Norfolk Southern (NSC) FY Conference Summary Company Overview - **Company**: Norfolk Southern Corporation (NSC) - **Date of Conference**: May 20, 2025 Key Points and Arguments Operational Performance - NSC has made significant progress in operational metrics, including network fluidity and service product quality, leading to improved productivity across the P&L [2][4] - The company demonstrated resilience during the first quarter, effectively managing 18 winter storms and recovering operations quickly [3] - Labor productivity, fuel efficiency, and purchase service costs have shown improvement, contributing to operational momentum [4] Financial Goals and Projections - NSC aims for $150 million in productivity savings and cost reductions in 2025, with a target of 3% revenue growth despite macroeconomic uncertainties [5][6] - The company anticipates a 150 basis points improvement in the operating ratio (OR) [6] Volume Trends - Volumes are tracking up approximately 6% quarter-to-date in Q2, with coal and auto segments performing better than expected [7][8] - Intermodal volumes remain steady, with international volumes holding strong despite concerns about a potential import cliff [9][12] Coal Market Insights - The coal segment is experiencing a replenishment of stockpiles due to winter recovery and summer electricity demand, although export coal prices remain depressed [14][16] - The company expects low single-digit declines in coal revenue per unit (RPU) due to pricing pressures [17][19] Intermodal and East Coast Operations - NSC is well-positioned to handle shifts in volume from West Coast to East Coast ports, benefiting from strong partnerships and population density on the East Coast [21][22] - The company is prepared for a return to normal equilibrium in port volumes, which could enhance operational efficiency [21] Revenue Growth and Pricing Strategy - The 3% revenue growth target is primarily driven by volume, with flat yields expected due to commodity mix challenges [24][26] - The company has seen a slight increase in yields excluding fuel, marking the first increase after six quarters of declines [37] Cost Management and Productivity - NSC has achieved strong labor productivity, with headcount down while volumes increase, indicating effective cost management [48][49] - The company is focused on reducing purchase service costs, which have shown a year-over-year decline [58] Inflation and Compensation - A 4% wage increase for union employees is expected to impact compensation costs significantly [63] - The company is managing inflation risks primarily in compensation and benefits, with ongoing efforts to enhance productivity to offset wage increases [63] Capital Expenditure and Cash Flow - NSC has reduced its capital expenditure guidance for 2024 from $2.4 billion to $2.2 billion, focusing on infrastructure and safety [64][65] - The potential for 100% bonus depreciation could provide significant cash flow benefits [66] Industry Outlook and Mergers - Discussions around potential mergers in the rail industry are ongoing, but NSC remains focused on enhancing service quality and operational efficiency rather than pursuing mergers at this time [68][70] Additional Important Insights - The company is committed to maintaining a sub-60% operating ratio in the long term, although the timeline for achieving this may be extended due to market conditions [32][33] - NSC is actively working on technology improvements to rationalize spending and enhance operational efficiency [61] This summary encapsulates the key insights and strategic directions discussed during the Norfolk Southern FY Conference, highlighting the company's operational resilience, financial goals, and market positioning.

Core Insights - Norfolk Southern Corporation will participate in the Wolfe Research 18th Annual Global Transportation & Industrials Conference on May 20, 2025, at 11 a.m. ET [1] - The presentation will be available on the company's Investors page on its website [1] Company Overview - Norfolk Southern has been operational since 1827, focusing on freight transportation that supports the U.S. economy [2] - The company is committed to sustainability, helping customers avoid approximately 15 million tons of carbon emissions annually by utilizing rail transport [2] - Norfolk Southern handles over 7 million carloads each year, covering a wide range of goods from agriculture to consumer products [2] - It leads in automotive traffic among Class I Railroads and boasts the most extensive intermodal network in the eastern U.S. [2] - The company serves a significant portion of the U.S. population and manufacturing base, with connections to major container ports along the Atlantic coast, Gulf Coast, and Great Lakes [2]

Summary of Key Points from the Conference Call Industry Overview - **Healthcare Sector**: Anticipation of an Executive Order on drug pricing expected next week, with a probability of over 70% for the implementation of Most Favored Nation (MFN) pricing to reduce the disparity between US and international drug prices [3][9] - **Transportation and Logistics**: Expected reduction in shipments due to tariffs, but supply chain disruptions may provide some offset. Favorable outlook for specific companies like XPO, NSC, and CP, while UPS and SAIA appear oversold [4] Company-Specific Insights - **Alphabet Inc. (GOOGL)**: Notable shift in search dynamics with the first-ever decline in Safari searches, raising concerns about AI search potentially replacing traditional search methods. However, long-term monetization of AI is expected to ramp up [2][27] - **Microsoft Corporation (MSFT)**: Azure reported a 35% year-over-year revenue growth, with a 34% increase in backlog, outperforming Amazon's AWS and Google's GCP. Combined cloud backlog growth of 33% indicates strong core demand despite AI capacity constraints [5][27] - **Tesla, Inc. (TSLA)**: Focus on Robotaxi and affordable model launches, but concerns over tariffs and execution risks contribute to share price volatility [6][27] - **Walmart Inc. (WMT)**: Anticipated Q1 sales are expected to be in line or slightly better, but caution is advised due to product mix and potential impacts on EBIT growth [5][27] - **Capital One Financial Corporation (COF)**: Continued performance exceeding expectations, with FY27 EPS estimates raised to approximately $25. Merger synergies of $2.7 billion expected to phase in from Q2 [7][27] - **MP Materials**: Potential factory closures in the US due to the absence of rare earth magnet flows from China, impacting industries such as aerospace and electric vehicles [7][27] - **GeneDx**: Management confidence in over 30% volume growth for NICU genetic diagnostics this year, with a compelling valuation at 4x projected 2026 revenues [8][27] Market Dynamics - **Quant Strategy**: Increasing EPS risk indicated by Q1 earnings beats and misses, with the Mag 7 model yielding a cumulative long-short return of 10.5% since its launch [2] - **Russell Rebalance**: Notable buy/sell pressure on specific stocks leading into the June 27 rebalance, with BAM, FLUT, and HWM among the top gainers, while SSB and HQY are under pressure [4] Additional Considerations - **Tariffs and Supply Chain**: The impact of tariffs on shipments and the potential for redirected flows to mitigate some negative effects [4] - **AI and Search Trends**: The evolving landscape of search engines and the implications of AI on traditional search methods [2] This summary encapsulates the critical insights and data points from the conference call, providing a comprehensive overview of the current state of the healthcare and technology sectors, along with specific company performances and market dynamics.

Financial Performance - In Q1 2025, Norfolk Southern Corporation reported railway operating revenues of $2,993 million, a slight decrease of 0.4% compared to $3,004 million in Q1 2024[104]. - Net income surged to $750 million in Q1 2025, reflecting a remarkable increase of 1,315% from $53 million in Q1 2024[104]. - The diluted earnings per share rose to $3.31 in Q1 2025, a substantial increase of 1,339% compared to $0.23 in Q1 2024[104]. - Adjusted income from railway operations for Q1 2025 was $961 million, up 6% from $904 million in Q1 2024, driven by lower operating expenses[108]. - The railway operating ratio improved to 61.7% in Q1 2025, down from 92.9% in Q1 2024, indicating enhanced operational efficiency[104]. Revenue Breakdown - Intermodal revenues increased by 2% to $760 million in Q1 2025, supported by a 3% rise in intermodal units transported[111]. - Coal revenues decreased by 7% to $370 million in Q1 2025, attributed to lower average revenue per unit and volume declines[111]. - Approximately 95% of Norfolk Southern's revenue base is covered by contracts that include negotiated fuel surcharges, which totaled $202 million in Q1 2025, down from $260 million in Q1 2024 due to lower fuel prices[113]. - The company anticipates revenue growth for the remainder of 2025 compared to 2024, driven by higher volume despite economic uncertainties[114]. Operating Expenses and Cash Flow - Railway operating expenses significantly decreased by 34% to $1,847 million in Q1 2025 from $2,791 million in Q1 2024, primarily due to insurance recoveries related to the Eastern Ohio Incident[104]. - Cash provided by operating activities was $950 million for Q1 2025, up from $839 million in Q1 2024, reflecting improved operating results[134]. - Cash used in investing activities decreased to $1.0 billion in Q1 2025 from $1.8 billion in the same period last year, primarily due to the prior year's acquisition of Cincinnati Southern Railway assets[135]. - Cash used in financing activities was $564 million in Q1 2025, compared to cash provided of $89 million in Q1 2024, reflecting lower borrowing proceeds and increased stock repurchases[136]. Tax and Debt - The effective tax rate for Q1 2025 was 23.3%, compared to (76.7)% in Q1 2024, influenced by low pre-tax income and a deferred income tax benefit[133]. - The debt-to-total capitalization ratio was 54.3% at March 31, 2025, slightly down from 54.6% at December 31, 2024[142]. Other Financial Metrics - The company had $1.0 billion in cash and cash equivalents as of March 31, 2025[134]. - Gains from operating property sales amounted to $23 million in 2025, compared to no gains in the prior year[129]. - The company has $6.6 billion authorized for stock repurchases, with $248 million spent in Q1 2025[136]. - Claims expense increased due to higher costs associated with environmental clean-up and personal injury case developments[127]. - The company recorded $99 million in restructuring expenses in Q1 2024 related to workforce reductions[130].

Q1 2025 EARNINGS CALL In addition to disclosing financial results in accordance with U.S. GAAP, the accompanying presentation contains non-GAAP financial measures. These non-GAAP measures should be viewed as a supplement to and not a substitute for our U.S. GAAP measures, and the financial results calculated in accordance with U.S. GAAP and reconciliations from these results should be carefully evaluated. Reconciliations to the most directly comparable financial measures calculated and presented in accordan ...

Norfolk Southern Corporation (NYSE:NSC) Q1 2025 Earnings Conference Call April 23, 2025 8:45 AM ET Company Participants Luke Nichols - Senior Director of IR Mark George - President and CEO John Orr - EVP and COO Ed Elkins - Chief Commercial Officer Jason Zampi - EVP, Treasurer, and CFO Conference Call Participants Kenneth Hoexter - Bank of America Christian Wetherbee - Wells Fargo Scott Group - Wolfe Research Brian Ossenbeck - JPMorgan Jonathan Chappell - Evercore ISI Jason Seidl - TD Cowen Brandon Oglenski ...

Core Insights - Norfolk Southern Corporation (NSC) reported first-quarter 2025 earnings of $2.69 per share, missing the Zacks Consensus Estimate of $2.72, but showing an 8% year-over-year increase due to lower costs [1] - Railway operating revenues were $2.99 billion, nearly in line with estimates, but decreased by 0.4% year over year [1] Financial Performance - Overall volumes increased by 1% year over year, while total revenue per unit dipped by 2% [2] - Income from railway operations rose over 100% year over year to $1.15 billion, and railway operating expenses declined by 34% to $1.85 billion, primarily due to a significant decrease in fuel expenses [2] Management Commentary - NSC's CEO, Mark George, highlighted the company's resilience in overcoming challenges from a disruptive winter storm season, resulting in improved operating ratios and earnings growth [3] Segmental Performance - Merchandise revenues remained flat year over year at $1.86 billion, below the estimate of $1.91 billion, with revenue per unit increasing by 2% [5] - Intermodal revenues rose by 2% year over year to $760 million, although below the projection of $778.2 million, with segmental volumes increasing by 3% but revenue per unit declining by 1% [5] - Coal revenues were $370 million, down 7% year over year, but exceeded the projection of $347.1 million, with coal volumes falling by 1% and revenue per unit declining by 5% [6] Liquidity and Share Buyback - At the end of the first quarter, NSC had cash and cash equivalents of $1.01 billion, down from $1.64 billion in the previous quarter, with long-term debt remaining flat at $16.6 billion [7] - The company repurchased and retired 1 million shares for $250 million during the first quarter [7] 2025 Guidance - For 2025, NSC anticipates revenue growth of 3% and a 150 basis points improvement in the operating ratio, with capital expenditure expected to be around $2.20 billion [8]

Norfolk Southern (NSC) came out with quarterly earnings of $2.69 per share, missing the Zacks Consensus Estimate of $2.72 per share. This compares to earnings of $2.49 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of -1.10%. A quarter ago, it was expected that this railroad would post earnings of $2.95 per share when it actually produced earnings of $3.04, delivering a surprise of 3.05%.Over the last four quarters, the company ...

Financial Data and Key Metrics Changes - The company reported an 8% growth in EPS on an adjusted basis, driven by $55 million in labor productivity savings despite incurring $35 million in storm restoration costs [6][7][28] - The operating ratio for the quarter was 67.9, which includes 120 basis points from storm restoration costs, reflecting a 200 basis point improvement year over year [28][29] - Net income and EPS improved by 8% year over year, with operating expenses down 3% on higher volumes [31] Business Line Data and Key Metrics Changes - Overall volume rose 1% year over year, with total revenue flat; however, total revenue less fuel was up 2% [21] - Merchandise volume fell due to weakness in metals and construction, while chemicals and agriculture saw gains [21] - Intermodal volume increased by 3% year over year, with slight RPU growth due to stabilization in truck pricing [22] Market Data and Key Metrics Changes - The company expects strength in the auto sector in the near term, although tariffs could pose a headwind [23] - Continued strength in chemicals markets is anticipated, with a focus on recapturing market share [24] - Coal prices remain pressured, with expectations of tempered production amid uncertainty around export trade [25] Company Strategy and Development Direction - The company is focused on safety, network performance, customer service, and cost control as part of its operational strategy [9] - The PSR 2.0 transformation is aimed at unlocking network value and delivering on financial commitments, with a zero-based operating plan being implemented [17][20] - The company is committed to maintaining quality service and is actively working to regain market share lost to competitors [68] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges posed by severe winter weather but expressed confidence in the company's ability to navigate these disruptions [5][6] - The company reiterated its full-year guidance of 3% revenue growth and 150 basis points of operating ratio improvement, while acknowledging uncertainty due to tariffs and economic conditions [32][33] - Management emphasized the importance of staying close to customers to adapt to changing market conditions and to capitalize on opportunities [26][33] Other Important Information - The company has resumed share repurchases, buying back nearly $250 million of shares in the quarter [31] - Insurance recoveries related to an incident in Eastern Ohio provided a net benefit of $185 million in the quarter [28] Q&A Session Summary Question: Operating ratio performance and targets - The management discussed the operating ratio and the impact of cost savings, indicating that the second quarter should see improvements [35][36] Question: Yield and pricing environment - Management noted that merchandise yields increased due to improved service, while intermodal pricing remains flat [42][45] Question: Cost management in a declining volume scenario - Management expressed confidence in their ability to manage costs effectively, even in a scenario of declining volumes [52][56] Question: Land sale timing and network performance - The company expects land sales to remain in the $30 million to $40 million range for the year, with network performance recovering well [61][64] Question: Share gains and tariff impacts - Management highlighted progress in regaining market share and discussed the potential mixed impacts of tariffs on different segments [112][114]

Financial Performance - Total railway operating revenues for Q1 2025 were $2,993 million, a slight decrease of 0.4% from $3,004 million in Q1 2024[2] - Net income for Q1 2025 increased significantly to $750 million, compared to $53 million in Q1 2024, representing a growth of 1,320%[2] - Earnings per share (diluted) rose to $3.31 in Q1 2025, compared to $0.23 in Q1 2024, marking a substantial increase of 1,341%[2] - Total railway operating expenses decreased to $1,847 million in Q1 2025 from $2,791 million in Q1 2024, a reduction of 33.8%[2] - Cash flows from operating activities for Q1 2025 were $950 million, up from $839 million in Q1 2024, indicating a growth of 13.2%[6] Shareholder Actions - The company repurchased and retired 1.0 million shares of common stock at a cost of $250 million in Q1 2025, while no shares were repurchased in Q1 2024[10] Insurance and Incident Recovery - The Eastern Ohio incident resulted in a net insurance recovery of $185 million in Q1 2025, compared to expenses of $592 million in Q1 2024[8] Asset Management - Current assets decreased to $2,701 million as of March 31, 2025, from $3,188 million at the end of 2024, a decline of 15.3%[4] - Total assets increased slightly to $43,800 million as of March 31, 2025, compared to $43,682 million at the end of 2024, an increase of 0.3%[4] - Long-term debt remained stable at $16,660 million as of March 31, 2025, compared to $16,651 million at the end of 2024[4]