Norfolk Southern Q1 Earnings Call Highlights

Key Points

• Norfolk Southern said it exited Q1 with “solid momentum” after winter storms, with a March rebound driving record gross ton miles and improved operational productivity while safety metrics notably improved, including a strong FRA mainline incident reliability record.
• Financially, adjusted operating ratio was 68.7% with adjusted EPS of $2.65, but results were pressured by higher fuel costs (about $31M more year-over-year) and $52M of merger-related expenses, and the company is maintaining 2026 adjusted operating cost guidance of $8.2–$8.4B.
• Revenue was roughly flat with RPU up 2% as merchandise and coal trends diverged (merchandise up, intermodal down 4%, coal volumes +9% but RPU down 9%), and Norfolk Southern plans to refile its merger application with Union Pacific by April 30 while pursuing local partnerships like a proposed Jaguar short-line/transload deal.

Norfolk Southern NYSE: NSC executives said the railroad exited the first quarter of 2026 with “solid momentum” after widespread winter storms disrupted operations and customer loadings in February, while higher fuel prices and merger-related expenses weighed on results.

Winter weather pressured February volumes, but March rebound lifted momentum

President and CEO Mark George said the company “successfully navigated another challenging winter,” noting weather events across much of its territory “put real pressure on the network and our volumes in the month of February.” As conditions improved, George said Norfolk Southern recovered and “was able to capture the available volume in March.”

Chief Operating Officer John Orr said the storms were “network-wide” and credited “more than 19,000 railroaders” for meeting both daily demand and storm backlog. Orr also said the team delivered “post-pandemic daily GTM volume records” as the network normalized.

Safety metrics improved, with mainline incident reliability highlighted

Management repeatedly emphasized safety as the top priority. George said the company’s “safety performance continues to excel,” attributing progress to investments in “technology, training, and standard processes,” including digital inspection tools and more rigorous operating standards.

Orr provided several safety metrics for the quarter, including an FRA personal injury ratio of 1.10, in line with full-year 2025 performance. He said the FRA accident ratio was 1.43, representing a 37% year-over-year improvement in the first quarter. Orr also reported an FRA mainline accident ratio of 0.26 and said Norfolk Southern “continues to lead the way for Class I railroads in mainline incident reliability.”

Operating and productivity initiatives offset inflation and fuel headwinds

Orr said Norfolk Southern is “advancing and layering progressive PSR 2.0 structural changes” intended to build resilience and efficiency. Operationally, he said shipments were “modestly lower” year-over-year, but the railroad moved 1.1% more gross ton miles, reflecting “stronger train productivity and better asset utilization.”

Orr cited year-over-year improvement in terminal dwell and said the network operated with “8.6% fewer recrews,” improved locomotive reliability, and continued reductions in unscheduled train stops. He also said the qualified train and engine crew base was down about 6% year-over-year, while the company continues recruiting in markets where it anticipates growth.

Fuel efficiency was a central theme. Orr said Norfolk Southern achieved a “fuel efficiency record” during the quarter. In response to questions, he added that sequential fuel improvements also included some accounting adjustments, but said the company is treating fuel as “a major cost lever” through “precision fueling” and an integrated fuel management system covering purchasing, distribution, and consumption.

Segment results: flat revenue, higher RPU, with intermodal and coal mix effects

Chief Commercial Officer Ed Elkins said overall volume finished down 1% year-over-year, “primarily due to challenging Intermodal market conditions as well as merger-related losses.” Despite lower volume, Elkins said revenue ended the quarter flat and revenue per unit (RPU) rose 2%, supported by core merchandise pricing and favorable mix at a high level, though coal created offsetting pressures within individual business groups.

• Merchandise: Elkins said merchandise volume and revenue increased 1% year-over-year, driven by “continued share gains” in chemicals and automotive. Merchandise RPU excluding fuel was flat, as strong core pricing was offset by mix effects from growth in lower-rated chemicals commodities such as frac sand and natural gas liquids (NGLs).
• Intermodal: Intermodal volumes decreased 4% due to difficult comparisons tied to “tariff front-running in 2025,” winter storm impacts, and ongoing merger-related losses from prior quarters. Intermodal revenue fell 1% and revenue excluding fuel declined 2%, while RPU rose 3% and RPU excluding fuel rose 2% on improved pricing and positive mix.
• Coal: Coal volumes increased 9% on higher electricity demand, stockpile replenishment, and what Elkins called a “supportive regulatory environment” for utility coal. Coal revenue declined 2% as RPU fell 9% due to mix headwinds from utility growth and what Elkins described as an “overhang of export pricing.”

Elkins pointed to several external factors shaping the outlook, including the conflict in Iran, which he said has “driven energy prices sharply upward.” He said fuel surcharge revenue would be the most immediate offset to fuel expense and added that Norfolk Southern is pursuing energy-related volume opportunities while monitoring potential impacts to consumer demand.

On intermodal, Elkins said international volumes are expected to remain soft amid tariff volatility and trade pressures, though lean retailer inventories could eventually support restocking-related freight. He also said the truck market has turned “relatively positive,” with dry van rates trending upward and capacity “right size” continuing as demand firms.

Adjusted results, cost guidance, and merger update

Chief Financial Officer Jason Zampi said Norfolk Southern incurred $52 million in merger-related expenses during the quarter and $10 million in costs tied to the Eastern Ohio incident. On an adjusted basis, Zampi said the operating ratio was 68.7% and earnings were $2.65 per share.

Year-over-year, Zampi said the adjusted operating ratio increased 80 basis points. He attributed about 280 basis points of pressure to inflation and fuel prices, partly mitigated by productivity and higher RPU. Zampi said overall costs rose 1% year-over-year, offsetting an estimated 5% inflationary headwind.

Fuel price was a key driver: Zampi said fuel expense was $31 million higher than last year due to price and more than $40 million higher than the company expected, with the surge accelerating late in March and continuing into the second quarter. In Q&A, Zampi said the price paid per gallon in March was up 45% versus last year and that similar dynamics were occurring in April. He also said storm-related costs were about $13 million to $15 million in the quarter.

Looking ahead, George reiterated 2026 adjusted operating cost guidance of $8.2 billion to $8.4 billion, saying the company is maintaining the range while acknowledging near-term fuel volatility. Zampi said the company expects “typical margin seasonality” from the first quarter to the second quarter. When asked about sequential operating ratio improvement, Zampi said management views normal Q1-to-Q2 improvement as about 200 basis points, driven by productivity initiatives, despite headwinds that include inflation, the absence of a prior-year land sale, merger-related competitive impacts, and fuel pressure.

On the pending merger with Union Pacific, George said Norfolk Southern remains on track to refile its application by the end of the month, later specifying April 30. He said the revised application will be “even stronger” with a “much stronger set of data,” while maintaining the same rationale: creating “the nation’s first single-line transcontinental railroad.” George said he feels “a lot better” than when the initial application was filed and emphasized efforts to address customer concerns and opposition claims with facts.

Separately, Elkins introduced a proposed short line and transload partnership with Jaguar Transport Holdings, subject to standard regulatory approval, focused on a high-density switching corridor in Doraville, Georgia. Elkins described it as a growth-oriented structure aimed at improving local service and capacity in metro Atlanta and said the company would look to replicate similar partnerships elsewhere if successful.

About Norfolk Southern NYSE: NSC

Norfolk Southern Corporation is a major U.S. freight railroad company that provides rail transportation and related logistics services. As a Class I carrier, the company operates an extensive network across the eastern United States and offers scheduled freight service for a broad range of industries. Its core operations include long-haul and regional rail freight transportation, intermodal services that move containers and trailers between rail and other modes, and terminal and switching services that support efficient rail shipments for industrial and port customers.

The company transports a variety of commodities, serving sectors such as coal and energy, automotive and automotive parts, chemicals, agriculture, metals and construction materials, and consumer goods.

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