Norfolk Southern (NSC) Bank of America’s 33th Annual Industrials, Transportation and Airlines Key Leaders Conference summary

Strategic initiatives and merger update

• Executing on a plan focused on safety, service, and cost discipline, with strong first quarter performance despite mixed demand and operational challenges.

• Progressing through a transformative merger, with a resubmitted application to the STB that addresses prior concerns and uses comprehensive Class I railroad traffic data.

• Key changes in the merger application include updated market share data, TRRA ownership details, and revised traffic flows, resulting in slightly lower CapEx and revenue synergy targets but reinforcing the merger's value.

• Committed Gateway Pricing remains a central benefit, enhancing customer optionality and aligning with regulatory themes.

• Confident that the merger enhances competition and public interest, with minimal need for major concessions.

Financial performance and outlook

• Volumes rebounded after weather disruptions, with current weekly carloads stable around 140,000 and expectations for continued strength.

• Enhanced competition post-merger announcement is expected to impact 2026 revenue by about 1%, mainly in domestic intermodal, though domestic intermodal performance remains strong.

• Adjusted OpEx for the year is targeted at $8.2–$8.4 billion, reflecting inflation, fewer land sales, and $150 million in productivity savings.

• Fuel costs are a significant headwind, with pump prices up 45% in March and 80% in April year-over-year.

• Headcount is expected to remain flat, with compensation per employee around $38,000 per quarter.

Productivity, operating ratio, and cost structure

• Achieved $30 million in productivity savings in Q1, targeting $150 million for 2026, building on $500 million over the past two years.

• Most productivity gains are structural, not volume-dependent, focusing on labor, fuel efficiency, and purchased services.

• Operating ratio improvement of 200 basis points is expected from Q1 to Q2, despite fuel headwinds.

• Long-term operating ratio improvement is expected from merger synergies, with $1 billion in cost savings and strong revenue growth anticipated.