NSC

SummaryView Transcript Railroads are seeing a significant upturn in Q2 earnings, with most Class 1 carriers raising their guidance. But the big story is the revelation of strategic deals between Union Pacific and Canadian National, directly tied to the CPKC merger. Discover how these competitive shifts will redefine domestic and cross-border rail operations, bypassing congested hubs and expanding market access for key commodities. Canadian National Railway will not oppose the proposed Norfolk Southern-Union Pacific merger after reaching two separate agreements with Union Pacific — one tied directly to the merger and one that stands on its own — that give CN a faster route to Mexico and a first-ever foothold in Kansas City, rail analyst Bill Stevens told FreightWaves. The deal that is independent of the merger grants CN haulage rights over Union Pacific’s tracks between Memphis and the Mexican border crossing at Eagle Pass, Texas, covering traffic moving between Canadian origins or destinations and Mexico. The arrangement gives CN a faster, more direct route to compete against CPKC, which already offers single-line service across Canada, the U.S., and Mexico. Currently, CN hands traffic to Union Pacific in Chicago, resulting in a shorter length of haul. In exchange, Union Pacific gains rights to use CN’s Chicago bypass — the EJ&E corridor acquired in 2009 — to avoid the city’s notoriously congested rail network. The merger-contingent piece grants CN trackage rights over Union Pacific through Missouri, running two parallel routes across the state. CN gains access to the Kansas City market for the first time operating its own trains and gets the use of Union Pacific’s underutilized Neff Yard in Kansas City. The arrangement addresses competitive concerns for roughly five shippers whose railroad options would drop from two to one under a NS-UP combination, and approximately two dozen shippers — mostly in the St. Louis area — who would go from three options to two. “CN said, hey, this solves our competitive concerns about the merger. We get growth opportunities out of it, and as a result, we will not oppose the merger,” Stevens said. The merger developments come as four of the six Class 1 railroads reported earnings this week showing broad-based volume improvement. CSX volumes were up 6%, Norfolk Southern up 4%, Canadian National up 5% on a revenue-ton-mile basis (flat at 0.35% on a carload basis), and Union Pacific up 2%. Three of the four railroads raised their financial or volume outlooks for the year. Intermodal led the gains: CSX intermodal rose 9%, Union Pacific domestic intermodal posted its fourth straight quarterly volume record with double-digit growth, and Norfolk Southern intermodal climbed 5%, driven in part by truck-to-rail conversions tied to high fuel prices. Coal results diverged sharply by railroad. Norfolk Southern coal was up significantly on exports of metallurgical coal, while Union Pacific coal fell due to high utility stockpiles and low natural gas prices. CN’s Chief Commercial Officer Janet Drysdale noted on the railroad’s earnings call that truck capacity in Canada is not as tight as in the U.S., explaining why CN’s domestic intermodal performance lagged its American peers. CN flagged tariff uncertainty, forest products weakness tied to slow U.S. housing starts, and strength in petroleum, chemicals, and grain as the key variables shaping its outlook. On the industrial side, Norfolk Southern said new plant openings and expansions across its network are running at double last year’s pace, while CSX cited data center construction as a driver of construction-related traffic. Union Pacific also pointed to manufacturing gains it expects will outpace overall industrial production — implying market share gains from truck. The Surface Transportation Board is set to receive a supplemental merger filing from Norfolk Southern and Union Pacific on Monday, ahead of a Future of Rail Symposium in Chattanooga on Tuesday where both railroads’ CEOs are scheduled to appear. CPKC reports earnings Wednesday; BNSF will report alongside parent Berkshire Hathaway next month. CN will not oppose the NS-UP merger after securing haulage rights from Memphis to Eagle Pass and first-ever access to the Kansas City market via Union Pacific’s Neff Yard. Four Class 1 railroads reported volume gains this week — CSX up 6%, NS up 4%, CN up 5% (revenue ton miles), UP up 2% — with three raising full-year outlooks, led by intermodal growth. NS-UP must file supplemental merger information with the Surface Transportation Board on Monday, with both CEOs set to discuss the deal at FreightWaves’ Future of Rail Symposium in Chattanooga on Tuesday. Speaker 1 [0:00] All right, let’s go to the other great mode of domestic surface freight. We’ve got Bill Stevens who’s going to talk, break down all of the action in the rails. It is absolutely hot. Bill, welcome to Freightways Today again. How are you, sir? Speaker 2 [0:16] I am well, Craig. Hi, hi, Julie. How are you both today? Speaker 1 [0:19] Well, we know it’s exciting. You’re going to be down in Chattanooga next Tuesday. We have the Future of Rail Symposium that will be right here in Chattanooga. We got the CEOs of probably the hottest story in freight, Norfolk Southern and Union Pacific. Now, we are told they won’t talk about the merger itself, so it’s going to be in the room. I don’t know if, if, uh, uh, if what you’re expecting to hear from that conversation. Speaker 2 [0:43] Well, um, our timing is perfect because on Monday they are going to file the supplemental information that the Surface Transportation Board asked for regarding the merger. So that is going to be question number one. What does this additional merger do that can— Speaker 3 [1:00] or additional information do that can help get your merger across the finish line from a regulatory review perspective? Um, so we’ll, we’ll have a— Speaker 2 [1:09] we’ll— Speaker 3 [1:09] they’ll have a lot to say about the merger, I am sure. Speaker 1 [1:12] So they will talk about it. I, I— that’s, that’s certainly refreshing. I think it’s what our audience wants. We’re going to give them what they want, right? Speaker 2 [1:18] Yes. Speaker 3 [1:18] Oh yes. Yeah, absolutely. Speaker 1 [1:22] I had the chance to interview the head of the STB, the chair of the STB, Patrick Bucks, a couple of days ago related to the virtual symposium. Now, one of my opening questions was, tell me about what your thoughts on the merger was. And he immediately shut me down. He’s like, I can’t talk about that. But it is great. And we’ve got, you know, BN’s gonna be on CSX. We’ve got some of the Canadian railroads. It’s a jam-packed agenda. I’m super pumped about it, Bill. Speaker 2 [1:52] It is. And we have some, some looks at autonomous trains as well, which is, you know, people say that’s going to be the future of growth in the industry. So it’ll be an interesting, interesting conference to look at. We have earnings reports came out last week and this week, uh, from— actually all this week, it’s been a long week, um, for, uh, 4 out of the, uh, 6 Class 1 railroads. Um, and really the results show what happens when you get a little bit of volume growth. Speaker 3 [2:28] Um, you know, all of the railroads reported improved financial results. Uh, some had record revenue. Speaker 2 [2:36] Um, if you look at this chart here, CSX’s volume was up 6%. UP up 2%, NS up 4%, and Canadian National up 5% with an asterisk because that is the way they prefer to count it based on revenue ton miles. Speaker 3 [2:51] If you look at carloads, which makes it— equates it with the other railroads on that chart, uh, volume was relatively flat at 0.35% growth. Speaker 2 [3:01] Um, but, uh, what, what’s important here too is these improving volume outlooks and financial outlooks have prompted 3 of the 4 railroads to raise their financial outlooks for the year and in some cases their volume growth outlooks. And intermodal has primarily been driving that, but it’s also broad-based across most of the merchandise carload sectors. Coal depends on the railroad. Norfolk Southern was up quite a bit. Speaker 3 [3:38] Thanks to exports of metallurgical coal. Union Pacific was down due to high stockpiles at utility plants and also low natural gas prices. Their business is predominantly utility coal. Speaker 2 [3:52] But, you know, you look at the intermodal figures, you know, CSX up 9%, UP was up 4%. But within that, their domestic intermodal set a 4th straight quarterly record for volume. And they had double-digit growth. Norfolk Southern intermodal was up 5%, and they’re seeing strong truck-to-rail conversions, they say, amid the high fuel prices. And the outlier here is CN. As we’ve talked about on Wednesdays, the intermodal market is different in Canada than it is in the US. And one thing that CN’s Chief Commercial Officer Janet Drysdale said on their earnings call this morning was that truck capacity is not as tight in Canada as it is in the US. Speaker 3 [4:42] And that’s been a key factor in driving those domestic volumes up in the US. Speaker 1 [4:48] The regulatory and immigration crackdown is really an American story. And Canada’s got its own situation with immigration issues, but they’re Their orientation on the Canadian truck drivers is quite different than the administration’s orientation. So it certainly makes sense that the Canadian railroads would not be as bullish on intermodal as what you see. Plus you’ve got the whole tariff overhang on this, Bill. Any thoughts there? Speaker 2 [5:17] Yeah, that’s it exactly. Speaker 3 [5:19] And CN said that the key here for them is to be adaptable amid ongoing trade tensions and disputes and tariffs that are levied one day and pulled back the next. Speaker 2 [5:32] Um, and so never-ending story. Speaker 3 [5:36] Exactly. Speaker 2 [5:36] And, um, you know, they’ve talked about metals traffic is, is still moving, uh, across the border, um, despite the tariffs because the US can’t produce enough of, of aluminum, for example. Um, forest products traffic not doing well for CN. Speaker 3 [5:53] Um, that’s partly due to tariffs, partly due to the low uh, you know, the slow housing starts in the US. Speaker 2 [5:59] Um, but, uh, you know, when you look through, um, the railroad’s outlooks, um, for the various traffic segments, um, you know, they really see broad-based, um, positive outlooks. Speaker 3 [6:14] Uh, at CSX, the only thing that was really, uh, negative was, uh, automotive and, and chemicals. And I think that might have more to do with the chemical plants that, that CSX serves. Speaker 2 [6:26] Union Pacific, the only negative thing that they had on their second half volume outlook was, was coal. Um, everything else, uh, was— Speaker 3 [6:35] they viewed in positive territory in their carload business, which is, you know, industrial products, uh, traffic, the ingredients that go into things. Speaker 2 [6:44] Um, they believe that theirs is going to be above the rate of industrial production, which suggests market share gains versus truck. Norfolk Southern said industrial activity is a positive for them as well as global energy prices. And in the intermodal side, the truck market tightening is positive. Speaker 3 [7:06] They were mixed on consumer demand, I think mostly because of the high fuel prices that are affecting everybody at the pump. Speaker 2 [7:16] And coal, they were kind of neutral. CN was really positive on petroleum and chemicals traffic. Speaker 3 [7:22] That’s a huge export story for them as well as internally with a new fuel facility in the Greater Toronto Area. Grain continues to be a bright spot for them. Speaker 2 [7:34] They do believe that their domestic intermodal is gonna grow this year and then automotive traffic as well. Speaker 3 [7:43] They’re down on intermodal, international intermodal, partly because they’ve been demarketing some of the lower margin traffic. Speaker 1 [7:52] Hey Bill. Speaker 2 [7:52] And then, yep. Speaker 1 [7:53] Go ahead, sorry. Speaker 2 [7:55] No, no. And then just forest products and fertilizers, they had a negative outlook on. CPKC, the other Canadian-based railroad, they report on Wednesday. Speaker 3 [8:03] And then BNSF, which is a unit of Berkshire Hathaway, they will report alongside their parent company next month. Speaker 1 [8:09] So this is a big change in direction. Earlier this year, we’ve covered it extensively. The railroads were pretty bearish on this year, or at least not constructive about this was going to be an off year. I think the industrial slowdown that we saw last year probably prepared them to think the worst. The change is that there’s a massive change in tone, just in terms of perception of the improvements in construction in this year that’s taking place across their business. Are they, do they believe this is really driven by higher demand? I know intermodal is a truck fungible story from a capacity standpoint, but what are they seeing on the demand side, particularly in the economic, the economy? Speaker 2 [8:51] Norfolk Southern pointed to industrial development efforts and how new plants and plant expansions are coming online in a variety of sectors across their network. I believe they said it was double, uh, what it was last year. It’s a similar story at CSX. So they are seeing that industrial economy, uh, pick up and, and gain steam. Speaker 3 [9:14] CSX also pointed to construction around data centers as driving, uh, some of their construction-related traffic increases as well. Um, and, um, Union Pacific had similar things to say about the industrial economy and manufacturing. Speaker 2 [9:29] Um, so I think they were cautious, uh, earlier, earlier on this year because of, um, the length of the freight recession and saying, oh, we see the turnaround, you know, next year or the second half of the year, and then it just not playing out. Speaker 1 [9:48] The industrial, the industrial economy was a dog last year. We see it in the freight data. It just was absolutely anemic, but it has come back since November, and that’s certainly given everyone— but I think Like many of the trucking companies in the first quarter when there was earnings reports, they were constructive, but still cautious. As we like to say in freight, nobody gets credit when you’re a public company for being wrong. In terms of if things are bad, you’re going to get spanked by the markets. If you are overconfident, and that’s why a lot of the public CEOs, particularly the seasoned ones, tend to be more conservative when they’re talking about market developments. It’s interesting, because We talked to a lot of those folks. They’re more bullish when they’re one-on-one than they tend to be with Wall Street when they’re talking about the market, because they have to be very careful to set themselves up for failure. Speaker 3 [10:36] That’s it exactly. It’s way better to under-promise and over-deliver than the other way around. Speaker 1 [10:41] The opposite, you get absolutely obliterated if you’re on the wrong side of that, if you’ve over-promised. As anybody who’s been public knows that that’s a dangerous thing. So Bill, I want to talk about the merger for a second, because it’s obviously the most important story. We have just a number of big announcements this week. You covered the whole story where CN was given— can you explain for those that aren’t real deep into the rail market, why is this a significant development? Speaker 2 [11:10] Well, a couple of things. First, railroading is all about the map. It’s not the highway network. You can’t just go anywhere. Speaker 3 [11:16] You can only go as far as your map gets you. Speaker 2 [11:20] And there were 2 deals that Union Pacific and Canadian National worked out. Speaker 3 [11:25] One is totally tied to the merger and the other never would have happened without merger discussions. Speaker 2 [11:31] So the first is, and this is not dependent on the merger, Canadian National gets a haulage rights agreement between Memphis and the Mexican border at Eagle Pass, Texas, over Union Pacific. So in other words, Union Pacific will haul CN’s traffic from Memphis to Eagle Pass. That enables CN to be a better competitor against CPKC, which can offer single-line service between Canada, the US, and Mexico. This, uh, CN deal applies only to Canadian origins and destinations traffic moving to and from Mexico, um, but it’s a faster route and is, and is far superior to, uh, the existing offerings. Speaker 3 [12:14] They currently hand off traffic to Union Pacific in Chicago, so they get a longer length of haul out of this. Speaker 2 [12:21] In exchange, Union Pacific, uh, gets rights to run over CN’s Chicago bypass. Back in 2009, they, they bought a railroad called the EJ&E, which basically is, is kind of like a loop road around Chicago, doesn’t go through it. Speaker 3 [12:39] And Chicago, of course, is congested, notoriously so at times. Speaker 2 [12:44] And, and it’s inconsistent and long, uh, the transit times through Chicago. Speaker 3 [12:50] CEO Jim Vena said at times when he was at CN, they could get a train faster from British Columbia to Chicago than it took to get from one side of town to the other. Speaker 2 [13:00] That’s an extreme example, but you Union Pacific will get this much faster route through Chicago as a result of this. And they want to— Speaker 3 [13:11] once they put the finishing details on this and reach a final agreement, it’s not contingent on the merger, and they want to start moving this traffic as soon as they can. Speaker 2 [13:21] The part that’s related directly to the merger involves giving CN access to customers, uh, in basically in, in the Midwest. Speaker 3 [13:33] There’s only a handful of them that under this merger, since there’s no overlap, would go from the option of having 2 Class 1 railroads serve them and have seen it just go to one. And it’s the same for customers that currently have the option of 3 railroads going down. Speaker 1 [13:48] Was this just a way of, for those customers that have dependencies, to demonstrate to the STB that they’re trying to find ways to provide some competition? Speaker 3 [13:57] Yes. And Union Pacific and Norfolk Southern were upfront about this when they filed their merger application. They knew that they were going to have to provide access to enhance competition in that overlapping area in the Midwest, which is primarily in Missouri. Speaker 2 [14:15] And so CN will get access. Speaker 1 [14:17] Is it chemicals? Like, what is the— what are the commodities that are impacted? Speaker 2 [14:21] It’s a variety of carload shippers. Speaker 3 [14:23] That specific question did get asked on CN’s earnings call today, and they didn’t really answer it. Speaker 2 [14:29] Um, it’s— Speaker 3 [14:30] it— but we’re, we’re talking 5, 5 shippers who see their option go from 2 to 1, and it, it’s 2 dozen perhaps who see their options go from 3 to 2, and most of those are in the St. Louis area. Um, so it’s a range of carload commodities and ag, given, you know, the location in Missouri. Um, and, and, um, CN will, uh, get at trackage rights over Union Pacific, which would have, uh, basically 2 parallel routes across Missouri. CN will use one, and they gain access to the Kansas City market for the first time, uh, on their own tracks or with their own trains, controlling their own destiny. And they get to use Union Pacific’s, uh, yard, uh, that is really not used very much today, Neff Yard in Kansas City. Speaker 2 [15:21] So in exchange for all this, CN said, hey, this solves our competitive concerns about the merger. We get growth opportunities out of it, and as a result, we will not oppose the merger. Speaker 1 [15:37] Well, Bill, I’m so excited to see you next week. We have the National Model Railroad Association’s convention, their annual convention will be here in Chattanooga. So for those that are interested in model railroads or in trains, it’s the perfect week to be here in Chattanooga to talk about that. And so So much is happening in the railroads. We have the right people coming to the virtual event. It’s a bang-up lineup, by the way. The post Unpacking Rail Earnings: How Volume Growth Fuels Merger Talks appeared first on FreightWaves.

Track your investments for FREE with Simply Wall St, the portfolio command center trusted by over 7 million individual investors worldwide. Norfolk Southern (NSC) has drawn fresh attention after reporting second quarter 2026 results that showed net income of US$734 million and earnings per share of US$3.26 from continuing operations, compared with the prior year period. See our latest analysis for Norfolk Southern. Norfolk Southern shares have climbed, with a year to date share price return of 16.65% and a 1 year total shareholder return of 22.57%. This suggests that momentum has been supported by recent earnings, dividend affirmations and attention on the proposed Union Pacific merger. If this earnings update has you thinking about what else could be moving, it might be a good time to scan the rail and infrastructure space using our 34 power grid technology and infrastructure stocks Norfolk Southern now trades at a discount to average analyst targets, even after the recent run. The market still prices in a fair bit of caution. Is that restraint justified when you compare it with current fundamentals? Norfolk Southern currently trades on a P/E of 28.6x, which sits slightly above an estimated fair P/E of 27.3x and below broader transportation peers. That leaves the stock looking a touch expensive against a fair value yardstick, while still cheaper than the wider industry. The P/E ratio compares the current share price with earnings per share. For a rail operator like Norfolk Southern, it gives a quick read on how much investors are paying for each dollar of earnings in a sector where assets are heavy and growth can be steady but capital intensive. On one hand, the current P/E is described as expensive relative to the estimated fair P/E level. This signals the market is paying a premium compared with where the SWS fair ratio suggests it could settle. On the other hand, at 28.6x it is described as good value versus the US Transportation industry average P/E of 37.9x and is also in line with the peer average of 28.8x. Taken together, this points to a stock that trades richer than a modelled fair multiple, yet still at a discount to the broader industry that investors may be using as a benchmark for expected earnings power. When set against the US Transportation industry, Norfolk Southern trades at a meaningfully lower P/E than the 37.9x average, and its P/E is very close to the 28.8x peer group average. The fair ratio provides an anchor level that the market could move towards if sentiment or earnings expectations change. This highlights that the current valuation sits just above that modelled fair multiple even as it remains below the wider sector. Explore the SWS fair ratio for Norfolk Southern Result: Price-to-earnings of 28.6x (ABOUT RIGHT) However, Norfolk Southern still faces headline risk from the proposed Union Pacific merger, as well as any shift in US freight volumes that pressures earnings expectations. Find out about the key risks to this Norfolk Southern narrative. While the P/E comparison leaves Norfolk Southern looking roughly in line with peers, the SWS DCF model points in a different direction. With the stock at $335.74 and the DCF value at $270.93, it screens as overvalued using this cash flow based approach. That raises a simple question for you as an investor: Which signal do you trust more when the market heats up, earnings multiples or long term cash flows? Look into how the SWS DCF model arrives at its fair value. Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Norfolk Southern for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 49 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity. With Norfolk Southern showing a mix of caution and optimism in this update, it makes sense to review the underlying data yourself and decide how you feel about the balance of risks and rewards. To help you weigh both sides before the market moves on, take a look at the 3 key rewards and 1 important warning sign If this Norfolk Southern update has sharpened your focus, do not stop here. The next step is to see what other stocks are quietly lining up compelling setups. Spot potential mispriced opportunities early and scan our broader market for companies that currently look attractively valued using the 49 high quality undervalued stocks. Strengthen your income toolkit and line up stocks that combine higher yields with more resilient profiles through the 9 dividend fortresses. Reduce unpleasant surprises and focus on companies with sturdier finances and steadier fundamentals by starting with the solid balance sheet and fundamentals stocks screener (48 results). This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Companies discussed in this article include NSC. 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Union Pacific Corporation (NYSE:UNP)'s Big Boy 4014, the world's largest operating steam locomotive, has been touring the country this summer, and grown adults keep tearing up when they see it. CEO Jim Vena said the tour east of the Mississippi wouldn't have been possible without one thing: the railroad operating firm’s pending merger with Norfolk Southern, since Union Pacific's own tracks run west of the river. In part, the nostalgia tour is a goodwill campaign for the biggest deal in the company’s history. On the business itself, Union Pacific Corporation (NYSE:UNP) reported a strong quarter. Revenue rose 12% to $6.86 billion, beating the $6.71 billion expected, and adjusted earnings came in at $3.41 a share versus $3.24 expected. The company raised its full-year guidance to high-single-digit earnings growth, up from mid-single digits. The stock rose about 2% in premarket trading. Costs rose too; operating expenses climbed 13% to $4.1 billion, mostly from a 63% jump in fuel costs linked to the Iran war. Union Pacific Corporation (NYSE:UNP) is trying to buy Norfolk Southern in a deal now valued around $71.5 billion, down from an earlier $85 billion price tag as terms have moved with Union Pacific's stock. It would create the first coast-to-coast U.S. railroad. The day before earnings, Union Pacific settled with Canadian National Railway, a major opponent that had been pushing regulators to demand more information. CN will drop its opposition in exchange for expanded Midwest access and a stake in two jointly owned terminal railroads. Vena called it proof the firm is "ready to move forward in the regulatory process." The deal still isn't approved, though. The Surface Transportation Board (STB) paused its review in May and just this week ordered Union Pacific to make employee-impact data public. Rivals BNSF and Canadian Pacific Kansas City are still lobbying against it, and some shippers and state attorneys general remain opposed. The companies still expect to close the deal in the first half of 2027. That raises a real question. Is this merger clearing its last real hurdles, or did the CN settlement just remove one opponent out of several? The core business (Union Pacific's actual railroad operations) is performing well on its own, guidance beat and rose, and pricing power held up despite surging fuel costs. The CN settlement removes a credible opponent and comes with political tailwinds too: Trump has publicly backed the merger and replaced a regulator who could have opposed it. Union Pacific Corporation (NYSE:UNP) and Norfolk Southern say the deal would save shippers $3.5 billion a year and remove 2.1 million trucks from the road. Wall Street responded fast: Baird, RBC, and JPMorgan all raised price targets this week, with RBC citing the CN deal directly as strengthening the merger's case. READ NEXT: 33 Stocks That Should Double in 3 Years and Cathie Wood 2026 Portfolio: 10 Best Stocks to Buy. BNSF and Canadian Pacific Kansas City (CP), both larger than CN, are still actively opposed, and shippers and state attorneys general haven't backed down. The STB's review remains paused, and forcing public disclosure of employee data suggests regulators aren't rubber-stamping this. Notably, JPMorgan raised its price target but kept a neutral rating, a sign at least one major bank isn't calling this done yet. Fuel costs are also a real, ongoing drag tied to a war with no clean resolution in sight. Insider Monkey's hedge fund database shows funds trimming ahead of this quarter. Overall, 96 funds were holding Union Pacific Corporation (NYSE:UNP) at the end of Q1 2026, down from 106, with dollar value held falling from $7.5 billion to $5.7 billion. That reflects sentiment before this week's beat and the CN settlement, both of which have since turned more positive. In contract, there were only 45 hedge funds with bullish Canadian Pacific Kansas City (CP) positions at the end of Q1. Hedge funds clearly think UNP is a better stock to buy than CP. Union Pacific had a genuinely strong quarter, and the CN settlement is a real step toward its biggest deal ever. However, one opponent down isn't the same as approved. BNSF, Canadian Pacific Kansas City, wary shippers, and a regulator still asking hard questions remain in the picture. The next real test isn't a nostalgia tour; it's whether the Surface Transportation Board restarts its review. While we acknowledge the risk and potential of UNP as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than UNP and that has 10,000% upside potential, check out our report about this cheapest AI stock. READ NEXT: Ryanair Holdings plc (RYAAY)'s Profit Fell by a Third on the Iran War. Is the Selloff a Buying Opportunity? and Space Exploration Technologies Corp. (SPCX) Stock Just Lost $1 Trillion in a Month. Is the Selloff a Buying Opportunity or a Warning? Disclosure: None.

Norfolk Southern Corporation NSC has a stronger near-term setup after a solid second-quarter earnings beat, record railway operating revenues and positive estimate revisions. The stock also offers meaningful price-target upside from the reported share price. The trade-off is valuation. Investors are being asked to pay a premium multiple while cost inflation, service execution and merger-related uncertainty remain important risks. Norfolk Southern reported adjusted second-quarter 2026 earnings of $3.52 per share, up 7% year over year. The result was 9% above the Zacks Consensus Estimate of $3.23. Railway operating revenues rose 11% year over year to a record $3.47 billion, topping the consensus mark by 4.4%. The gain reflected 4% volume growth, stronger revenue per unit and higher fuel surcharges. Estimate momentum adds support to the near-term bull case. The full-year earnings estimate has increased 3.9% over the past four weeks, while the report also shows positive changes across one-week, four-week and 12-week estimate-revision periods. That matters because rising estimates often reinforce favorable short-term sentiment. For NSC, the revisions suggest analysts are giving more credit to revenue improvement and operating execution after the stronger-than-expected quarter. NSC trades at 25.17X forward 12-month earnings. That is above 21.77X for the Zacks rail sub-industry, 13.6X for the broader transportation sector and 21.57X for the S&P 500. The premium is not only relative. Norfolk Southern’s five-year forward P/E range runs from 14.03X to 25.2X, with a median of 18.71X, putting the current multiple near the top of its own historical range. Norfolk Southern’s $383 price target compares with a reported share price of $335.74. That implies meaningful appreciation potential from that level. Still, the upside is not without a cost. Investors are paying a high multiple for projected 2026 EPS of $12.60 versus $12.49 in 2025, suggesting relatively modest near-term earnings growth despite stronger revenue momentum. Norfolk Southern generated $1.40 billion of operating cash flow in the first half of 2026. The company ended June with $1.07 billion in cash and cash equivalents, while total debt declined to $16.62 billion from $17.09 billion at year-end 2025. Shareholder returns remain anchored by the dividend. Norfolk Southern announced a quarterly dividend of $1.35 per share, and the company has paid dividends for 176 consecutive quarters since its formation in 1982. Buybacks, however, remain suspended following the Union Pacific UNP merger agreement. Norfolk Southern Corporation dividend-yield-ttm | Norfolk Southern Corporation Quote The bottom line: NSC’s earnings beat, estimate revisions and price-target upside support investor interest, especially for those focused on momentum. Record revenues and improved demand trends strengthen the near-term story. The stock carries a Zacks Rank #2 (Buy), and its Momentum Score of A supports the near-term case. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. However, the Value Score of F, Growth Score of D and VGM Score of D show that NSC looks more suitable for momentum-oriented investors than for value or growth-focused buyers. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Norfolk Southern Corporation (NSC) : Free Stock Analysis Report Union Pacific Corporation (UNP) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Image source: The Motley Fool. Thursday, July 23, 2026 at 10:00 a.m. ET Investor Relations - Luke Nichols President and Chief Executive Officer - Mark George Chief Operating Officer - Michael Barr Chief Commercial Officer - Ed Elkins Chief Financial Officer - Jason Zampi Operator: Good morning, ladies and gentlemen, and welcome to the Norfolk Southern Corporation Q2 2026 Earnings Conference Call. Also note that this call is being recorded on Thursday, July 23, 2026. And I would like to turn the conference over to Luke Nichols. Please go ahead, sir. Luke Nichols: Thank you, and 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 a reconciliation of any non-GAAP measures used today to the comparable GAAP measures, including adjusted or non-GAAP operating ratio. Please note that all references to our prospective operating ratio during today's call are being provided on an adjusted basis. Turning to Slide 3. I'll now turn the call over to Norfolk Southern's President and Chief Executive Officer, Mark George. Mark George: Good morning, everyone, and thanks for joining us. Here in Atlanta with me are Brian Barr, our Chief Operating Officer; Ed Elkins, our Chief Commercial Officer; and Jason Zampi, our Chief Financial Officer. Look, a lot has changed since our last call, most importantly, the sharp inflection in volumes. Initially catalyzed by the Iran conflict that bolstered our energy markets and that strength has now spread into other markets, including domestic intermodal and industrial products. With that backdrop, we delivered a strong second quarter with results that exceeded our own expectations starting with strong volume and revenue growth, culminating in 7% net income and EPS growth. The results are thanks to the dedication of our railroaders and a special shout out to our commercial team who stayed close to our customers during this dynamic environment. As demand strengthened in several markets, our team continued to focus on operating safely while serving our customers. Absorbing the higher volumes coming out of the winter disruptions put pressure on the network, but we've addressed these issues head on. Our team has worked hard to execute with urgency and discipline. We already drove acceleration of the network here in July, and we will continue to progress. Brian will give more detail on these actions in his remarks. Bottom line, I'm holding our team to a high standard. Our customers count on us to maintain consistent, reliable service. And as such, we have to be resilient, whether it's bouncing back from weather events or absorbing volume surges we need to deliver the service our customers expect from Norfolk Southern. And our priorities remain clear: safety, service, disciplined cost control and earning the trust of our customers. Those priorities guided our decisions throughout the quarter and will continue to guide the company moving forward. Now before we move on, I'd like to touch on the recent appointment of Brian as our Chief Operating Officer. While he may be a new face to many of you, he's certainly not new to Norfolk Suven. Over the last 2 years, he's led our mechanical organization, where his team helped deliver industry-leading locomotive fleet reliability and he played an important role in optimizing network performance, while earning the trust and respect of our organization. He has had a long and successful history on the transportation side as well at our eastern peer, and he started his to wear at Conrail. So he knows our network well. It's another example of the leadership depth we have across the organization and our commitment to developing strong operators who are ready to lead. In his new role, he's building on the progress he himself helped us deliver. Now leading the broader operations organization with a strong foundation and safety and a shared commitment to creating a faster, more reliable network while continuing to innovate and drive more productivity. So with that, let me turn it over to Brian to discuss our operational results in more detail. Michael Barr: Thanks, Mark, and good morning, everyone. It's my privilege to be with you today. Before I begin, I want to recognize the men and women of Norfolk Southern. They worked through a challenging quarter, continued serving our customers and remain committed to operating safely. NS railroaders are the heartbeat of this network and their efforts continue to propel our results. successful railroading demands doing the simple things exceptionally well. I have learned that throughout my career, including my time working directly for Hunter Harrison. Planning and execution are built on discipline. Accountability and staying relentlessly focused on the operating plan. The reality is railroading is a grind doing the small things over and over again, very well. That is what delivers results. Those principles still apply today, which is why I'm spending as much time as possible in the field, leading from the front, not the top. Working with our teams, understanding challenges firsthand and driving the actions necessary to improve service and strengthen network performance. This is not about changing our operating strategy, it's about continuously improving our results. The primary levers for improving service and productivity across the network are running the plan, aligning the resources with demand, improving terminal performance and eliminating unnecessary variability. We've got more work to do, and we know it. Turning to Slide 5. To be the best run railroad, you have to be the safest. Safety remains the foundation of Norfolk Southern. Our teams delivered another quarter of strong safety performance with continued improvements in FRA accident and personal injury rates. Let me be very clear, safety has no finish line. This is not about ratios, it's about our employees. No matter how strong our results are, we approach every incident with humility and discipline. As you can see on the slide, the first half comparisons for our FRA personal injury index, accident rates and mainline accident rates are all improving. Specifically in the quarter, our personal injury index was down 16% year-over-year. I want to acknowledge my former department mechanical, we're going 2 consecutive months injury-free, a significant step for an entire department operating in shops and yards across our entire network. Our accident rate was down approximately 25% in the quarter year-over-year, while our near best-in-class mainline accident rate remained flat. We're proud of the progress but we're not satisfied as we still have work to do. Strong safety performance drives strong operating performance, discipline, accountability and consistent execution. The 2 go hand-in-hand. Turning to Slide 6. Demand remained strong throughout the quarter. At the same time recovering from several network disruptions while supporting that level of buying placed additional pressure on crew resources and create a variability and portions of the network. We have a clear understanding of what we need to do to create real resilience and deliver on our strategy, improve originations, reduced terminal dwell, increase velocity, run the railroad, the plant. That's where our attention is focused. When we do those things consistently, velocity improves, the network becomes more fluid, and the railroad performs at a very high level. I'm highly confident in our team and many of the actions we have taken in these past 6 weeks are already starting to demonstrate tangible benefits. In the last month, on-time originations have increased 20%. Terminal performance is improving as we have balanced our resources, which is leading to a reduction in terminal dwell. And train velocity is rising as we are reducing recrews and giving the railroad back on plan. Our priority remains executing the fundamentals exceptionally well. Turning to Slide 7. Operating safely and efficiently, optimizing asset utilization, driving cost discipline, delivering consistently for customers and developing our team of railroaders will drive our long-term success. We remain committed to at least $150 million in cost takeout during 2026, which will deliver at least $650 million in cumulative savings over the 3-year period, exceeding our original target. One of the most powerful levers we have is velocity. When the railroad moves quickly and consistently, service improves and cost comes out of the system. Recrews decline, grow productivity increases, terminal congestion eases, asset utilization improves, locomotives cycle more efficiently and spend less time sitting in yards. The more efficiently, we move freight across the network the more value we create for our customers and shareholders. The opportunity in front of us is straightforward. Their disciplined execution with the strong commercial momentum Ed and his team continue to generate across the business. That combination is how we improve service, grow the franchise and create long-term value. I am exceptionally confident in our team and the potential of this railroad. There is no shortage of talent, experience or commitment across our organization. We know where the opportunities are. We know what needs to improve, and we have the people and resolve to get it done. When we do those things consistently, the results will follow. With that, I'll turn it over to Ed. Ed Elkins: Thanks a lot, Brian, and good morning, everyone. Let's move to Slide #9. We can see that fuel surcharge was a major factor in the second quarter, helping to blunt some of the fuel expense pressures. Now if you look past these headline numbers, you'll see that even without fuel, we achieved record revenue in the quarter. Volume increased 4% year-over-year, driven by strength in several commodity markets that benefited from elevated global energy prices as well as very favorable trucking market dynamics that bolstered our intermodal business. RPU less fuel was up 1% as steady pricing was partially offset by some high-level mix. Within merchandise, volume increased 2% and revenue less fuel achieved another record, increasing 4% from a year ago, driven by continued gains in energy demand in our chemicals markets. RPU less fuel grew 3% year-over-year, supported by price and mix. In our intermodal business, volumes increased 5%, and this reflected firm consumer demand highway market conditions that increased demand for intermodal and recent business wins, particularly within our domestic segment. So overall, Intermodal revenue less fuel increased substantially by 7% and RPU less fuel increased 1%, marking the beginning of a positive shift in intermodal pricing. Turning to coal. Volume increased 3% and benefiting from the continued ramp-up of our new metallurgical coal export customer as well as incremental export thermal business opportunities, reflecting volatile global energy markets. RPU less fuel increased 1% due to favorable seaborne coal pricing, and this was partially offset by some negative mix within the commodity group. On Slide 10, we highlight several dynamic factors that are influencing our market outlook. The Warner Iran impacted many energy-related commodities in the second quarter. These impacts could carry forward for the duration of the conflict, bringing volume and revenue opportunities. Overall, we're positive on the growth potential across the markets that we serve. Now as you would expect, however, energy prices, the consumer and interest rates all remain wildcards and factors that we will be monitoring. In merchandise, we have a subdued but positive outlook for vehicle production. Industrial activity has shown solid momentum with manufacturing continuing its expansion for the sixth consecutive month and we maintain a cautious but optimistic outlook despite volatility and a shifting economic landscape. Additionally, and specifically, we could continue to see near-term opportunities in markets like natural gas liquids export plastics and crude oil. Turning to our intermodal markets. The truck market has turned positive with dry van rates trending upward and capacity continues to tighten as demand is also firming. Demand has been supportive for our domestic and premium segments in the near term as new orders are rising and retail sales have shown some modest growth. This has been partially offset by tariff and trade uncertainty that's going to continue to weigh on international volumes. Taken together, we have a bullish view of intermodal, an outlook which is only reinforced by elevated fuel prices that will continue to make truck conversion more attractive to our customers. Considering coal, we expect to see continued overall strength led by our export in metallurgical coal business. And while our outlook for utility coal remains positive due to growing electricity demand and a favorable regulatory backdrop natural gas prices and growing renewable energy production does create some uncertainty for utilities heading into the second half. Now let's look at Slide 11, where industrial development remains a key strategic priority for Norfolk Southern. Our project pipeline continues to gain momentum with a number of new manufacturing facilities and expansion projects that are expected to enter the design and construction phase in 2026 projected to be nearly double last year's level. And as you would expect, we're also projecting substantially more carload potential to materialize as a result across multiple commodity groups. All of this bodes well for the long-term value of our network and for the American economy. To highlight just a few examples. So Dito Apco joint venture will build a new manufacturing facility in Orangeburg County, South Carolina, to produce ladder frames for Scout Motors. Additionally, Virginia Transformer, the largest transformer manufacturer in North America will build a state-of-the-art power transformer plant in muscle shows, Alabama to support growing demand in heavy manufacturing, mining, energy infrastructure, grid expansion and behind-the-meter power generation in the U.S.A. And lastly, Sylvie Materials is constructing a new cement terminal in Columbus, Ohio, Piedmont, South Carolina; Greensboro, North Carolina and in Charlotte, North Carolina to support increased construction demand. As always, and finally, we want to thank all of our customers for their continued partnership and business. The entire NS team is aligned around delivering the service that our customers need every day building trust as a vital partner in their supply chains. And with that, I'll turn it over to Jason Zappi to review financial results. Jason Zampi: Thanks, Ed. I'll start on Slide 13 with a reconciliation of our GAAP results to the adjusted numbers that I'll speak to today. We incurred $51 million in merger-related expenses during the quarter, while total costs related to the Eastern Ohio incident were $15 million. Additionally, we incurred $6 million of restructuring costs. Adjusting for these items, the operating ratio for the quarter was 65.5% and earnings per share was $3.52. Moving to Slide 14, you'll find the comparison of our adjusted results versus last year. As expected, higher fuel prices were a significant driver of both the revenue and expense increases. Overall, the operating ratio increased 210 basis points versus last year. with fuel price headwinds driving an approximate 110 basis point increase. In addition, inflationary pressures drove another 190 basis point headwind compared to last year. That said, higher volumes and RPU in the quarter helped mitigate these expenses, leading to a 5% improvement in operating income. Last quarter, we had highlighted our expectation to match normal operating ratio sequential seasonality of 200 basis points despite the known fuel pressures. The team did a great job capitalizing on the sustained volume trends in the quarter while managing our controllable costs to deliver a 320 basis point sequential improvement. Taking a closer look at our expense profile for the quarter on Slide 15. Costs were up 15%, over 2/3 of which was driven by the substantial rise in fuel expense this quarter. In addition, inflationary pressures continued, notably as you see in comp and benefits, but also within purchased services and materials. Finally, volumetric and some network fluidity related costs drove increases in overtime rents and materials. So to summarize our financial results on Slide 16, and despite the cost headwinds we faced, higher fuel prices, inflationary pressures and volumetric expenses, we drove a 5% increase in operating income. Importantly, we also delivered a 7% increase in both net income and earnings per share in the quarter. We are pleased to see the continued strength in volumes, and we will continue to focus on opportunities to improve our service product, which will generate incremental revenue and drive cost efficiency. Mark, I'll turn it back over to you. Mark George: Okay. Thanks, Jason. All right. Closing on Slide 18. As we move into the second half of the year, our priorities remain clear. First, we will continue to focus on operating a safe and reliable railroad. As Brian said, safety is paramount. Our metrics are good relative to history, but we will never be satisfied or done seeking improvements. Second, we remain focused on disciplined execution, there's more work to do to fortify service, but we are making progress and are driving improvements across the network that you'll notice in the weekly data. The stronger-than-expected results we delivered this quarter reflect the hard work of our team, delivering continued productivity improvements and managing through a dynamic operating environment, all while positioning the company for long-term success. Looking ahead, as Ed laid out, we remain optimistic about the demand environment. We are seeing encouraging trends across key markets, including domestic intermodal, chemicals and coal. And while there is uncertainty in the broader economy, we are well positioned to capitalize on profitable growth opportunities while continuing to improve operational performance. Now regarding the financial guidance, our original OpEx guidance was $8.2 billion to $8.4 billion, which we are updating to account for the large swing in fuel estimated to be $400 million to $500 million of incremental expense compared to our review at the beginning of the year. So our new 2026 operating expense outlook is $8.8 billion to $8.9 billion. Now neutralizing for the fuel impact, our core operating costs are trending toward the higher end of the prior range due to a stronger volume outlook. But overall, I am pleased with our team's cost performance in this dynamic and volatile environments. Our CapEx guidance of approximately $1.9 billion this year is unchanged. We are maintaining discipline while continuing to invest in the safety, reliability and capacity of our network. And finally, while we are fully focused on running the business and serving our customers every day, we continue to make progress on the proposed company supply chain delivering greater value for customers and communities with single-line frictionless service that will create benefits for all stakeholders. You'll have seen our agreement with CN, which is a win-win-win scenario that further enhances competition in the freight rail space on top of the additional enhancement features that we will be presenting in the STB response here shortly. And with that, we'll open the call to questions. Operator? Operator: And your first question will be from Chris Wetherbee at Wells Fargo. Chris Wetherbee: Maybe I could start with a question just on sort of the pricing environment and the opportunity that maybe you guys can see. We tend to think about the sort of truck markets being a little bit more an interplay with the rails in the Eastern part of the U.S. And obviously, you have a very robust intermodal franchise. So I guess as we think about the tightness we're seeing in the truck market, can you talk about how we might see that sort of transition into pricing opportunity for you, both on the intermodal side of the business, but also merchandise as well? Mark George: Thanks, Chris. Sure. It's a great question and 1 that we're dealing with every day here. It's really an encouraging freight environment right now, not only for truck freight and competing with the highway, but also, in general, for freight in the U.S. I'll look at a few key indicators and all of them have improved themselves since the beginning of the year when we when we really laid out our plan. And that includes GDP as well as manufacturing and housing starts shocking, which was also improved in terms of outlook. And when I think about manufacturing, we've seen 6 months of sequential improvement now in the ISM Manufacturing Index, and that's the best post-COVID performance that we've seen. So I think that's very encouraging for the U.S. economy. You couple that with what I just talked about regarding industrial development, what we're seeing with our pipeline moving. And I feel like that, that also bodes very well. Thinking of truck and specifically, you look at outbound tender rejections, right, up at around 15% now on average, I think, across all truck types across the U.S. That is a multiyear high in and of itself. And then we look at flat dead rejections, which are a subset of that, that's about 40% right now, which is about as high as I've ever seen it. That means construction really. And so I think that bodes well in general. And then, of course, we've talked about fuel as have other people. That too sets the stage for our intermodal business, but also merchandise and both franchises to compete very ably. So we are we are very optimistic for the outlook going forward, both in terms of volume opportunity, but also the opportunity to price in several key markets. Operator: Next question will be from Scott Group at Wolfe Research. . Scott Group: So it sounds like you're confident about making progress on the service side. I'm just wondering, do you feel like you need to add a lot of head count and other resources in order to get that service improvement. And so maybe just along those lines, like I don't know, Jason, if you have any thoughts about like how to think about the just near-term cost and margin trends into Q3 and Q4? Mark George: Yes. I'd start first regarding headcount. I think overall system-wide, we're probably at an area where we can absorb volume, but we do have pockets where we are a little bit tight on T&E. So that's -- those are the areas where we're focusing on. So we probably have little bit more hiring to do there. But again, we have to continue to hire to replace attrition because we do run at around 8% attrition a year out of our T&E rank. So we're always going to be hiring system-wide, but we've got a handful of core locations that we probably need to augment, and that's where we're putting our more immediate focus. Brian, I don't know if you have any other comments on that. . Michael Barr: Yes. So going through the operations here, I mean, where we're at in the second quarter and transitioning to the third quarter now. We're seeing improvements in originations were up 20% right now from where we were in the second quarter. we're seeing improvements in the velocity, the car miles per day. So as we go through the operation, that's really generating some efficiencies for us where there won't be a massive add to resources other than the natural attrition that occurs in the second half of this year going into 2027. But there doesn't need to be an ad. We're really running the plan, refining our processes getting back to basic fundamental railroading of on time over the road to help us pick up speed. You got to remember, Scott, when you slow a network down, which is what happened to us for a couple of reasons, it requires more resources to dig back out. So the quicker we can accelerate the network, the fewer additional incremental resources you actually need to add it actually frees up resources on the human side and on the locomotive side. So these are encouraging trends that Brian has driven here in the past 1.5 months or so to actually spool the network up a little bit. So we're in less deficit than we otherwise would be if we were still stuck in that, call it, 18-mile an hour range, 19 miles an hour range. Mark George: Jason, is there something you want . Jason Zampi: Yes. I think, Scott, the last part of your question, just kind of talking about what we should think about for margins here on out. Obviously, like we talked, we're pleased where we finished the second quarter. outperforming both historical seasonality and our own expectations. But what I would say, if you think about the third quarter, typical seasonality on average, call it, flat to 50 basis points worse as you move from second quarter to third quarter. But 2 things I'd call out here specifically. First, we've talked about that fuel price headwind that we've been experiencing here in the second quarter. and that's switching to a tailwind in the third quarter. That's both true from a year-over-year and a sequential perspective. So we will have that benefit sequentially going from second to third. However, we do have some almost about a 4% wage increase that's going into effect that -- excuse me, did go into effect in July here. So that will temper a little bit of that tailwind. So you put that all together, I think we're at a place where we believe we can beat that normal sequential seasonality. And I'd put that up to 100 basis points better than normal. Operator: From Brian Ossenbeck at JPMorgan Chase. Brian Ossenbeck: Maybe just a follow-up for Ed. I mean looking at the RPU ex fuel, not a whole lot of movement of our in the quarter. So maybe you can give us a sense in terms of how the cadence progresses with some of these renewals, maybe some of the tighter truck market environment starting to flow through the numbers. And I guess when you try to balance that out with volume is a little while ago, we heard about the flexible freights and trying to get freight off the highway and keep it. Maybe you can give us an update in terms of how that's progressing because clearly, the market's got a lot stronger since I think the last time you laid out that framework? Ed Elkins: Yes, for sure, and I appreciate the question. I think as I said earlier, it's a very optimistic freight market out there. And I think we have the right tools in place to really be able to capitalize from that and deliver value for our customers. So when I think about price right now on the highway, you're hearing it from some of our customers and probably some of your other channel checks, that it's a really good environment. Spot price has been putting pressure upward now for several months. And that's exactly what it takes to drive that contract price, which is longer term up as well. I typically say you need 3 to 6 months of upward pressure to start moving that line up or downward pressure to move it down. We're solidly in a place where there's upward pressure being applied now on the highway, and that will flow through over time into our long-term contracts as well as our short-term contracts with our intermodal customers and with others. So we see -- and I think I've talked to you guys a lot over the past 4 years, about a cold spring and all that stuff. Well, we're right here ready to uncoil now. And I think as the year progresses and we move into '27, a lot of the work that we've done over the past 3 or 4 years to really restructure our contracts to make us more responsive that pressure that I was talking about from the spot price into the contract price is going to manifest itself. Operator: Jason Seidl at PD Carlin. Jason Seidl: Mark and team, I hope you guys are well. how should we think about the intermodal conversions that are coming off the highway? In other words, when you guys take this business back to the -- Mark George: Jason, I think we're doing really well today. Ed, why don't you respond to that? Ed Elkins: For sure. It's really our customers on the intermodal side who are out there selling our service in theirs to the BCOs, the beneficial owners. Typically, what we would see as an annual bid cycle. Sometimes there's a few that are multiyear and some that are what we call mini bids, which might last for order but typically, we think in annual pulses for those customer commitments and as I do that, what I'm really thinking about is how do we deliver value alongside our partners on the intermodal side so that, that 1-year commitment maybe turns into a generational commitment because the service is good and the value is outstanding. Jason Seidl: And that's in the demand environment and the weekly volumes certainly seem to be pretty consistent and consistently improving. We've reached kind of the anniversary date of the announced merger, and I know there was a lot of share shift or share loss, honestly, in the early stages of that. Has that ended at this point? And do you feel like you're at a point now where you start winning some of that business back, even given the uncertainty in the timing of the review process? Mark George: Yes. Actually, great question. We did have some losses right out of the gate there, which we're going to be lapping here in September. So I would say that the bulk of what those losses were probably experienced between September and November, September, December. And frankly, I think we've had a pretty good run since then. I'm not sure that we're going to recapture those specific things that were lost, but we are growing in other areas that are really helping to offset and compensate for it. But we'll largely be lapping that here in the fourth quarter. But Ed, do you want to add anything to that? Ed Elkins: Sure. When you look and when you talk to our customers about where they're growing and where you've heard from them about where they're growing on their recent calls. The action is mostly in the East, which is really good because our network is superbly positioned to take advantage of that. And I think that's why you're seeing this share conversion and the opportunity that's there, specifically on our local network alongside our transcontinental connections that's really driving a lot of that growth. So I'm confident, just like Mark is that over time, we're going to get that business back because I think our network delivers the most value. In the meantime, we're continuing to accumulate share from the highway from other places. . Operator: From David Vernon at Bernstein, Fair . David Vernon: Sorry, troubles with the new button. So Ed, I wanted to get your perspective on sort of what you're seeing in the activity book for you guys from an industrial perspective. I think a lot of our investors are keenly focused on whether we're starting to see some broadening of industrial activity outside of AI and data center build-outs. So I'd love to get your perspective on that. . And if you could also share kind of what the underlying sort of volume growth rate is in intermodal ex some of the declines that you had from some merger actions before the volume numbers there are coming in above 3, probably stronger than I would have thought they would have been at the beginning of the year, just given what we're talking about with the competitive share losses. So any commentary there would be helpful. Ed Elkins: Sure. Thanks for the question. If you look back to that slide we presented that showed the acceleration, I think that really tells the story right there. We have maintained a robust pipeline over the past couple of years of economic activity in terms of industrial development. And what we try to do is watch as that activity moves this way through the pipeline from being a prospective investment to 1 that we believe is actually turning into freight. And so we've seen that pipeline accelerate over the past 6 months I would probably argue that it was decelerating for the past year before that, mostly because of trade uncertainty, tariff uncertainty, a lot of economic uncertainty, which was probably impeding customers from making those investments. But probably through a combination and this is conjecture on my part, through a combination of they've waited so long they can't wait anymore plus getting signals from the market that it is a safe investment despite all the uncertainty, we've seen a real acceleration in that pipeline, which we think is encouraging, of course, both for our network and for the American economy. And I think this goes beyond data centers. It really is new manufacturing capacity coming online, either in the form of expansions for our existing facilities or new facilities actually being located there. So we feel very good about that, and we look forward to seeing that continue. On the intermodal side, we think there's still plenty of room to run in terms of opportunity and our ability to absorb that volume over time here. We have a good intermodal network. Brian has made some real strides in terms of delivering that value and reaccelerating the network, and we're being aggressive in terms of making sure that our customers, as they go out and sell that freight have a real solid place to land it. David Vernon: But I think with regard to how much headwind were the share losses to our intermodal, we say it's about 3 points. That's right, in the quarter right? So if not for those share losses, we would have had 3 points more growth. Mark George: 100%. Operator: From Ravi Shanker at Morgan Stanley. Unknown Analyst: This is Mason on for Ravi. I was just wondering if in the results, you guys saw any pull forward of import volumes and if you're expecting any bounce in volumes after the August tariff deadline? Ed Elkins: Very good question. I would say, I would argue that we probably have seen a little bit of pull forward throughout the beginning portion of this year, the first half. It's probably too early for me to determine whether or not we're seeing any additional activity predicated off new tariff implementations or regimens coming online. . Operator: Stephanie Moore at Jefferies. Please go ahead. Stephanie Benjamin Moore: Maybe touching on a couple of questions that were asked, but maybe asked a little bit differently. You talk a lot about the maybe resurgence and industrial activity. And to your point, some of those major projects getting to a more accelerating phase. That being said, given there is a lot of noise and conversations obviously going on around what the network will look like post merger, if the merger goes through, I can imagine it creates maybe some uncertainty for your customers. So to the extent that you've obviously seen really good progress across a lot of your industrial customers, maybe talk a little bit about the response from others that maybe are taking a little bit of a pause if they are, just given maybe some of the uncertainty deal related? Mark George: Thanks, Stephanie. Look, I think, honestly, the merger is giving a lot of the potential customers here some hope. And so it's definitely not slowing things down. If anything, it's accelerating things because they know that they're going to need maybe 18 to 24 months before they're live, so they want to be ready to take advantage of the new network. But Ed, why don't you add more color, please? Ed Elkins: No, I agree. And it's been talked about plenty of times before, but I'll say it 1 last time, and that is removing interchange friction, removing the impediments to a transcontinental network here is good thing for customers. And I think it's a remarkably good thing for new customers who are investing today in a network that we believe is going to be even better and more powerful going forward. Mark George: It actually has the opposite effect, Stephanie. It's not paralyzing decision making. If anything, it's accelerating decision making. So thanks for the question. Operator: Bascome Majors at Stephens. Bascome Majors: Bascom Brian, I wanted to see if you could go a little more into the sequential shift in the customer-facing side of the metrics, particularly where the merch plan compliance dropped about points or so quarter-per-quarter over-quarter, but you did talk about directionally, a lot of the service metrics improving both client-facing and the ones that we can see into the end of the quarter now? Mark George: Yes, absolutely. So the merchant and compliance year-over-year, we were down 12.8%, 13.9% sequentially here right now in the third quarter, we 6.62% improvement currently from where we finished the second quarter. We have a lot of activity around the car movement, and I spoke of the improvement in the originations and the velocity. But just to give you a perspective, we went out and wait boarded a terminal there in Chattanooga in the month of June. Going through that. We took 150 cars a day out of Chattanooga that were coming off interchange and from other locations on the network, we were able to take that handling out at Chattanooga. So we weren't processing the cars there, moving them up the network process on the second time with removing that handling, we were able to serve those cars deeper into the network speed them up. That helped Chattanooga pick up their originations. It improved their terminal dwell. And it helps us provide the resources for the entire south as Chattanooga and Birmingham, where we've done similar things occur, which then carries the traffic to the north. So we're finding activity like that all across the network, and we're opportunity ripe for those events as we're creating blocks in even areas in the north at Bellevue and in Elkhart, where generating those blocks because we're running on time because we're processing more rapidly than we were in the first half of the year is allowing us to create capacity. Those blocks are allowing us to even remove train sets from the network, putting resources, both crew and power back into the network and help us provide service to the customer, reducing their time in route. So we're seeing very positive effects here with the speed, with the origination and some of the internal measurements, but it's all really in an effort to help process cars for the customer and be more reliable. Unknown Executive: And I think what you're seeing here is really a team that's getting into the details and getting out there in the field and being very, very tactical, trying to really accelerate the network and free up some resources. So a lot of the moves that Bryan is talking about lessens the dependence on human resources. So that's another way to free up T&E to actually be able to respond to some of the volume that we've had. So that growth, coupled with these actions, we've actually seen an improvement in our train speed now here in the past few weeks. So we're feeling very encouraged about where we are operationally. So thanks, Operator: From Richard Harnain at Deutsche Bank. Richa Talwar: Yes, I just wanted to see if you could talk about the competitive dynamic a little bit more. Your competitor -- primary competitor in the East has introduced some new product improvements, be it their new partnerships and Harry tunnel beginning to sell that. Just curious if that's affecting the competitive environment at all and how that overall environment is basically evolving. I know you kind of touched on it. You're seeing opportunities to grow in other areas. But yes, just addressing those specific points. Mark George: Yes. I think both competitors in the East are doing good things for their customers. Ultimately, we're both driving to try to take freight off the highway and we're having success, and this is a really strong market backdrop to do that. So we applaud them for their successes and we're really proud of ours. Ed, do you want to add anything? Ed Elkins: No, I agree. I'm really proud of ours, too. Mark George: All right. Thanks a lot, Rich. Operator: Brandon Oglenski at Barclays. Brandon Oglenski: This is Eric Morgan on for Brandon. I wanted to just come back to pricing in intermodal. Can you just maybe speak at a high level to the extent to which you normally participate in the truck load cycle. I'm not sure if you have like a rule of thumb where truckload contract rates are up x, you might see your yields move why a certain number of months or quarters later. And relatedly, just it sounds like you're incrementally constructive on domestic relative to international and intermodal. Can you just speak to how that might translate to mix in that line from here? Ed Elkins: I think you got it right in terms of -- we are very constructive on the domestic side, maybe a bit less so on a sequential basis for the international side. Look, we have spent years working on reframing our contracts and our relationships with customers so that we can be responsive to that market dynamic of rising or falling truck prices to number one, stay competitive; and number two, delivers much value that we can to shareholders with the service that we're offering. We've taken that from a lag that's probably defined in many months or sometime maybe a year down to a couple of quarters, a couple 3 quarters. I'm really rounding off there. But it's a shorter cycle than it was previously, and we are very encouraged by what we're seeing both in the headlines on the highway, but also what we're seeing in our own day-to-day pricing opportunities. Operator: Question from Ari Rosa at Citigroup. Ariel Rosa: So this is 1 of the more upbeat calls I've heard from you guys in a while. I guess, understandably given the macro backdrop. But talk about the downside risk. Like how do you think about what -- the kind of the sustainability of this macro environment do higher fuel prices pose any risk or any concern to some of the industrial customers? And then broadening that out for a long time, we've talked about the ability for NS to get back into that kind of low 60s OR if we see this macro environment sustain itself, do you think that's something that's feasible as we think about kind of the trajectory over the next 2 to 3 years? Mark George: I think from a macro perspective, we all feel good now, but there's -- we're cautiously optimistic and the cautious part is due higher fuel prices, sustained higher fuel prices eventually hurt the consumer, which can diminish demand and start working against us in the future. So that is the risk. I think we all felt like a short-term bump in fuel is something that the economy can handle and it has handled thus far. How long this persists and the long-term impact of it is the question mark, and I think that's probably the big risk. Let's face it. We've had basically 4 years that we've navigated through a freight recession. And we've been waiting for this to break. It is the longest freight recession in history. So we've been ready to come out of this, I remember quite well when we were at 18, 24 months, the recovery was imminent, and it never actually came. So it does feel like this confluence of higher fuel prices and also some of the enforcement on commercial driver licenses and drug and alcohol testing, all of these things maybe have had an impact finally on the trucking side of things, where we're coming out of this in a much more rail competitive environment. But we have to keep our eyes on what happens long term if fuel stays high for long. Maybe if we stay under $100 a barrel, we can handle it. But if it goes to $110, $120 for any prolonged period of time, maybe it becomes more problematic. I don't know where those thresholds are but that's where we feel we have probably the bigger risk. Did I miss anything, Ed? Ed Elkins: No, no. I think we see a good demand environment and improving the command environment and the supply side that has been constrained on the highway for all those reasons that you talked about. And I think you're absolutely right to be cautious about fuel price and how long is the same itself at those higher prices. Mark George: Yes. So hopefully, that gives you the answer you're looking for, Ari. And look, that same 4 years, we've been dealing with a freight recession, which has basically wanted our top line completely from a volume perspective. We've also had to absorb very high inflation right? And that's a real hard combination that's had an impact on the overall P&L and profitability. So can we now enjoy a couple of few years, a real strong top line where we keep in check the cost line. That is going to be the path toward really improving margins over the long term. I don't think the inflation goes away, quite honestly, because we're locked in with these union agreements that are fairly generous but we have to control all the other aspects in our P&L on the cost side, while we try to manage the volume growth that we expect if things turn like we think they will, and better RPU, hopefully not offset by mix like we've also had to deal with in the past several years. So there is a path there. There is a path there. If everything goes right, and we manage well. Thank you, Ari. . So look, I think at the end of the day, we're going to wrap the call up here, and I want to thank everybody for listening in. Again, we're executing in a very dynamic environment, thanks to the discipline of the team. I'm really excited about the work that Brian and his team are doing to already improve our network so we can handle more and more volume. -- service is improving, and we've got momentum. So I feel good about that. We haven't taken our eye off the ball at all with regard to productivity. Productivity and service and safety. They all must move together. Safety. We're really proud of our results. We are doing well and looking ahead, we're just -- we're cautiously optimistic as we just said. So thanks again to our role rotors and thanks again to our customers and all of our other partners out there. We'll see on the road. Take care. Operator: Thank you. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. And at this time, we do ask that you please disconnect your lines. Before you buy stock in Norfolk Southern, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Norfolk Southern wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $369,577!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,301,557!* Now, it’s worth noting Stock Advisor’s total average return is 908% — a market-crushing outperformance compared to 208% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors. See the 10 stocks » *Stock Advisor returns as of July 23, 2026. This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. Norfolk Southern (NSC) Q2 2026 Earnings Call Transcript was originally published by The Motley Fool

Interested in Union Pacific Corporation? Here are five stocks we like better. Union Pacific reported record Q2 2026 results, with net income of $2 billion and adjusted EPS of $3.41. Revenue rose 12% to $6.9 billion, helped by 2% volume growth, pricing gains, and higher fuel surcharge revenue. The company raised its full-year 2026 EPS outlook to high single-digit growth, while acknowledging fuel prices remain a major cost headwind. Cash from operations increased 21% to $5.5 billion, and Union Pacific paid down $1.5 billion in long-term debt in the first half. Operational performance improved across the network, with record freight car velocity, train speed, and terminal dwell metrics. Management also highlighted continued progress on the proposed Norfolk Southern merger, including a new settlement agreement with Canadian National. Buffett Spent 60 Years Ignoring Tech and the Bill Is Coming Due Union Pacific (NYSE:UNP) reported record second-quarter 2026 financial results, with executives citing volume growth, pricing gains and improved operating performance, while also raising the railroad’s full-year earnings outlook. Chief Executive Officer Jim Vena said the company delivered “record financial results driven by strong execution and 2% volume growth.” Net income totaled $2 billion, and earnings per share were $3.36 on a reported basis. Adjusted for merger costs, EPS was $3.41. → Could Truth API Become Trump Media’s First Meaningful Revenue Driver? AI Broke the Trucks: 3 Transports to Buy After the AI Panic “There was a lot of in and outs as we compare our performance against last year,” Vena said, noting fuel was a major driver of both surcharge revenue and expense. Excluding those factors, he said Union Pacific saw “solid core improvement” in revenue and operating income. Chief Financial Officer Jennifer Hamann said operating revenue rose 12% from a year earlier to $6.9 billion, while freight revenue also increased 12% to $6.5 billion. Fuel surcharge revenue contributed 750 basis points to freight revenue growth and increased by roughly $460 million, reflecting higher fuel prices and volume. → 3 Photonics Companies Making Quantum Tech Possible 2026 Sector Playbook: 3 Sectors Trading Below Fair Value Volume growth added 225 basis points to freight revenue, while core pricing and business mix contributed 175 basis points. Hamann said the company’s “quarterly pricing dollars continue to exceed inflation dollars” as Union Pacific competes for business at levels reflecting the value of its rail service. Business mix was a slight headwind in the quarter, Hamann said, as stronger-than-expected domestic intermodal growth offset the mix benefit from lower international intermodal traffic. → AeroVironment’s Stock Is Down, But Drone Demand Is Taking Off Operating expenses rose 13% to $4.1 billion, primarily due to higher diesel fuel prices. Fuel expense increased 63%, driven by a 60% increase in the average fuel price and 2% higher gross ton miles. The company’s average price per gallon rose to $3.86 from $2.42 a year earlier, adding 120 basis points to the operating ratio. Union Pacific’s operating ratio was 59.2% in the quarter. Hamann said cash from operations increased 21% to $5.5 billion, while free cash flow totaled $1.8 billion after network reinvestment and dividends. The company also paid down $1.5 billion of long-term debt in the first half, bringing adjusted debt-to-EBITDA to 2.5 times. Union Pacific raised its 2026 outlook to reported EPS growth in the high single-digit range, up from its prior outlook for 6% year-to-date growth in line with January expectations. Hamann said the company expects continued operating ratio improvement despite pressure from fuel costs. “Fuel prices remain volatile,” Hamann said, adding that recent purchases have been above $4 per gallon. In response to an analyst question, she said fuel would likely continue to pressure the operating ratio, but Union Pacific expects volume opportunities and productivity gains to help offset that headwind. Vena said he would prefer lower fuel prices despite the revenue benefit from fuel surcharges, because sustained high fuel prices could affect customers and consumer demand. Hamann said the company has not yet seen that demand impact. Executive Vice President of Marketing and Sales Kenny Rocker said second-quarter freight revenue excluding fuel surcharge grew 4% to $5.5 billion, which he described as a record. In the bulk segment, revenue rose 7% despite a 1% decline in volume. Grain and grain products posted double-digit volume growth, driven by export demand, facility expansions, renewable fuels and related feedstocks. Rocker said the category delivered record second-quarter volume and revenue. Coal volume was pressured by weaker natural gas prices, mild weather and customer downtime. Industrial revenue increased 8% on 3% volume growth. Petrochemicals benefited from improved demand and new business, while metals and minerals volumes rose on higher domestic steel production and business development wins, offsetting weakness in export soda ash. Premium revenue rose 21% on 4% volume growth and a 16% increase in average revenue per car. Domestic intermodal posted its fourth consecutive record quarter in both volume and revenue, with private asset, rail asset and parcel volumes all up double digits. Rocker said the business benefited from constrained truck capacity and share gains. International intermodal volume fell 14%, though the company saw improvement late in the quarter from stronger West Coast imports. Looking ahead, Rocker said grain and grain products are positioned for further second-half growth, while coal is expected to remain challenging due to elevated inventories and lower natural gas prices. He also said domestic intermodal should continue to perform well, supported by over-the-road conversions and Union Pacific’s service product. Executive Vice President of Operations Eric Gehringer said Union Pacific delivered record second-quarter operating performance while handling 2% more volume. Employee and derailment rates improved compared with their respective three-year rolling averages. Freight car velocity increased 5% to 231 miles per day, a second-quarter record. Train speed rose 3%, and terminal dwell improved 7% to 19.7 hours, matching the first-quarter record and marking the third straight quarter below 20 hours. Gehringer said both the intermodal and manifest service performance indexes finished at 95%. The company also reported record workforce productivity, train length and fuel consumption performance. Locomotive productivity improved 1%, fuel consumption improved 1%, workforce productivity rose 5%, and train length increased 2% from a year earlier. Gehringer said Union Pacific continues to make strategic capacity investments, including in the Houston Complex, Pacific Northwest siding extensions and Sunset Double Track projects. Vena also provided an update on Union Pacific’s proposed merger with Norfolk Southern. He said the Surface Transportation Board accepted the company’s application as complete on May 28 and that Union Pacific planned to submit supplemental information requested by the board on Monday. Vena said Union Pacific has expanded its Committed Gateway Pricing and made other voluntary commitments intended to improve the competitive nature of the proposed merger. He also highlighted a newly announced merger settlement agreement with Canadian National. Vena said the agreement with Canadian National addresses ownership and competitive issues involving the Kansas City terminal and Terminal Railroad Association of St. Louis, while also giving Canadian National access between east of St. Louis and Kansas City. He said the agreement would provide CN with a path to move traffic into Mexico and would give Union Pacific better east-to-west access through Chicago. Vena argued the merger would create seamless single-line service, improve reliability, lower costs and make rail more competitive against trucks and other railroads. “Now versus almost one year ago when we first announced our plans to merge, we have even more conviction that our transaction is in the public interest,” he said. Union Pacific Corporation (NYSE: UNP) is one of the largest freight railroad companies in the United States. Its principal operating subsidiary, Union Pacific Railroad, has roots that trace back to the Pacific Railway Act of 1862 and the construction of the first transcontinental rail link completed in 1869. The company is headquartered in Omaha, Nebraska, and operates as a holding company for rail transportation and related services. Union Pacific's core business is the movement of freight by rail across an extensive rail network serving the western two‑thirds of the United States. This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected]. The article "Union Pacific Q2 Earnings Call Highlights" was originally published by MarketBeat. View MarketBeat's top stocks for July 2026.

This article first appeared on GuruFocus. Net Income and EPS Growth: 7% increase in both net income and earnings per share. Volume Increase: 4% year-over-year increase in volume. Revenue Growth: Record revenue achieved in the quarter, driven by strong volume and favorable market conditions. Operating Ratio: Adjusted operating ratio for the quarter was 65.5%. Operating Income: 5% improvement in operating income despite cost headwinds. Fuel Surcharge Impact: Major factor in offsetting fuel expense pressures. Intermodal Revenue: Increased by 7%, with a 5% increase in volumes. Coal Volume Increase: 3% increase in coal volume. Cost Takeout Commitment: At least $150 million in cost takeout during 2026. Operating Expense Outlook: Updated to $8.8 billion to $8.9 billion due to fuel expense increases. CapEx Guidance: Approximately $1.9 billion for the year, unchanged. Warning! GuruFocus has detected 10 Warning Sign with NSC. Is NSC fairly valued? Test your thesis with our free DCF calculator. Release Date: July 23, 2026 For the complete transcript of the earnings call, please refer to the full earnings call transcript. Norfolk Southern Corp (NYSE:NSC) reported a strong second quarter with 7% growth in net income and EPS, driven by increased volumes and revenue. The company achieved record revenue in the quarter, even excluding fuel surcharges, with a 4% year-over-year volume increase. Safety performance improved significantly, with a 16% reduction in personal injury index and a 25% decrease in accident rates year-over-year. NSC is committed to cost discipline, aiming for at least $150 million in cost savings during 2026, contributing to a cumulative $650 million over three years. The company is optimistic about growth potential across key markets, including domestic intermodal, chemicals, and coal, supported by favorable market dynamics and industrial development projects. Higher fuel prices and inflationary pressures have driven up costs, contributing to a 210 basis point increase in the operating ratio compared to last year. Network disruptions and increased demand have put pressure on crew resources, creating variability in portions of the network. The company faces challenges in maintaining consistent service levels, requiring ongoing efforts to improve terminal performance and reduce variability. There is uncertainty in the broader economy, with potential risks from sustained high fuel prices impacting consumer demand and industrial activity. NSC's operating expenses are expected to be higher than initially forecasted due to a $400 million to $500 million increase in fuel costs. Q: Can you discuss the pricing environment and how the tightness in the truck market might translate into pricing opportunities for Norfolk Southern, particularly in intermodal and merchandise? A: Mark George, President & CEO, explained that the current freight environment is encouraging, with improvements in GDP, manufacturing, and housing starts. The tight truck market, indicated by high outbound tender rejections, presents opportunities for Norfolk Southern to compete effectively in intermodal and merchandise, both in terms of volume and pricing. Q: Are you planning to add more headcount to improve service, and how should we think about near-term cost and margin trends? A: Mark George noted that while the overall system can absorb volume, there are pockets where more hiring is needed, particularly in T&E. Brian Barr, COO, added that operational improvements are generating efficiencies, reducing the need for significant resource additions. Jason Zampi, CFO, mentioned that despite a 4% wage increase, they expect to beat normal sequential seasonality in margins due to a fuel price tailwind. Q: How is the RPU ex-fuel progressing, and how are you balancing volume growth with pricing in the current market? A: Claude Elkins, EVP & Chief Commercial Officer, stated that the freight market is optimistic, with upward pressure on spot prices expected to influence contract prices. The company has restructured contracts to be more responsive to market dynamics, and they anticipate pricing improvements as the year progresses. Q: How are intermodal conversions from the highway progressing, and have you seen any impact from the merger on share shifts? A: Claude Elkins explained that intermodal customers are selling the service to BCOs, with annual bid cycles typically. Despite initial share losses post-merger, the company is growing in other areas and expects to lap those losses by the fourth quarter. The network is well-positioned to capture growth opportunities. Q: What are the downside risks to the current macro environment, and is there potential for Norfolk Southern to achieve a low 60s operating ratio? A: Mark George highlighted that sustained high fuel prices could eventually hurt consumer demand, posing a risk. However, the company is optimistic about the demand environment and believes there is a path to improving margins if they manage volume growth and cost control effectively. For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Norfolk Southern (NSC) came out with quarterly earnings of $3.52 per share, beating the Zacks Consensus Estimate of $3.23 per share. This compares to earnings of $3.29 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of +8.98%. A quarter ago, it was expected that this railroad would post earnings of $2.51 per share when it actually produced earnings of $2.65, delivering a surprise of +5.58%. Over the last four quarters, the company has surpassed consensus EPS estimates four times. Norfolk Southern, which belongs to the Zacks Transportation - Rail industry, posted revenues of $3.47 billion for the quarter ended June 2026, surpassing the Zacks Consensus Estimate by 4.42%. This compares to year-ago revenues of $3.11 billion. The company has topped consensus revenue estimates three times over the last four quarters. The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call. Norfolk Southern shares have added about 14.6% since the beginning of the year versus the S&P 500's gain of 9.6%. While Norfolk Southern has outperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock? There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately. Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions. Ahead of this earnings release, the estimate revisions trend for Norfolk Southern was mixed. While the magnitude and direction of estimate revisions could change following the company's just-released earnings report, the current status translates into a Zacks Rank #3 (Hold) for the stock. So, the shares are expected to perform in line with the market in the near future. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. It will be interesting to see how estimates for the coming quarters and the current fiscal year change in the days ahead. The current consensus EPS estimate is $3.34 on $3.33 billion in revenues for the coming quarter and $12.24 on $12.79 billion in revenues for the current fiscal year. Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Transportation - Rail is currently in the bottom 24% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1. Another stock from the same industry, Canadian Pacific Kansas City (CP), has yet to report results for the quarter ended June 2026. The results are expected to be released on July 29. This railroad is expected to post quarterly earnings of $0.89 per share in its upcoming report, which represents a year-over-year change of +9.9%. The consensus EPS estimate for the quarter has been revised 0.7% lower over the last 30 days to the current level. Canadian Pacific Kansas City's revenues are expected to be $2.91 billion, up 9% from the year-ago quarter. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Norfolk Southern Corporation (NSC) : Free Stock Analysis Report Canadian Pacific Kansas City Limited (CP) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Union Pacific raised its financial outlook Thursday as the railroad’s second-quarter volume, revenue, and profits increased. “Strong execution and volume growth enabled another successful quarter and record financial results,” Chief Executive Jim Vena said. The railroad’s operating income grew 9%, to $2.8 billion, as revenue rose 12%, to $6.86 billion. Earnings per share, adjusted for the impact of one-time items, increased 13%, to $3.41. “Put it all together, we had a record quarter,” UP (NYSE: UNP) Chief Financial Officer Jennifer Hamann said on the railroad’s earnings call, with new marks set for revenue, operating income, and net income. The operating ratio was 59.7%, a 0.7-point increase from a year ago, as operating expenses rose 13% due to a combination of inflation, higher volume, and costs related to the proposed merger with Norfolk Southern (NYSE: NSC). Overall volume was up 2% for the quarter. Premium business, including intermodal and automotive, was up 4%, almost entirely from intermodal. Industrial products volume increased 3%. Bulk business was down 1% as a 12% increase in grain traffic was not enough to overcome a 14% decline in coal volume. “Domestic intermodal delivered its fourth consecutive record quarter in both volume and revenue. It’s evident our outstanding service set the foundation to grow the business, and that’s exactly what we’re doing,” said Kenny Rocker, executive vice president of marketing and sales. “In the second quarter, private asset, rail asset, and parcel volumes were all up double digits, benefiting from constrained truck capacity and share gains.” Omaha-based UP now expects high single-digit percentage growth in earnings per share, up from mid single-digits, as the railroad’s economic forecast rose to mixed from muted. UP has a positive outlook for all of its major traffic segments with the exception of coal, which faces headwinds from a combination of high power plant stockpiles and lower natural gas prices. The railroad’s key operating metrics improved for the quarter. Average car miles per day increased 5%, to 231, as terminal dwell declined 7%, to 19.7 hours, and average train speed rose 3%, to 24.7 mph. “We delivered record second quarter operating performance, ran a fluid network, and improved safety all while handling 2% more volume,” said Eric Gehringer, executive vice president of operations. UP saw record workforce productivity as train and engine crew headcount declined 2%. UP also set records for train length and fuel consumption, while terminal dwell tied a company record. The railroad said its safety performance improved, too, but did not provide specifics on its employee injury and train accident rates. Subscribe to FreightWaves’ Rail e-newsletter and get the latest insights on rail freight right in your inbox. Read more: Norfolk Southern’s earnings rise with volume gains First look: Union Pacific earnings First look: CSX earnings Street flip: Intermodal rail charges ahead in latest data Peak fatigue? Intermodal slows in latest data The post Union Pacific posts record financial results, raises outlook appeared first on FreightWaves.

Norfolk Southern reported stronger second-quarter profits today amid across-the-board volume growth. “A lot’s changed since our last call. Most importantly the sharp inflection in volumes, initially catalyzed by the Iran conflict that bolstered our energy markets. And that strength has now spread into other markets, including domestic intermodal and industrial products,” Chief Executive Mark George said on the railroad’s Thursday morning earnings call. “With that backdrop, we delivered a strong second quarter with results that exceeded our own expectations.” Adjusted for the impact of one-time items – including expenses related to the February 2023 East Palestine, Ohio, derailment and hazardous materials release, and the proposed merger with Union Pacific (NYSE: UNP) – the railroad’s operating income increased 5%, to $1.19 billion, as revenue rose 11% to a record $3.46 billion. Earnings per share increased 7%, to $3.52. The railroad’s adjusted operating ratio was 65.5%, up 2.1 points from a year ago, as expenses increased by 15%, mostly due to higher fuel costs and inflation. Overall volume was up 4%, with all three of the railroad’s business segments seeing growth. Intermodal was up 5% thanks to domestic loads. Coal carloads increased 3% thanks to a 25% surge in export volume. Merchandise traffic was up 2%. “Overall, we’re positive on the growth potential across the markets that we serve,” Chief Commercial Officer Ed Elkins said. “Now as you would expect, however, energy prices, the consumer, and interest rates all remain wildcards and factors that we will be monitoring.” Tighter trucking capacity will help highway-to-rail freight conversions, he said, particularly for domestic intermodal. The Atlanta-based railroad (NYSE: NSC) has made strides in speeding up its network, which never fully bounced back after harsh winter weather. Terminal dwell was up 5.7% in the second quarter compared to a year ago, while average train speed was down 7.8%. The railroad has a few pockets where train crews are in short supply. “Successful railroading demands doing the simple things exceptionally well,” says Brian Barr, who was promoted to the railroad’s chief operating officer on June 1. “I have learned that throughout my career, including my time working directly for Hunter Harrison. Planning and execution are built on discipline, accountability, and staying relentlessly focused on the operating plan. The reality is railroading is a grind. Doing the small things over and over again very well. That is what delivers results.” Average train speeds have risen for four straight weeks, while terminal dwell has fallen for four weeks in a row. Merchandise and intermodal trip-plan compliance also have seen improvements over the past month. “We’re feeling very encouraged about where we are operationally,” George said. “This is not about changing our operating strategy. It’s about continuously improving our results. The primary levers for improving service and productivity across the network are running the plan, aligning the resources with demand, improving terminal performance, and eliminating unnecessary variability. We’ve got more work to do, and we know it,” said Barr. NS remains on path to exceed its plan for a $150 million reduction in costs this year, as well as its three-year target of $650 million in cost reductions. The railroad’s personal injury rate improved 16% during the quarter, while the train accident rate improved 25%. Subscribe to FreightWaves’ Rail e-newsletter and get the latest insights on rail freight right in your inbox. Read more: First look: Union Pacific earnings First look: CSX earnings Street flip: Intermodal rail charges ahead in latest data Peak fatigue? Intermodal slows in latest data WATCH: Hellish wildfire overtakes CN train, crew in Canada The post Norfolk Southern’s earnings rise with volume gains appeared first on FreightWaves.

Interested in Norfolk Southern Corporation? Here are five stocks we like better. Norfolk Southern posted a stronger-than-expected Q2, with adjusted EPS of $3.52, a 65.5% adjusted operating ratio, and 7% growth in both net income and earnings per share. Revenue set records as volumes improved across merchandise, intermodal, and coal. Executives said volume growth is creating near-term service pressure, but the railroad is already seeing improvement in July. The company is focusing on better originations, lower terminal dwell, faster train velocity, and tactical operating changes to restore network fluidity. Cost and fuel inflation are pushing up full-year expense guidance, with 2026 operating expenses now expected at $8.8 billion to $8.9 billion, up from the prior range. Norfolk Southern kept capital spending at about $1.9 billion and reiterated at least $150 million in 2026 cost reductions. This Railroad Stock Is Chugging Along to a New All-Time High Norfolk Southern (NYSE:NSC) reported a stronger-than-expected second quarter, with executives pointing to a sharp rebound in freight volumes, higher energy-related demand and improving intermodal trends, while also acknowledging service pressures caused by the rapid increase in traffic. President and Chief Executive Officer Mark George said the company delivered “a strong second quarter” after volumes improved sharply, initially driven by energy markets tied to the Iran conflict and later spreading into domestic intermodal and industrial products. George said the quarter produced 7% growth in both net income and earnings per share. → Could Truth API Become Trump Media’s First Meaningful Revenue Driver? These 3 industrial stocks just got upgraded ahead of earnings The railroad’s adjusted operating ratio was 65.5%, according to Chief Financial Officer Jason Zampi. Adjusted earnings per share were $3.52. Zampi said operating income increased 5% from a year earlier, despite higher fuel costs, inflationary pressures and volume-related expenses. Chief Commercial Officer Ed Elkins said overall volume increased 4% year over year. He said that even excluding fuel surcharge impacts, Norfolk Southern achieved record revenue in the quarter. → 3 Photonics Companies Making Quantum Tech Possible All Aboard! The Sell-Side Has Railroads In Reversal Within merchandise, volume increased 2%, while revenue excluding fuel rose 4% to another record. Elkins said the gains were driven by energy demand in the company’s chemicals markets, with revenue per unit excluding fuel up 3% due to price and mix. Intermodal volume rose 5%, supported by firm consumer demand, favorable trucking market conditions and recent business wins in domestic intermodal. Intermodal revenue excluding fuel increased 7%, while revenue per unit excluding fuel rose 1%, which Elkins described as “the beginning of a positive shift in Intermodal pricing.” → AeroVironment’s Stock Is Down, But Drone Demand Is Taking Off Coal volume increased 3%, helped by the ramp-up of a new metallurgical coal export customer and additional export thermal opportunities tied to volatile global energy markets. Revenue per unit excluding fuel increased 1%, reflecting favorable seaborne coal pricing, partly offset by negative mix. Elkins said the company is “positive on the growth potential” across its served markets, while noting that energy prices, consumer demand and interest rates remain variables. He said Norfolk Southern has a cautious but optimistic outlook for merchandise, a bullish view of intermodal and continued strength in export metallurgical coal. George said higher volumes following winter disruptions put pressure on the network, but he said the company has addressed the issues “head-on.” He said Norfolk Southern is already seeing acceleration in the network in July and expects continued progress. New Chief Operating Officer Brian Barr said demand remained strong throughout the quarter, but recovering from network disruptions while handling higher volumes created pressure on crew resources and variability in parts of the system. Barr said the company is focused on improving originations, reducing terminal dwell, increasing velocity and running the railroad to plan. He said on-time originations increased 20% over the past month, terminal performance is improving and train velocity is rising as recrews decline. During the question-and-answer session, Barr described tactical operating changes, including work at the Chattanooga terminal that removed handling for about 150 cars per day. He said similar efforts are helping create capacity, reduce time in route and return resources to the network. George said the company does not expect a “massive” addition of resources, though it needs to hire in certain tight locations and continue replacing attrition in train and engine ranks. He said accelerating the network reduces the need for incremental labor and locomotives. Barr said safety remains the foundation of Norfolk Southern’s operations. In the second quarter, the company’s personal injury index declined 16% year over year, while the accident rate fell approximately 25%. Its mainline accident rate remained flat and near best-in-class levels, according to Barr. He also highlighted the mechanical department, which he previously led, for going two consecutive months injury-free across shops and yards on the network. Barr said the company is pleased with the progress but “not satisfied,” adding that safety has no finish line. Zampi said total costs rose 15% in the quarter, with more than two-thirds of the increase driven by a substantial rise in fuel expense. Inflation also pressured compensation and benefits, purchased services and materials, while volume and network fluidity issues contributed to higher overtime, rents and materials. Norfolk Southern incurred $51 million in merger-related expenses during the quarter, $15 million of costs related to the Eastern Ohio incident and $6 million of restructuring costs, Zampi said. George said the company is updating its 2026 operating expense outlook to $8.8 billion to $8.9 billion, up from the prior range of $8.2 billion to $8.4 billion. He attributed the increase largely to an estimated $400 million to $500 million of incremental fuel expense compared with the company’s view at the beginning of the year. Excluding fuel, he said core operating costs are trending toward the high end of the previous range because of a stronger volume outlook. Capital expenditure guidance remains unchanged at approximately $1.9 billion. George said the company is maintaining discipline while investing in safety, reliability and network capacity. Barr reaffirmed Norfolk Southern’s target of at least $150 million in cost reductions in 2026, which he said would bring cumulative savings to at least $650 million over three years, exceeding the company’s original target. Elkins said trucking market conditions have become increasingly supportive for rail conversion. He cited rising dry van rates, tightening truck capacity and elevated outbound tender rejections. He said higher fuel prices also make intermodal conversion more attractive to customers. In response to analyst questions, Elkins said upward pressure in spot trucking rates typically needs three to six months before influencing contract pricing. He said Norfolk Southern has restructured contracts in recent years to respond more quickly to movements in truck pricing, reducing the lag from many months or a year to “a couple quarters.” Elkins also said industrial development remains a key strategic priority. He said the number of new manufacturing and expansion projects expected to enter design and construction in 2026 is projected to be nearly double last year’s level. He cited projects from Sodecia Aapico JV in South Carolina, Virginia Transformer in Alabama and Silvi Materials cement terminals in several markets. George said the company remains focused on the proposed combination with Union Pacific and is confident the transaction can strengthen supply chains through single-line service. He also referenced Norfolk Southern’s agreement with CN, calling it a “win-win-win” that further enhances competition in freight rail. Looking ahead, George said Norfolk Southern is cautiously optimistic. He said higher fuel prices could become a risk if sustained long enough to hurt consumer demand, but he added that the current environment is more favorable for rail after what he described as a prolonged freight recession. 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. This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected]. The article "Norfolk Southern Q2 Earnings Call Highlights" was originally published by MarketBeat. View MarketBeat's top stocks for July 2026.

Norfolk Southern Corporation (NSC) reported adjusted second-quarter 2026 earnings of $3.52 per share, up 7% year over year and 9% above the Zacks Consensus Estimate of $3.23. Railway operating revenues rose 11% to a record $3.47 billion, beating the consensus mark of $3.32 billion by 4.4%. The top-line gain reflected 4% volume growth, stronger revenue per unit and higher fuel surcharges. Total units reached 1.86 million, while adjusted income from railway operations increased 5% to $1.20 billion. Norfolk Southern Corporation price-consensus-eps-surprise-chart | Norfolk Southern Corporation Quote Merchandise revenues increased 8% year over year to $2.13 billion. Units rose 2%, while revenue per unit advanced 6%, supported by higher fuel surcharge revenue and favorable rate and mix. Chemicals revenues climbed 18%, agriculture, forest and consumer products increased 4% and metals and construction rose 5%. Automotive revenues advanced 3%, with units remaining essentially flat. Intermodal revenues jumped 22% to $908 million, with units up 5% and revenue per unit rising 16%. Domestic intermodal units grew 11%, more than offsetting a 3% decline in international units. Coal revenues climbed 7% to $424 million as units increased 3% and revenue per unit improved 4%. Export coal tonnage surged 25%, while utility and domestic metallurgical tonnage declined 8% and 15%, respectively. Adjusted railway operating expenses rose 15% to $2.27 billion. Fuel expense surged 85%, or $186 million, mainly because of higher prices. Compensation and benefits increased 8%, while purchased services and rents climbed 6%. The adjusted operating ratio, which measures operating expenses as a percentage of revenues, deteriorated 210 basis points to 65.5%. Higher fuel expense and the related surcharge revenues created a 110-basis-point year-over-year headwind. Excluding fuel, revenues grew 5%, while revenue per unit increased 1%. Service and network measures weakened during the quarter. Train speed declined to 19.9 miles per hour from 21.6 a year ago, while terminal dwell increased to 24.0 hours from 22.7 hours. Car miles per day fell to 138 from 142. Customer-facing metrics also softened. Merchandise plan compliance dropped to 68% from 78%, and the intermodal service composite declined to 85% from 89%. Management said that network velocity was regaining momentum in the third quarter and reiterated that NSC remains on track for at least $650 million of three-year cost reductions. Safety performance provided a counterweight to the service pressure. The first-half FRA accident rate improved to 1.61 from 2.37 in the prior-year period, while the FRA mainline accident rate declined to 0.49 from 0.56. The first-half personal injury index improved to 1.03 from 1.08. Management emphasized continued investment in safety and linked the progress to longer-term culture change across the railroad. Net cash provided by operating activities totaled $1.40 billion in the first six months of 2026, down from $2.03 billion a year earlier. Property additions were $821 million, while dividends totaled $606 million. Norfolk Southern did not repurchase shares during the period. NSC ended June with $1.07 billion in cash and cash equivalents. Total debt declined to $16.62 billion from $17.09 billion at year-end 2025, while the debt-to-total-capitalization ratio improved to 50.6% from 52.4%. Management now expects adjusted operating expenses of $8.8 billion to $8.9 billion for 2026. The revised view includes a projected $400 million to $500 million incremental fuel impact versus the original guidance, along with higher volumes. Capital spending is expected to be $1.9 billion, about $300 million or 14% below the 2025 level. The program is expected to support network reliability and capability as the company prioritizes safety, consistent service and disciplined execution. Currently, NSC carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. Delta Air Lines (DAL) reported second-quarter 2026 earnings (excluding 88 cents from non-recurring items) of $1.56 per share, beating the Zacks Consensus Estimate of $1.51. Earnings declined in double digits (% wise) from a year ago as sharply higher fuel costs pressured profitability. Revenues rose on a year-over-year basis to $17.67 billion but missed the consensus estimate of $17.76 billion. Broad demand strength lifted adjusted total revenue per available seat mile, or TRASM, 12.4%, while premium and diversified revenue streams continued to expand. United Airlines Holdings, Inc. (UAL) reported second-quarter 2026 adjusted earnings of $1.99 per share, down 48.6% year over year but above the Zacks Consensus Estimate of $1.92 by 3.7%. Operating revenues rose 16% to $17.67 billion and were essentially in line with the $17.68-billion consensus mark. A 12.1% increase in total revenue per available seat mile, or TRASM, and broad-based gains across premium, loyalty and cargo revenues supported the top line despite sharply higher fuel costs. J.B. Hunt Transport Services, Inc. (JBHT) reported second-quarter 2026 earnings of $1.91 per share, up 45.8% from $1.31 a year ago. The figure beat the Zacks Consensus Estimate of $1.71 by 11.7%. Operating revenues climbed 19.4% year over year to $3.50 billion and surpassed the consensus mark of $3.19 billion by 9.5%. Higher volumes and pricing across several businesses supported growth, led by a 10% increase in Intermodal loads. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Norfolk Southern Corporation (NSC) : Free Stock Analysis Report Delta Air Lines, Inc. (DAL) : Free Stock Analysis Report United Airlines Holdings Inc (UAL) : Free Stock Analysis Report J.B. Hunt Transport Services, Inc. (JBHT) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research