Norfolk Southern (NYSE:NSC) released first-quarter financial results and hosted an earnings call on Friday. Read the complete transcript below.
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Summary
Norfolk Southern Corp reported a modest increase in adjusted expenses by just 1% year over year despite inflationary pressures and higher fuel costs.
The company is advancing PSR 2.0 structural changes to build more resilience and efficiencies across their network, enhancing safety and service capabilities.
Although first-quarter revenue remained flat, the company is optimistic about growth prospects, particularly in domestic intermodal and export coal markets, despite macroeconomic uncertainties.
Management highlighted significant improvements in fuel efficiency and labor productivity, and reiterated their commitment to safety and operational excellence.
The company remains on track with its merger application and maintains its cost guidance for 2026, though acknowledging potential volatility due to fluctuating fuel prices.
Full Transcript
OPERATOR
Good morning ladies and gentlemen and welcome to the Norfolk Southern Corporation first quarter 2026 earnings conference call. At this time, note that all participant lines are in listen-only mode. Following the presentation, we will conduct a question and answer session and if at any time during this call you require immediate assistance, please press star zero for the operator. Also note that this call is being recorded on Friday, April 24th, 2026 and I would like to turn the conference over to Luke Nichols. Please go ahead sir.
Luke Nichols (Operator)
Good morning 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 our 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. Turning to slide 3, I’ll now turn the call over to Norfolk Southern’s President, Chief Executive Officer Mark George.
Mark George (President and Chief Executive Officer)
Good morning and thanks for joining us with me today are John Orr, our Chief Operating Officer, Ed Elkins, our Chief Commercial Officer, and Jason Zampi, our Chief Financial Officer. Before we get into details, I wanted to start by recognizing our Thoroughbred team. Working together, we successfully navigated another challenging winter with weather events that affected most of our territory, putting real pressure on the network and our volumes in the month of February. But as conditions normalized and our network recovered, we were able to capture the available volume in March and exited the quarter with solid momentum, all while staying focused on what matters most, operating the railroad safely. Our safety performance continues to excel, which remains our most important work. We’re seeing the benefits of the investments we’ve made in technology, training and standard processes. From digital inspection tools to more rigorous operating standards, these efforts are helping us detect and address potential issues earlier and keep our employees, customers and communities we serve safe. Our FRA-reportable accident rate is down yet again thanks to the systems we have and our leadership. I’m proud of how our people stayed disciplined and committed. Through all the weather challenges and other distractions on costs, we remained disciplined. Total adjusted expenses were up just 1% year over year despite inflationary pressures, storm costs and sharply higher fuel prices. We earned new business, expanded key relationships and saw customer confidence grow across multiple sectors, reflecting improved execution and trust in our capabilities. We’re seeing strength and encouraging results across multiple parts of the business, reflecting focused investments and improved coordination across our teams. Ed will walk through some of our wins and the underlying volume drivers in more detail. Lastly, stepping back to the broader environment, the macro remains a mix of puts and takes. Customers continue to manage dynamic and shifting supply chains, but our message is simple. Norfolk Southern is well positioned to grow alongside of them. The strength of our network combined with the flexibility we built into our cost structure gives us confidence to navigate whatever the market brings. And with that, I’ll turn it over to John to get into the operational details.
John Orr (Chief Operating Officer)
John Good morning everyone and thanks Mark Throughout 2025 our Norfolk Southern team was focused on growing our team’s capabilities, skills and speak up willingness, creating the environment to deeply embed our safety and service maturity and capabilities. Now, with a full quarter behind us in 2026, we are realizing measurable gains from those successive efforts. We are advancing and layering progressive PSR 2.0 structural changes to build more resilience and efficiencies across the railway, develop generational railway leaders and provide our customers with the best possible service plan. As Mark noted, extreme and network wide winter weather in the first quarter tested the network. I am very proud of the entire enterprise in the way we anticipated, prepared and responded to deliver for our customers. The extraordinary commitment of more than 19,000 railroaders across our franchise was clear in the service and volume execution coming out of the system wide storms. Thank you to all my fellow railroaders. The entire team delivered both daily and storm backlog demand and drove post pandemic daily GTM volume records made possible by our operations and commercial teams turning to slide five at Norfolk Southern. Safety is the core value through which all of our operating decisions are made. Our continued investment in safety is producing results while building a stronger, more durable safety culture. In the quarter our FRA personal injury rate was 1.10. This is consistent with full year 2025 performance. Our FRA accident ratio was 1.43. This reflects a 37% improvement year over year. In the first quarter our FRA meanline accident ratio was 0.26. For the second consecutive year, Norfolk Southern continues to lead the way for Class 1 railroads in mainline incident reliability. This progress is not isolated, it is also mirrored in a reduction of non FRA reportable accidents. These improvements reflect the strategic impact of our intentional coordination of field level technology coupled with execution across back office work scope, process refinement and field conversion engagement combined, we are creating reliable network value by engineering out risk from operations wherever our teams work. This holistic approach to safety improvement is now embedded in how we plan, execute and manage the railway every day. While we are all proud and encouraged by our safety improvements, we are driven by a relentless drive for continuous improvement. Our enterprise is committed to putting in the work we know there’s more work to do. We are strengthening our stop work authority, reinforcing a speak up culture and relentlessly addressing root cause analysis to prevent block crossing and other incidents. Turning to Slide 6 throughout the first quarter, the network demonstrated resilience in the variable demand environment we faced. Our focus remains on improving our train speed while maintaining balanced discipline around energy management and service levels, a core operational priority. While shipments were modestly lower year over year, we moved 1.1% more gross ton miles reflecting stronger train productivity and better asset utilization across the network. Terminal dwell improved year over year. Coupled with continuous focus on execution to the plan, this supports gains in car miles per day. We have been intentional about protecting service and operating the network at a lower cost structure. That discipline is reflected in 8.6% fewer recruits. Improved locomotive reliability and continued reductions in unscheduled train stops. Improved crew scheduling and greater crew availability are supporting stronger crew productivity across the network and a better aligned qualified T and E crew base which is down about 6% year over year. And we continue to strategically recruit and renew our workforce in markets where we anticipate growth, reliability drives, improved productivity, improves locomotive and fuel efficiency. Taken together, these results demonstrate we are controlling what we can control, managing costs, improving efficiencies and positioning the network to respond to the evolving market conditions. Turning to slide 7 at the core of PSR 2.0 is a self reinforcing operating system, a flywheel where disciplined execution compounds over time. At Norfolk Southern, we know when we run the plan, reduce recruits and improve network velocity. We create stability in the operation. Stability matters to our people and to our customers. It allows us to deliver our service and utilize assets more effectively, improve locomotive and field productivity and operate with better energy efficiencies. Operational gains have manifested into the continued evolution of our service plan and its execution. They feed directly back into better schedules, better planning and more consistent execution. We now have a connected system where every improvement strengthens the next. That compounding effect is how we intentionally build a more resilient railroad. Steadily over time, our war rooms continue to translate this discipline into measurable results. The mechanical room has improved detection, quality in our wheel integrity systems while delivering confirmed defect identification that directly improves safety and reliability. This is a clear example of technology, process and field execution working together at scale. At the same time, our need for speed war room is embedding advanced analytics directly into daily operating. By pairing data science with frontline execution, we are improving plan quality, accelerating decisions and strengthening the performance across our network. Disciplined execution across the organization is delivering results in the first quarter we achieved a fuel efficiency record, strengthening our competitive position in a high fuel price environment while protecting margins. More importantly, it reflects the repeatability of this operating system. Taken Together, our PSR 2.0 transformation and operating systems position us to continue to outperform our original cost reduction commitments and deliver sustained progress across safety, service and financial performance. With that, I’ll turn it to you Ed.
Ed Elkins (Chief Commercial Officer)
Thanks a lot John and good morning everybody. Let’s move to Slide 9. We closed out the first quarter with significant volume momentum and this is offsetting a volatile February where severe winter weather impacted our customer car loadings for several weeks. Overall volume finished down 1% primarily due to challenging intermodal market conditions as well as merger related losses. However, revenue ended the quarter flat year over year and revenue per unit (RPU) was up 2% with solid core merchandise pricing and some favorable high level mix which were somewhat overshadowed by some puts and takes within the individual business groups, particularly within coal. Within merchandise, volume and revenue increased 1% from a year ago and this was driven by continued share gains in our chemicals and our automotive markets. revenue per unit (RPU) less fuel was flat year over year within the segment as strong core pricing was offset by mix interactions due to sustained growth of lower rated commodities within our chemicals franchise that we’ve talked about for a couple of quarters. Now in our intermodal business, volumes decreased 4% reflecting difficult comparisons related to tariff front running in 2025 as well as impacts from the winter storms in the quarter and ongoing merger related losses from prior quarters. Overall, intermodal revenue declined 1% and revenue less fuel decreased 2% due to these volume impacts while improved pricing and positive mix within the segment drove revenue per unit (RPU) higher by 3% and revenue per unit (RPU) less fuel higher by 2%. Looking at coal volume increased substantially as higher electricity demand, stockpile replenishment and a supportive regulatory environment powered our utility segment. Now this strength was partially offset by reduced volume in domestic met coal and so while total coal volume increased 9%, revenue declined 2% as mixed headwinds from utility growth and continued overhang of export pricing drove revenue per unit (RPU) down by 9%. Let’s go to slide 10. Here we highlight several dynamic factors influencing our market outlook, including the conflict in Iran which has obviously driven energy prices sharply upward. In the near term, our fuel surcharge revenue will be the most immediate impact as an offset to fuel expense and additionally, we’re aggressively pursuing volume and revenue opportunities in a variety of energy related markets while also monitoring potential impacts to overall consumer demand. Looking at merchandise, we have a subdued but positive outlook for vehicle production due to near term economic uncertainty on the part of consumers. Manufacturing activity remains mixed with output forecasted to expand modestly amid the shifting economic landscape. Energy prices and global supply chains will be significant wildcards in the months ahead due to the conflict in Iran and depending on the duration of supply chain disruptions, we could see near term opportunities in markets like natural gas liquids, export, plastics and potentially even crude oil. Looking to our intermodal markets, international volumes are going to remain soft due to continued tariff volatility and trade pressures. On the other hand, retailers have been maintaining lean inventories in response to this macro uncertainty for which eventual restocking offers some support for baseline freight activity. The truck market has turned relatively positive with dry band rates trending upward in 1Q26 and capacity continues to right size while demand is firming. Taken together, we have an optimistic view of intermodal, although we’re tempering that optimism somewhat due to increased competitor activity following the merger announcement, let’s turn to coal, where a combination of global factors is supporting pricing across both metallurgical and thermal seaborne markets. Now, most notably, the conflict in Iran is impacting global LNG supply chains, opening the global market to consider alternatives such as US Sourced thermal coal. The utility outlook remains positive as growing domestic electricity demand and inventory restocking should continue to support Norfolk Southern coal volumes. Okay, let’s move to slide 11 where I’m excited to introduce an innovative new short line and transload partnership which is subject to standard regulatory approval with Jaguar Transport Holdings. Unlike traditional short line transactions across the industry, which have been focused on finding efficiencies and leveraging lower density lines, our new partnership focuses on growth in a high density switching corridor located in Doraville, Georgia. Our new partnership, which includes operation of both an industrial short line and our transload terminal, will deliver exceptional local service and responsive capacity to customers in the growing metro Atlanta market. Now here’s what I want everyone to take away. This new partnership is just the latest example of our larger growth strategy in action. We’re focused on building and executing innovative deal structures that deliver new capabilities and exceptional value for our customers. Look for more innovative solutions and new capabilities in the months ahead as we continue to execute on our strategy for growth. With that, I’m going to turn it over to Jason Zampe to review our financial results.
Jason Zampi (Chief Financial Officer)
Thanks Ed. I’ll start with a reconciliation of our GAAP results to the adjusted numbers that I’ll speak to Today on slide 13 we incurred $52 million in merger related expenses during the quarter while total costs related to the Eastern Ohio incident, were $10 million. Adjusting for these items, the operating ratio for the quarter was 68.7 and earnings per share (EPS) was $2.65 per share. Moving to Slide 14, you’ll find the comparison of our adjusted results versus last year. From a year over year perspective, the operating ratio increased 80 basis points. Inflation and fuel price headwinds drove an approximate 280 basis point increase. However, we were able to mitigate a large part of that increase through productivity and higher revenue per unit. Taking a closer look at our quarter on slide 15, overall costs were up 1% as we were able to offset an estimated 5% headwind from inflationary pressures. Specifically, fuel price alone was $31 million higher than last year and over $40 million higher than our expectations, a phenomenon that really accelerated in the later part of March and has continued here into the second quarter. We have continued to deliver on our productivity initiatives with fuel efficiency and labor productivity delivering over $30 million in savings. Partially offsetting those gains, we had some volumetric increases that drove purchase services and rents higher in the quarter. So to summarize our financial Results on Slide 16, while first quarter costs were only up 1% and in line with our cost guidance for 2026, the lack of revenue growth combined to drive a modest earnings per share (EPS) reduction. While we overcame typical operating ratio seasonality in Q1, we are constantly striving to improve. We continue to refine our focus to unearth other opportunities and you heard John talk about some of those initiatives as we work towards the 150 plus million dollars of efficiencies planned for this year on top of the over $500 million in productivity we generated over the last two years. Fuel …
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