Norfolk Southern Corp. 2026 Q3 Earnings Call

Please go ahead. 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 investor 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.

Well, good morning, everyone, and thank you for joining us. We are here in Atlanta, and I'm joined by Brian Barr, our Chief Operating Officer, Ed Elkins, our Chief Commercial Officer, and Jason Zampi, our Chief Financial Officer. Our third quarter was strong, with steady execution, making notable improvements to our network while delivering solid results. We have an outstanding team of thoroughbreds who remain focused on the fundamentals: operating a safe, reliable railroad, serving our customers, growing the business, and improving productivity across the network. So a big thanks to all our team. Collectively, we delivered very strong revenue and operating income growth while we continued to advance productivity. While we absorbed higher fuel costs this quarter, our team executed well on the controllables, maintaining cost discipline while improving the efficiency of the operations.

Overall, we were pleased with how the business performed in a dynamic operating environment and believe that the underlying fundamentals of the franchise remain strong. Demand for rail service is growing, with encouraging trends in areas such as domestic intermodal and chemicals, which Ed will discuss in more detail. The current macro environment is tightening the truck market, and that helps rail be more competitive. What you saw in the quarter is us capturing the increased customer demand. Operationally, we continue to make progress. Under Brian's leadership, we've made targeted adjustments across the network and key service metrics are improving even as we handle higher volumes. Brian will detail some of the changes that helped us achieve record productivity performance in the quarter, and we are making other operational improvements while adding resources that will improve network performance going forward.

You should expect to see these efforts show up more clearly as we close out 2026 and continue into next year. Bottom line, we're handling the volume today, and we expect stronger results as the resources come online and our demand pipeline continues to fill out. While we're encouraged by the meaningful progress we're making, we know there's more work to do. We've consistently said that we hold ourselves to a higher standard. We're accelerating some targeted capital investments into this year to accommodate continued volume growth so that we can deliver the level of service our customers expect. Meantime, we've identified opportunities to build more sustainable processes across our network so we can create a more resilient railroad for the long term. With that, let me hand it off to Brian.

Appreciate it, Mark, and good morning, everyone. I want to begin by thanking the men and women of Norfolk Southern. As I spend time in the field, it is clear our team is putting in the work. Our railroaders managed another demanding quarter, overcoming significant weather and operating disruptions while remaining focused on serving our customers and operating safely. As I said on this call last quarter, and say it to our teams frequently, successful railroading comes down to doing the fundamentals exceptionally well. Originate trains on time, reduce terminal dwell, run the plan, and align resources with demand. During the third quarter, our focus on those fundamentals drove clear sequential improvements across the network. Turning to slide 5, the most important part of railroading is ensuring our employees and the communities we serve remain safe. Our preliminary year-to-date FRA personal injury index is 1.08.

Our train accident rate is 1.74, a historical best for Norfolk Southern. Our accident performance continues to show step function improvement, and it's a clear sign of our railroaders' commitment to safety. We recognize the progress, but we are not satisfied. We will never stop pushing ourselves to be the safest in the industry. Turning to slide 6, we entered the quarter with a clear plan to recover network fluidity by improving originations, reducing dwell, increasing velocity, and getting the railroad back on schedule.

We delivered sequential improvement across those foundational measures. These are results our customers can see and feel. This quarter-over-quarter improvement demonstrates that our operating actions are producing results. Moving to Slide 7, our progress came despite significant August weather across the north. On our network's high-speed corridor, the team quickly restored infrastructure, removing hundreds of downed trees, repairing multiple washouts, and handling widespread power outages by activating strategic reroutes and repositioning resources. While the historic wind and rain interrupted some of our July momentum, it did not derail our progress. We made meaningful improvements versus the prior quarter, as you can see by the metrics on the slide. We also drove substantial year-over-year progress, operating 5% more gross ton miles in Q3 2025.

The network absorbed this growth almost entirely through our existing infrastructure, driving a 4% increase in both train length and weight compared to the same period last year. Turning to Slide 8, we generated strong productivity in a higher volume environment. Our on-time origin performance increased by 12 percentage points, and we continue to see progress here daily. Running an on-time network is essential to driving cost out. Workforce productivity was a Q3 record. We have begun localized hiring to support growth, and targeted train plan consolidations will reduce labor intensity where demand is strongest, allowing us to continue capturing truck-to-rail conversions. In the third quarter, the team made improvements by redesigning car connections at terminals and removing costly handlings to reduce dwell. In the quarter, we eliminated 95 crew starts per week and took 200 cars offline per day.

These adjustments allow the network to accommodate 3% carload growth in the quarter. Let me give you a couple examples of our recent plan improvements. First, we consolidated smaller trains between Birmingham and Macon. This saves 14 crew starts per week, reduces the number of locomotives needed, and delivers cars faster to the customer. In another example, we shifted 50 daily switch cars from Enola Terminal to Allentown Yard. That change freed up manpower for road service in Enola and moves the switching work to a lower cost per car location. It also removes six blocked crossings at Enola, creating additional yard capacity. Adjustments like these are keeping our network fluid and agile. When trains originate on time and move faster, recrews decline, locomotives turn more efficiently, cars spend less time in terminals, and crews spend more time moving freight. That is how service and productivity reinforce one another.

I'm proud of the way our operating team continues to improve the railroad. That work has us on track to deliver at least $650 million in cumulative cost savings. We made meaningful progress during the quarter, but there is more work ahead. Our standard is a railroad that operates safely, executes consistently, and delivers service our customers can plan around every day. We will keep leading from the front, running the plan, and delivering results. I will now turn the call over to Ed.

Thanks a lot, Brian, and good morning, everyone. Our commercial results this quarter reflect a strong macro backdrop and a tightening truck market, which has allowed NS to drive growth across our network. Volume grew in every one of our business groups, and we set an all-time record for revenue less fuel. Let's move to Slide 10. We achieved 14% overall revenue growth for the third quarter, which is inclusive of fuel surcharge. When we look at revenue on a less fuel basis, we delivered a 6% increase to set an all-time record. We finished the quarter with broad-based strength, achieving 3% volume growth in each of our business verticals. These gains were supported by elevated global energy prices, a robust industrial backdrop, and favorable truck market dynamics. RPU less fuel increased by 3% as our teams focused on pricing to the market.