Norfolk Southern Corporation (NYSE:NSC) M&A Conference Call July 29, 2025 8:30 AM ET Good morning, ladies and gentlemen, and welcome to the call to discuss America's First Transcontinental Railroad. [Operator Instructions] And I would like to turn the conference over to Luke Nichols. Please go ahead. Luke Nichols Good morning. 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 o ...

Market Overview - Pre-market futures are up due to various earnings reports, economic data, and a significant railway merger [1] - The Dow is slightly down by 12 points, while the S&P 500 is up by 11 points, and the Nasdaq is up by 88 points [1] Railway Merger - Union Pacific (UNP) is set to acquire Norfolk Southern (NSC) for $72 billion, or $320 per share, creating the first trans-continental railroad in the U.S. [2] - The merger requires approval from the Surface Transportation Board, and the current administration may favor the deal despite monopolistic concerns [3] Trade Balance - The Advanced U.S. Trade Balance in Goods for June shows a pullback to -$86 billion, better than expected, driven by a 4.2% decline in imports [4] - This indicates a slowdown in trade due to higher tariff expectations, contrasting with the record-low trade balance of -$162 billion in March 2025 [4] Q2 Earnings Highlights - Boeing (BA) reported a Q2 loss of $1.24 per share, improving by 30 cents over consensus, with revenues of $22.75 billion exceeding estimates by 4.1% [5] - UnitedHealth (UNH) missed earnings expectations with $4.08 per share versus $4.84 expected, while revenues of $111.6 billion slightly beat estimates [6] - Royal Caribbean (RCL) reported earnings of $4.38 per share, surpassing consensus by 6.8%, despite revenues of $4.54 billion missing projections [7] - Spotify (SPOT) reported a loss of $0.48 per share, significantly missing the $2.13 consensus estimate, with revenues of $4.76 billion also falling short [8]

Core Viewpoint - Union Pacific Railroad Company (UNP) confirmed the acquisition of Norfolk Southern Corporation (NSC), aiming to create the first transcontinental railroad network in the United States [1] Group 1: Acquisition Details - The valuation for Norfolk Southern is set at $320 per share, with a total enterprise value of $85 billion [1] - The merger is expected to generate significant synergies, fundamentally altering the U.S. supply chain landscape [1] Group 2: Financial Impact - Annual synergy opportunities from the merger are projected to reach $2.75 billion [1]

Morning Brief anchor Julie Hyman breaks down the latest market news for July 29, 2025. Union Pacific agrees to acquire Norfolk Southern for an $85 billion stock and cash deal. The Federal Reserve kicks off its July meeting today. Economists and markets expect the Fed to hold rates steady. #youtube #stocks #investing About Yahoo Finance: Yahoo Finance provides free stock ticker data, up-to-date news, portfolio management resources, comprehensive market data, advanced tools, and more information to help you m ...

Deal Overview - Union Pacific 将以现金加股票方式收购 Norfolk Southern，交易价值约 720 亿美元 [2] - 这将创建美国第一家横跨东西海岸的货运运营商 [2] - 预计在 2027 年初完成交易 [5] Strategic Rationale - 合并旨在改善客户服务，为客户提供更好的产品，并帮助他们在市场上取得成功 [4] - 合并后的公司能够无缝地运输产品，无论产品来自亚利桑那州还是密西西比州东部 [5] - 双方都处于强势地位，运营良好，安全记录和服务记录优秀，客户净推荐值也很高 [6][7] - 合并被视为 1+1=3 的协同效应，将创造比各自独立运营更大的价值 [8] - 铁路可以在美国的再工业化中发挥重要作用，促进货物的运输 [9] Regulatory and Integration Considerations - 该交易需要通过美国 Surface Transportation Board (STB) 的审批 [14] - Union Pacific 对 STB 遵循严格规则的意愿表示乐观 [15] - Union Pacific 保证 Norfolk Southern 和 Union Pacific 所有工会员工的工作 [12] - 合并后的公司将进行两年的规划，以便在获得批准后顺利整合，避免中断 [13] Addressing Past Concerns - Union Pacific 认为过去的铁路行业整合经验（1990 年代）的教训已被吸取 [10][11] - Union Pacific 已经改变了运营方式，采用了新的技术平台 [11] - Union Pacific 相信与 Norfolk Southern 的整合不会出现之前的问题 [11]

Core Insights - Norfolk Southern reported revenue of $3.11 billion for the quarter ended June 2025, reflecting a 2.2% increase year-over-year, but a slight miss of 0.76% against the Zacks Consensus Estimate of $3.13 billion [1] - The earnings per share (EPS) for the quarter was $3.29, up from $3.06 in the same quarter last year, exceeding the consensus EPS estimate of $3.27 by 0.61% [1] Financial Performance Metrics - Total carloads volume was 1.79 million, slightly below the four-analyst average estimate of 1.81 million [4] - Coal carloads volume was 181.7 thousand, surpassing the average estimate of 176.35 thousand [4] - The Railway Operating Ratio was reported at 63.4%, higher than the average estimate of 62.6% [4] - Merchandise railway operating revenues totaled $1.97 billion, matching the average estimate and showing a year-over-year increase of 3.6% [4] - Specific merchandise categories showed varied performance: - Agriculture, forest and consumer products revenue was $645 million, slightly above the estimate of $643.81 million, with a year-over-year increase of 3.7% [4] - Coal revenue was $395 million, slightly below the estimate of $396.48 million, reflecting a year-over-year decrease of 0.8% [4] - Chemicals revenue was $546 million, slightly below the estimate of $549.39 million, with a year-over-year increase of 2.6% [4] - Intermodal revenue was $743 million, below the estimate of $765.09 million, with a year-over-year increase of 0.1% [4] - Automotive revenue was $323 million, exceeding the estimate of $311.33 million, with a year-over-year increase of 4.2% [4] - Metals and construction revenue was $458 million, above the estimate of $449.09 million, with a year-over-year increase of 4.1% [4] Stock Performance - Norfolk Southern shares have returned +11.9% over the past month, outperforming the Zacks S&P 500 composite's +3.6% change [3] - The stock currently holds a Zacks Rank 4 (Sell), indicating potential underperformance relative to the broader market in the near term [3]

Mergers and Acquisitions - Union Pacific 将以 850 亿美元的现金和股票交易收购 Norfolk Southern [1] - 该交易预计将带来 25% 的溢价 [2] - 合并后的公司将创建美国第一条单线横贯大陆铁路网络 [2] - 预计交易完成时间为 2027 年初，取决于监管部门的批准 [4] - Surface Transportation Board (STB) 对大型一级铁路公司合并的批准有很高的门槛 [3] UPS Performance - UPS 股价下跌约 3% [5] - 公司未给出业绩预测，导致股价下跌 [5] - 经济不确定性影响了 UPS 的业务和预测能力 [6] - 移除最低限度豁免对公司产生了负面影响 [6] - UPS 正在重组其网络，以应对电子商务带来的增长，但电商业务利润率较低 [7] - 第二季度收益略低于预期，主要原因是国内业务的收益略有下降，成本略有上升 [8]

Core Viewpoint - Norfolk Southern reported quarterly earnings of $3.29 per share, exceeding the Zacks Consensus Estimate of $3.27 per share, and showing an increase from $3.06 per share a year ago, indicating a positive earnings surprise of +0.61% [1] Financial Performance - The company posted revenues of $3.11 billion for the quarter ended June 2025, which was below the Zacks Consensus Estimate by 0.76%, but an increase from $3.04 billion year-over-year [2] - Over the last four quarters, Norfolk Southern has surpassed consensus EPS estimates three times, but has only topped revenue estimates once [2] Stock Performance - Norfolk Southern shares have increased approximately 22% since the beginning of the year, significantly outperforming the S&P 500's gain of 8.6% [3] Future Outlook - The company's earnings outlook is crucial for assessing future stock performance, with current consensus EPS estimates at $3.33 for the coming quarter and $12.63 for the current fiscal year [7] - The Zacks Rank for Norfolk Southern is currently 4 (Sell), indicating expectations of underperformance in the near future [6] Industry Context - The Transportation - Rail industry, to which Norfolk Southern belongs, is currently ranked in the top 38% of over 250 Zacks industries, suggesting a favorable industry outlook [8] - Another company in the same industry, Canadian Pacific Kansas City, is expected to report earnings soon, with a consensus EPS estimate of $0.82, reflecting a year-over-year increase of +6.5% [9]

Mergers and Acquisitions - Union Pacific 将以 850 亿美元收购 Norfolk Southern [1] Market Movers - Bloomberg Stock Movers 报告将报道当日的赢家和输家 [1]

Summary of Union Pacific and Norfolk Southern Merger Conference Call Industry and Companies Involved - **Industry**: Rail Transportation - **Companies**: Union Pacific Corporation (UNP) and Norfolk Southern Corporation Core Points and Arguments 1. **Historic Merger Announcement**: The merger between Union Pacific and Norfolk Southern is valued at over $250 billion, creating America's first transcontinental railroad, which is seen as a transformative moment for the companies and the nation [5][4][12] 2. **Economic Impact**: The merger aims to enhance the U.S. supply chain and transportation landscape, making freight rail transportation more cost-effective and efficient, thereby supporting U.S. economic growth [9][10][22] 3. **Operational Efficiency**: The combined network will span over 50,000 miles across 43 states, improving service reliability and reducing transit times by 24 to 48 hours for approximately 1 million carloads currently interchanged between the two companies [19][21] 4. **Environmental Benefits**: The merger is expected to reduce highway congestion and lower emissions, as one intermodal train can replace over 550 trucks on the highway and is 75% more fuel-efficient [10][11] 5. **Job Security**: All current union employees will retain their jobs post-merger, with the expectation that the combined company will create additional jobs through growth and economic development [12][14] 6. **Financial Projections**: The combined company is projected to generate $36.4 billion in revenue and $18 billion in EBITDA, with an operating ratio of 62.1%. The merger is expected to unlock $2.75 billion in annual synergies by the third year post-close [28][29][32] 7. **Shareholder Value**: Norfolk Southern shareholders will receive one share of Union Pacific stock and $88.82 in cash for each share of Norfolk Southern, representing an $85 billion headline value and a 25% premium [31][32] 8. **Capital Investment**: The combined investment in infrastructure is expected to total around $5.6 billion in 2025 to support safety and operational efficiency improvements [21][22] Additional Important Content 1. **Regulatory Approval Process**: The transaction is subject to review by the Surface Transportation Board (STB) and requires approval from both companies' shareholders. The companies are committed to a seamless integration process to avoid disruptions [38][40][41] 2. **Cultural Alignment**: Both companies emphasize their shared commitment to safety, performance, and operational excellence, which is seen as crucial for the successful integration of the two organizations [44][62] 3. **Market Competition**: The merger is positioned as a way to enhance competition not only within the rail industry but also against other transportation modes such as trucking and barging [22][23] 4. **Synergy Breakdown**: The projected $2.75 billion in synergies includes $1.75 billion from revenue growth driven by modal conversion and $1 billion from cost efficiencies through shared best practices and improved asset utilization [33][34][35] 5. **Long-term Growth Strategy**: The companies plan to leverage their combined strengths to capture market share from Canadian ports and enhance intermodal service offerings, particularly in underserved markets [110][111] This summary encapsulates the key points discussed during the conference call regarding the merger between Union Pacific and Norfolk Southern, highlighting the anticipated benefits, financial implications, and strategic goals of the combined entity.