Norfolk Southern Corporation

What they do

Norfolk Southern operates approximately 19,100 route miles across 22 states and the District of Columbia, hauling raw materials, intermediate products, and finished goods, with connections to every major container port on the Atlantic coast plus Gulf Coast and Great Lakes ports. The system reaches manufacturing plants, electric generating facilities, mines, distribution centers, and transload facilities, and interchanges with other rail carriers for nationwide reach. It also runs freight service over lines with Amtrak and commuter passenger operations.

Revenue drivers

• Merchandise traffic — Growth in automotive and chemicals traffic drove merchandise revenues higher in 2025, reflecting improved service and customer demand.
• Intermodal — The most extensive intermodal network in the eastern U.S., moving overseas freight through several Atlantic and Gulf Coast ports.
• Fuel surcharge revenue — Higher fuel surcharges represented six points of the 11% second-quarter 2026 revenue growth, and higher fuel prices significantly affected both revenues and expenses.
• Railway line and property sales — 2025 results included meaningful gains on monetized properties, while 2024 results included $433 million in gains on sales of railway lines.

Recent performance

Second quarter 2026 railway operating revenues were an all-time quarterly record of $3.5 billion, up $355 million or 11% year-over-year, on 4% volume growth. Income from railway operations was $1.1 billion, down 4%, and diluted EPS was $3.26, down $0.15 or 4%. Reported operating ratio was 67.6% versus 62.2% in second quarter 2025, reflecting the absence of prior-year Eastern Ohio incident insurance recoveries plus merger expenses and higher fuel prices. Adjusting for merger-related expenses, restructuring and other charges, and the Incident, income from railway operations was $1.2 billion (up 5%), operating ratio was 65.5%, and diluted EPS was $3.52 (up 7%).

Strategy

Norfolk Southern states it is focused on operating a safe, reliable railroad, providing high-quality, consistent service, and executing with discipline to capitalize on emerging opportunities. It cites operational productivity, modest volume growth, and favorable merchandise pricing as drivers of 2025 earnings growth and is prioritizing labor productivity and fuel efficiency. On July 28, 2025, it entered a Merger Agreement with Union Pacific to create what it calls America's first transcontinental railroad, a stock-and-cash transaction subject to STB approval. Management also continues work to resolve environmental and legal matters from the Incident, with 2025 insurance and other recoveries exceeding incremental expenses.

Risks

• Merger completion uncertainty — The Mergers require regulatory approvals including STB approval and are subject to conditions and an end date, and failure to complete could materially adversely affect the Company.
• Termination fee exposure — If the Merger Agreement is terminated under specific circumstances, either Norfolk Southern or Union Pacific must pay a $2.5 billion termination fee.
• Eastern Ohio incident costs — The Incident and related proceedings continue to affect results, with 2026 second-quarter results hurt by the absence of prior-year insurance recoveries.
• Fuel price and surcharge exposure — Higher fuel prices significantly impacted both railway operating revenues and expenses, with fuel translating to 110 basis points of operating-ratio headwind year-over-year.

Outlook

Management said second-quarter demand improved across key markets and exceeded expectations, and that the company is well positioned to create value if encouraging demand trends continue. Priorities for the second half of the year are operating a safe, reliable railroad, providing consistent service, and executing with discipline. No specific full-year revenue, EPS, or operating-ratio guidance figures were disclosed in the provided materials.