the state line and really reinforce the emergency capability, but then challenge them to get back on track faster. So we called it March Madness and got into really pushing hard like a college team to focus on the price at the end of the month really restoring as much as possible for the quarter.

So winter has affected us, in some cases affected our customers even more. But between Jason and I and Ed, we’re really focused on what’s out there, what can we recover. And I’m really, really proud of how we’re picking it up.

Brian Ossenbeck, JPMorgan Transport Logistics Cover, JPMorgan: So Jason, you’ve been around for a while at the network. And John kind of laid out some of the things that have changed that we’re working on like right now. But what would have happened last year or prior to the plan if something like this similar would have happened at the network?

Jason Zampi, CFO, Norfolk Southern: Yes. So exactly like you said, Brian, eighteen months ago, two years ago, this would have put us down for quite some time. And we’re not talking this incident kind of days, we’d be talking months to kind of revamp from something like that. So it’s really incredible the resiliency that we’ve been able to build into the network. And you’ve seen it with this storm, the series of storms this winter, the hurricanes last year, all kinds of disruptions that John and his team have this operational momentum that really helps us get out of these situations very quickly.

And the other thing, it’s when we think about resiliency, I think about the speed of recovery, but it’s also the agility that John and his team have been able to show. So whether that’s port strikes and freight completely shifting to a different coast or it’s things like the Baltimore Bridge outage and what we had to do there to continue to serve our customers, that agility and resiliency never existed before. And so that both of those things are super important right now as we come into a time that’s pretty uncertain with a lot of other things going on. So it’s really just incredible what the team has been able to accomplish.

Brian Ossenbeck, JPMorgan Transport Logistics Cover, JPMorgan: So you talked about the number of days and number of storms and whatnot. First quarter is always a bit tough from a borrower and financial perspective. Are you able to put any more context or color or quantify what has cost so far?

Jason Zampi, CFO, Norfolk Southern: Yes. So, I would say just starting off, we’re super focused on our full year guidance, right? And just as a reminder, that’s at least $150,000,000 of productivity savings. And it’s 150 basis points of year over year operating ratio improvement with about 3% revenue growth. So that is our key focus.

But like you said, Brian, first quarter is typically the high watermark from an operating ratio perspective. If you think about it sequentially from fourth quarter going into first quarter, it’s probably about 200 basis points of headwind there. But with these winter storms that we’ve just gone through here and yes, winter happens every year, but I think John kind of pointed out these were really abnormal impacts on us. So from an expense perspective, kind of incremental to that seasonality, we probably have upwards of $40,000,000 of expense that’s going to hit us this quarter. And obviously, it’s going to have some top line impacts as well.

Now, John and Ed and the whole team are really focused on and we are recapturing a lot of that volume that was lost over those couple of weeks, months where we had these big disruptions. But we won’t be able to get all that back by the end of the quarter. So it’s what it’s really created is kind of a timing challenge. We will get that revenue. We’re confident we’ll recapture all of it, but most likely not all within the first quarter.

So, that adds kind of another headwind to the first quarter. So, I think you’re going to see some elevated results in the first quarter from an OR perspective. But having said that, all in, we still feel very confident in our full year guide.

Brian Ossenbeck, JPMorgan Transport Logistics Cover, JPMorgan: So one of the other big piece of uncertainty obviously is just tariffs and the on and off nature of that. And I don’t know if anything’s come on or off since we’ve been speaking, but possibly. But in your conversations with shippers and John just preparing the network for that, I imagine railroads historically don’t do freight in general, just doesn’t do well with on and off. So I guess firstly, have you seen any behavior changes? And then have you seen or felt any sort of impact from those on the network side?

John Orr, COO, Norfolk Southern: Yes. Brian, I’ve had the privilege of working in Canada, United States and Mexico. A lot of those are import export operations. And I can tell you this that uncertainty in any environment is not healthy, whether it’s a relationship or a business. And we saw that even with the East Coast port strike threat in a three day strike manifested into a lot of disruption in the supply chain.

I think we took a lot of pages from that. Number one, even though there were some repositioning of freight to the West Coast, we were able to interchange and effectively move it within our catchment, whether it came from the East Coast or the West Coast. So we had enough capacity and capability in line of sight and trading relationships with our with our West Coast, rail rail exchangers to be very responsive. And it’s very much the same right now. We’re jumping on everything.

We’ve got locomotives in reserve. We’ve got them hot and ready, and we’ve got them deployed wherever we need them. We’ve got a resource in cars that are still parked and we’re pulling them out. So you know, one of the most front and center commodities is steel, and we’ve been very responsive to our steel producers in pulling out some cars that are stored to help them move as much as they can. And we’re ready to do that with any any of our customers.

We want our customers to win in their markets. We’re willing to use the resiliencies that we’ve accrued to be as agile and responsive as we can, and we’ve got the resources ready to go. And I think despite all the turbulence on the surface of water, there’s steady state underneath it. And I think those steady states will come. And for all of the reasons that the tariff talks are on, there will be a healthy outcome at some point.

And we’re ready to work through the turbulence as well as a steady state. And I think when you have a railway working as closely as we are and as customer centric as NS is, we’ve got what I would say a unique ability to be more responsive than perhaps others. And that’s our wheelhouse. So we’ll continue to serve our customers, be really agile and help them win despite the turbulence.

Brian Ossenbeck, JPMorgan Transport Logistics Cover, JPMorgan: Jason, from a, I guess, end market perspective or financial on the volume side, are there any commodities or trade flows that you’re watching in particular that could be as written the tariffs are going to cover a wide range of things, but like export coal, for example, possibly export agriculture, obviously steel, autos. What do you look at kind of like the exposure of as they stand right now on the network?

Jason Zampi, CFO, Norfolk Southern: Yes. So, first adding on to your previous question, we I think, like most people, customers, manufacturers, everybody’s kind of in a wait and see approach, right? Just seeing how all this uncertainty plays out, obviously, keeping a close handle on what’s going on. But from our business perspective, about 75 of our businesses is domestic. But we move The U.

S. GDP. So wherever the manufacturing occurs, wherever our shippers are, we stand ready to serve them. And I think that’s the great part about the agility that I just mentioned and what the work John and his team have done. If the volumes there, we’re ready to move it.

We’ve got the capacity, the resiliency and the agility to handle it. So we’ll see how it plays out. But I think we’ve got a good line on being able to move the traffic.

Brian Ossenbeck, JPMorgan Transport Logistics Cover, JPMorgan: So on a related topic, I guess, the with Agility, if we do have a share shift back to the East And Gulf Coast, which is assume we would, but it’s hard to say for sure, Would that be net positive, negative, neutral? And is it a different way of trade flows, obviously, or the freight flows rather? But would you be happier having more back on the East And Gulf Coast? Or does it not necessarily matter because you’re getting some of that interchange from the West Coast anyway?

Jason Zampi, CFO, Norfolk Southern: Yes. So I don’t know if you have an opinion operationally, John, but I just the way I think about it is, to your point, we’ll see how it shakes out, right? I mean, tariffs may impact that. But assuming freight does kind of come back to the East Coast, which makes sense for certain things instead of going from LA to New York, comes in on the East Coast. I’d say we’re kind of agnostic to it.

There’s puts and takes benefits and detriments each way. As an example, something comes in on the East Coast where we’ve got a lot of dense density there that we can serve, but we’ve got shorter length of haul. If it comes in West Coast, we’ve got longer lengths of hauls, but you could have some traffic leakage in some of the gateway cities like New York or Kansas City. So I think there’s puts and takes to both. We’ve shown that wherever that traffic wants to come in, we’ll move it.

But I think we’re we’ll take it wherever it comes.

John Orr, COO, Norfolk Southern: Yes. And for me, I invest in generational rail orders, really focus on terminal performance and first mile, last mile capability and of course, over the road. But when their first mile starts on our territory, you’ve got the opportunity to really set the clock on PSR two point zero really relies on a lot of accuracy and then stability. And if they’re coming on to us, then you don’t have multi thousand mile journey that had could be plus or minus several hours to make a connection or to make you know to optimize your train yield. And when they’re coming to us, and then we can really have more influence on that and more of the quality of the first touch into the country and then the last touch into the marketplace.

But either way, we’ve got some really good railways that we interchange. We’ve got a very, very robust network that includes a lot of sophistication on how we move cars from one company to another. So from a financial position, I agree with Jason. Just from an operating person, I like to control what I can control. So I’d prefer it to be on me, but we take it either way.

Brian Ossenbeck, JPMorgan Transport Logistics Cover, JPMorgan: So one more kind of operational free flow question. If we see these fees, levies, we’re going to call them on port calls for vessels that are tied to China in some shape or form, what I’ve heard is that’s going to create more bunching potentially more congestion is these vessels just visit the larger ports on the East and in the West Coast. But I don’t know if you heard anything different from your conversations with your ocean carrier partners, but would that be something you think the network would be able to handle just broadly speaking rail network in general because I tend to think of more stuff at one place at one time potentially causing some congestion?

John Orr, COO, Norfolk Southern: Well, I won’t work in hypotheticals, but just constructively, I would think that density helps rails and the frequency of departure or and how we manage that is not a bad thing. It’s the consistency if I’m looking at competing modal competition and I’m a producer, I’m looking for the lowest cost, most reliable system of moving it. And a lot of times due to our service in the past or other economic drivers, including just in time supply, People have chosen other modes of transportation. I think the threat of increased costs or the reality of an increased cost really would drive me as a logistics person to go to the lowest cost transportation and shave money so I can provide end user a better product at a lower cost. So I think railways are positioned, especially us, who really work in that industrial complex of the Eastern United States to really be responsive and support.

You know the control over the net effective costs within the country. So I think, Yeah, it depends on how much capacity you have. We’ve got capacity to serve. We can we can manage through frequency of departure. Any kind of surges and we do.

We saw it during Port Strike. We see it as vessels recover from ocean borne storms and the sequencing gets out of kilter. It’s nothing we don’t do. And the longer if it becomes a part of our landscape, we just adjust to it.

Jason Zampi, CFO, Norfolk Southern: And I just add to wherever if that concentration does occur, I mean, we serve every port on the East Coast and The Gulf. So I mean, we’re well positioned from that perspective. Like John said, we’re ready to handle it.

Brian Ossenbeck, JPMorgan Transport Logistics Cover, JPMorgan: So maybe talk a little bit more about truckload conversion. We’ve seen that pick up here, especially on the East, which is a little surprising considering the truck market’s recovering anytime soon, it looks like. But maybe in talk just approaching that market, and I think in the past you’ve called it more flexible freight. So how to get that to come to Norfolk, come to the railroad and then stay and not just go back and forth when it suits whatever that supply chain is that we’re talking about?

Jason Zampi, CFO, Norfolk Southern: Yes. So I think about that kind of in two pieces. So one, I would call share recapture. So that’s freight that we used to move and no longer do and then share growth, right? So just new opportunities there.

And I think the foundation for both of those is a really good consistent service product. And that’s something that we’ve talked about here, but that is what John and his team have built. So that’s the key to either picking back up freight that we had lost or just growing with new customers. So, I think that’s key. The next step in that is then how do we enhance the ease of doing business with us and whether that’s becoming a rail customer for the first time or it’s providing that consistent reliable service that the customer can trust that is more truck like.

So, I think those are the key components for us. But really, the good service product is the thing that really unlocks all of

Brian Ossenbeck, JPMorgan Transport Logistics Cover, JPMorgan: that conversion. Yes.

John Orr, COO, Norfolk Southern: And Brian, you would have seen last year in 2024, we spent a lot of time stabilizing the level of service, creating a lot more reliable service product and a couple of cranks of the operational improvement wheel on our planning, our structure and our train service plan in general. This year, as we talked about in December or January, I guess, We’re taking now that capability that we’ve developed and turning up the heat a little bit more on ourselves, greater length of fall for our trains. That means our assets are going to be turning The tighter standards within terminals so that our cars dwell and the utility of the cars are optimized. So we’re taking what we’ve done as a base last year and turning it up. Or as we did that, we started with safety and capability.

Now we’re looking at safety capability and business acumen. So really helping our leadership across all the stratas understand the business outcomes that they’re driving. If you can do that and still have a balance on your cost structure and your truck like service, which that’s the goal. That’s one of the goals is that’s going to help us now have a competitive front view and reputation from people who want to convert. They really want a lower cost, better choice to move or hedge a little bit.

So we’re going to really go strong on our service quality still on our cost structure and our top and bottom line focus. But it’s really about what our customers need, how can we get be more inclusive to onboard more people.

Brian Ossenbeck, JPMorgan Transport Logistics Cover, JPMorgan: Maybe, Jason, you can offer some comments on how the domestic channel partners are doing during bid season. Obviously, the truck market, as I just mentioned, is not really going up anytime soon. At least it doesn’t look like it’s bouncing out seasonality, so that’s a good sign. But how the folks with the private boxes, maybe even the rail owned boxes feeling as they go into that sort of market services certainly helping, but the competition probably not.

Jason Zampi, CFO, Norfolk Southern: Yes. So I think I’d say, I think we’re around like 70% of the way into our into that process. We’re hearing good things from our channel partners. I think a lot of positivity out there. We’ve I would say, you talk about truck pricing.

I mean, you see the same metrics that we do and we’re not really expecting a big rebound there anytime soon. That’s not in our base case scenario. Obviously, we’ll take it when it comes. But I think so far from where we are in the bid season, we’re feeling pretty good about things and as are our channel partners and our beneficial owners as well.

Brian Ossenbeck, JPMorgan Transport Logistics Cover, JPMorgan: So maybe you can talk a little bit more about pricing, Jason, as you get into again come back to the service product, which is improving the time lag of catching up with inflation, certain contracts probably work that way. But still not the best market from a visibility perspective, but I think you guys are a little bit unique in terms of how you’re able to approach that market and approach pricing, which has been a little difficult for the industry to get ahead of costs recently. So how does that what was sort of your base case for the year and you’re sort of tracking along that to start?

Jason Zampi, CFO, Norfolk Southern: Yes. So I mean, I think, as you said, it’s pricing conversations are always tough. But when you have a great service product, it makes that a little bit easier. And we can show the value that we’re bringing to them. I think from an overall perspective, it’s kind of hard to talk about pricing at the high level because it is so there’s so many different moving parts.

So I think if you start with coal, you think about that’s kind of tied to Seaborne benchmarks and you see what’s happening from that perspective. On the IP side, we’ve really done a really good job of strong pricing there, been very disciplined on our pricing side and have, I think, beat our own pricing plan there as we move through last year. So we expect to continue that momentum. And I think what the service product does is it allows us to, like I said, number one, continue that momentum, but two, add additional volume from that from those customers whether existing or new. So that’s what’s going on, I think, in the IP side.

And then on the intermodal side, kind of like I just talked about, really, because that is so truck competitive, we’re really focused on what the truck pricing environment is. And as I just mentioned, we don’t have that any kind of significant rebound built into our base case plan there. But I think it’s like I said, I think it’s easier to think about the pricing across those three big commodities separately and what we can do there. But I think we’ve been really proud of what we’ve been able to do on the industrial product side from a pricing perspective and now with this consistent service product adding volume to that as well.

Brian Ossenbeck, JPMorgan Transport Logistics Cover, JPMorgan: So John, one question I want to ask you for a little while now is car miles per day, because we see that from typically the longer length of whole networks like when we spoke to this morning where it’s over 200, two 15, which sounds great on an absolute basis relative to Easterns, which are a bit shorter. So how do we put that it’s relatively new for Norfolk to talk about that. How do we put that into context? Like where do you have a view on where that can go and what that would mean?

John Orr, COO, Norfolk Southern: Yes. Well, it probably is a reflection of my roots. And so car miles per day are important, but it’s a massive asset that reflects not only on the use of a car, but the product in it and how fast fast it’s getting to where it needs to go. And but I don’t I’ll tell you, Brian, I don’t fall in love with any one particular metric. And I certainly won’t allow my team to talk vanity metrics.

So it has to have a business reason why we’re focused in on it. And that is so tied into how effective we are over the road and how really precise we are within the terminal. So that’s what I’m focused on. I just like want to keep pushing myself in incremental improvements and really haven’t really we haven’t touched the value proposition for this network yet. I don’t know where the ceiling is.

I know we’ve created a lot of capacity for both trains, train length, train yield, throughput and terminals. So car miles is one of those things that you’ve seen a lot of improvement. And even despite the headwinds that we’ve had this winter through the storms, we’re still improving across the board on our train speeds, our car miles are well, it gets impacted probably more than anything else and even our locomotive utilization. So I look at it as a balance. And as I talk through it, I always talk through our internal assets of car, car miles, our network productivity, horsepower per GTMs, etcetera, and then as the customer sees it.

So I’m always trying to have that balance. So there’s probably lanes, especially in the Northern Corridor where we could really crank it up. But then at what costs and what value so we’re really want to make sure when I’m going in the pit to change the tires. I’m going to get faster lap times for the and win the race. So we just got to be balanced on how we look at that.

But I think car miles are very instructive to how we’re running, how our network is planned. And more importantly, it’s the deltas between expectation and reality that we have to drive into. So those help us and guide.

Brian Ossenbeck, JPMorgan Transport Logistics Cover, JPMorgan: Another area that seems like a potential upside for Norfolk is just on the fuel economy and fuel efficiency. I know you’ve brought some people to help out with that. It’s always been interesting that CSX, given the shorter length of haul, has been able to lead at least The U. S. Rails in that perspective.

So is that achievable in your view over some period of time? Is there a mix differential because you have a bit more intermodal? Where where does that stand? I guess you can use a baseball analogy in terms of innings.

John Orr, COO, Norfolk Southern: Winning innings? Well, we the home team or the away team?

Brian Ossenbeck, JPMorgan Transport Logistics Cover, JPMorgan: We’ll give you a home team.

John Orr, COO, Norfolk Southern: Home team. Perfect. Well, it’s it’s the top of one inning or another. But I would say there are a couple of pieces to that. I am absolutely committed to being the best we can be in fuel.

And I think we can meet and exceed our competition in the East on that. And it’s early days, and we’ve made a lot of improvements, but there are administrative controls. So how do we account for fuel? What processes do we have in place? And then how do we reconcile right and how quickly and so we’ve really worked at speeding all of those things up and creating as much automation as possible.

But there are investments that we’re prepared to make. We’re in the midst of one hundred day review of all of our purchases and services and category management of those things and front and center is fuel. And that’s why I brought Mina and Carlo and other people into the company. They are absolute experts at this. And so that you’ll see deeper dives on that reconstruction of how we source fuel.

How do we deploy it? Even the cat some capital investment around managing those things. And I would say that the nice thing is probably in the early innings of the World Series. So you know, there’s not just nine innings is up to 63 innings, but we’re making a lot of progress. And so we’re really looking at sustained improvement.

And then we’ll see inflection points where we get a lot of value. And then the next iteration in improvement. And you saw that last year. So we’re really challenging ourselves. Absolutely.

Really aggressive improvement and we’re tracking fairly close to that. So I’m excited by it. Really, really excited by it.

Brian Ossenbeck, JPMorgan Transport Logistics Cover, JPMorgan: Great. One question we’re asking everybody here this week is, we’ve seen more reports and the AR came out with one on cargo theft and how much that cost to industry and it’s we hear more from shippers at conferences we go to as well. So it does seem like it’s not just any specific railroad and it’s getting more organized, more challenging for freight in general. So is that reached level of heightened focus from your conversations? And how is the industry trying to address that?

John Orr, COO, Norfolk Southern: Yes. I’ll say this. Police report to me at NS and I take it very seriously. And I want to give them all the tools and skills and support that they need to effectively protect our infrastructure, our people and of course, cargo. And I don’t know how to say this politically correctly, but I do not want places like Atlanta and Chicago to experience the same kind of Theft and disruption that we saw in other parts of the country.

And so we’ve we’ve really been focused on how do we How do we do that? So for me, a train at rest is a train at risk

Jason Zampi, CFO, Norfolk Southern: and

John Orr, COO, Norfolk Southern: then faster we move them, the better we’re going to be to insulate especially through risk areas so we know where our risk areas are and in order to really energize our police I’ve brought in a group that I worked with in in Mexico who were very skilled at assessing an action. Action orientation around concentrically protecting key areas and we’re really looking at how do we do that? How do we then do do what we can ourselves and bring our partners in other railways that we interchange in some of these areas? Even groups that that have interest including BCOs and other other people that, that may want to be a part of that, but we’re taking it very seriously. We’re able to work through through it very well right now.

I just don’t want to give any kind of opening to further disruption. Right.

Brian Ossenbeck, JPMorgan Transport Logistics Cover, JPMorgan: So we have a couple of minutes left. If there’s anybody in the room who wanted to ask a question, if not, I’ve certainly got a few more in the back there.

Unidentified speaker: The three day port strikes that happened, you touched on that a little bit now. It didn’t really have a huge disruption to your network. One of the issues with the port strikes was the automation at the ports and the union’s desire to have that kind of kiboshed in some ways. How does automation at the ports affect your business? Does it affect how much you can load, when you can load, if they were to become 60%, eighty % automated, would that change in what way or another your business?

John Orr, COO, Norfolk Southern: Well, I think globally, we’ve seen the impact on progress through optimization or improvements. It’s how it interfaces with people and that willingness to engage in it. Ports are going to do what they’re going to do when they load the railcars and if they can find more efficiencies, whether it’s traditional or new ways, then we’re ready to jump on that. And I’ve worked in areas where they’re more technologically advanced and others where it’s more traditional. And either way, we’re able to provide effective service and move the goods.

I think that where the benefit could or the thesis could be as how effective things move on that port in a constraint on acreage or limitations that are terrestrial. That will be up to the ports on how they deal with that. But we’re agnostic one way or the other. And we have great partnerships with our ports and they’ve been able to respond to changes that we’ve made and headwinds that we faced and we’re ready to support our trading partners in any way we can. So I don’t think it’s I’ve got a position one way or the other.

Brian Ossenbeck, JPMorgan Transport Logistics Cover, JPMorgan: So John, maybe I’ll wrap up with a kind of related question. When you look at staffing, engagement, bench strength of the team, there has been a lot of operational changes we’ve seen. Pretty contentious negotiation with industry and labor, we’ve seen work rest rules change. But how are you feeling right now in terms of how all that’s positioned and being able to execute down to the field level?

John Orr, COO, Norfolk Southern: Brian, one of the things that one of the first things I did was take the field leadership out of Atlanta and put them where they belong in the field. So our Vice President, Operational Vice Presidents, General Management, Superintendents, that top three tiers of management that weren’t necessarily in the field where they were able to make decisions, influence people, push them out. That’s allowed us to decentralize some of the decision making and put in controls into Atlanta to validate the decisions. That’s helped us tremendously in the agility, the responsiveness. It’s helped in safety.

Our safety performance last year improved over 35% in injuries and accidents were on track to around 37% right now. On top of that, as we as we move through the year, So stability, safety and engagement has been improved tremendously. Worse I’m still looking to build up the bench. That’s why I’m spending a lot of time this year on clarity camps, so it will be a business acumen, communications and capability and safety for the top 30% graduates from my safety camps will advance into business clarity camps to really drive home that that, that need. And build the bench and create that capability.

And so we’re finding ways to really develop people more rapidly within NS and we’ve got it. We’ve got a great host of people with talent all over the place and finding those nuggets and moving them out into the field. We’ve got a group of PhDs that we in our operations research department. I brought them into my war rooms. Now they still work for an ill.

And there were looking at the trending of traction motors and outputs of, you know, locomotives and any kind of erosion in power and traction and then sending them out to the field. They’re actually riding trains and feeling what they’re actually experiencing in the academic world into a practical world and connecting to our team. And so they’re elevating. So the business is improving from places I didn’t even anticipate last year. So we’ll continue to do that.

And I think it supports us and we’re early days into this transformation. But I would think that it’s important to tell you across the board whether it’s the finance department, the commercial group, the back office or the operations teams were really focused on improving NS, creating top and bottom line growth, closing performance gaps to our peers and providing the best service we can possibly provide. And we’re moving along that purposefully with deliberate practice. We know that we don’t have all the answers yet and we’re really, really focused on developing that capability even more fully. So we can compete and we can win.

Brian Ossenbeck, JPMorgan Transport Logistics Cover, JPMorgan: Okay, great. Well, we’re out of time, so we have to wrap it up there. But John, Jason, thank you very much for spending your day with us. We appreciate it. Thanks very much.

John Orr, COO, Norfolk Southern: Thank you, everybody.

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