Norfolk Southern (NYSE:NSC) executives said fourth-quarter results reflected a softer-than-expected volume environment, but emphasized that cost performance came in line with prior guidance and that the railroad made measurable progress in safety, service, and productivity during 2025.
Operating backdrop: softer volumes, disciplined costs
CEO Mark George said fourth-quarter demand was “clearly softer than anyone had predicted,” but the company “controlled the controllables,” with costs landing “exactly in line” with the guidance provided in the prior quarter. George also said the company maintained focus on day-to-day execution despite heavy external attention around the pending merger, prioritizing safety, dependable service, and cost control.
Safety and operations: “best year in more than a decade” on accident rates
Management highlighted safety and operational improvements as a central theme of the call. George said Norfolk Southern had 0 reportable mainline derailments in the fourth quarter, and that more than three-quarters of monthly traffic is now scanned by portal technology as part of the company’s expanded digital train inspection program.
COO John Orr described 2025 as a “defining year” operationally and said the company advanced “structural changes required under PSR 2.0” to build a more resilient, efficient railroad. Orr reported several safety metrics for the year:
- FRA reportable injury ratio improved 15% to 1.0
- Reportable accidents improved 31% to 2.19
- Fourth-quarter mainline accident rate was 0.13, a 71% year-over-year improvement
Orr also pointed to productivity levers in train operations, including larger train size while reducing horsepower used, and cited year-over-year improvements such as train load up 4%, horsepower per ton down nearly 10%, fuel efficiency up 4%, and GTMs per crew start up 2.5%. He said unscheduled stops declined 31% year-over-year.
On technology and mechanical integrity, Orr highlighted a newly introduced Wheel Integrity System that identified a wheel casting flaw tied to an external vendor. Orr said the system helped confirm seven additional brand-new wheel sets across North America with the same defect, leading to an “immediate industry-wide recall.”
Segment commentary: merchandise strength offset by intermodal and coal headwinds
Elkins said merchandise volume increased 1% year-over-year in the fourth quarter, driven by auto and chemicals markets. Merchandise revenue excluding fuel grew 2% year-over-year, with RPU excluding fuel up 1%, though he noted negative mix “most notably” within chemicals.
Intermodal was described as the most challenged area in the quarter. Elkins said shifting market conditions drove a 7% decline in intermodal volume, while RPU rose 1% in what he called an “unexceptional pricing environment,” resulting in a 6% decline in intermodal revenue.
Coal results were mixed. Elkins said coal volume increased 1% as higher electricity demand, favorable natural gas prices, and regulatory support strengthened utility coal markets, partially offset by reduced export volume. However, coal revenue fell 11% as lower seaborne coal prices drove RPU excluding fuel down 12%.
For the full year, Elkins said merchandise revenue excluding fuel grew $287 million, or 4%, and that Norfolk Southern delivered record annual revenue and record revenue excluding fuel across each underlying merchandise business group in 2025. He specifically cited a record year for the automotive franchise, attributing performance to stronger train performance, improved car order fill, reduced terminal dwell, and a 4% year-over-year improvement in equipment cycle times.
Elkins said intermodal revenue finished flat for the year, reflecting trade volatility and second-half share losses tied to merger-related competitor activity. He also cited a $108 million year-over-year decline tied to seaborne coal weakness and said volatile fuel surcharge revenue was a $134 million drag.
Financial results: adjusted OR 65.3; $2.2B in free cash flow
CFO Jason Zampi reviewed fourth-quarter adjusted results and key reconciling items. He said total costs attributable to the Eastern Ohio incident were $29 million, including $24 million of recoveries under property insurance policies. The company also recorded $65 million in merger-related costs, primarily legal and professional services and employee retention accruals.
On an adjusted basis, Zampi said the company posted a fourth-quarter operating ratio of 65.3 and earned $3.22 per share. He said operating ratio performance deteriorated versus the prior year and prior quarter due to top-line headwinds, including the impact of competitor responses to the merger, which management said affected the full fourth quarter.
Zampi said expenses were favorable by 1% versus both comparison periods, primarily due to a large land sale that benefited operating expenses by $85 million. He reiterated that the company’s quarterly expense guidance had been $2.0 billion to $2.1 billion, and said that absent the land sale, expenses would have been within that range. He also cited ongoing inflation headwinds in wages, materials, and depreciation, as well as storm-related recoveries in the quarter.
For the full year, Zampi said performance was favorable across metrics versus the prior year, although not as originally planned because a previously projected 3% revenue growth did not materialize. He said the company exceeded original productivity targets by more than $65 million and noted that third- and fourth-quarter land sales helped mitigate operating income pressure. He also said resolution of a state tax issue increased net income and EPS by $50 million and $0.22, respectively, contributing to 5% bottom-line growth year-over-year.
Zampi said Norfolk Southern generated $2.2 billion in free cash flow, nearly $500 million higher than the prior year, with the highest free cash flow conversion rate since 2021.
2026 outlook: cost envelope, lower capex, and merger update
Looking ahead, George said the company’s 2026 priorities are safety, consistent service, and controlling costs while “fight[ing] for every dollar of quality revenue.” Management guided to a 2026 cost base range of $8.2 billion to $8.4 billion, which Zampi said excludes merger-related retention expenses. Zampi described expense drivers as a combination of inflation running closer to 4% (including wage increases, health and welfare up over 12%, and insurance premium increases of 25%), more normalized land sales versus 2025, and a productivity commitment of $150 million.
On capital spending, management said 2025 capex totaled $2.2 billion and guided to approximately $1.9 billion in 2026. Orr said the company delivered the 2025 capital program on time and on budget, and said improved network reliability and asset efficiency enabled a 14% reduction in the 2026 capital envelope. Zampi and Orr said the reduction reflects better asset utilization and network fluidity, allowing pullbacks in some equipment spending while maintaining focus on safety and resiliency.
On the merger process, George said the company is working with Union Pacific to respond to the Surface Transportation Board’s request for additional information and submit an augmented application. He emphasized that the STB’s initial action addressed completeness rather than merits and said the company remains committed to engaging stakeholders through the regulatory review.
About Norfolk Southern (NYSE:NSC)
Norfolk Southern Corporation is a major U.S. freight railroad company that provides rail transportation and related logistics services. As a Class I carrier, the company operates an extensive network across the eastern United States and offers scheduled freight service for a broad range of industries. Its core operations include long-haul and regional rail freight transportation, intermodal services that move containers and trailers between rail and other modes, and terminal and switching services that support efficient rail shipments for industrial and port customers.
The company transports a variety of commodities, serving sectors such as coal and energy, automotive and automotive parts, chemicals, agriculture, metals and construction materials, and consumer goods.
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