Financial Data and Key Metrics Changes - Revenue for Q3 2025 increased by 2% year-over-year, but was below expectations by approximately $75 million due to macro headwinds and competitor responses to the merger announcement [20][14] - The operating ratio for the quarter was reported at 63.3, reflecting a 10-basis point improvement year-over-year [19][24] - Earnings per share for the quarter were $3.30, indicating a solid bottom-line performance despite revenue challenges [19] Business Line Data and Key Metrics Changes - Merchandise volume grew by 6% year-over-year, driven by strong performance in auto, chemical, metals, and construction markets [14] - Intermodal volumes decreased by 2%, impacted by trade uncertainties and competitor reactions to the merger announcement [15] - Coal revenue per unit (RPU) decreased by 7% due to weakening seaborne coal prices, marking a significant revenue headwind [15] Market Data and Key Metrics Changes - The overall volume for Q3 finished flat despite a 4% increase in gross ton miles (GTM) [14] - The company anticipates softer import demand in intermodal markets due to tariff volatility and oversupplied truck capacity [16] - Utility demand is expected to remain strong, supporting coal markets, but export coal markets face significant uncertainty [17] Company Strategy and Development Direction - The company is focused on maintaining safety and service while preparing for growth, particularly in light of the proposed merger with Union Pacific [7][24] - Norfolk Southern is committed to enhancing productivity and efficiency, raising its cumulative efficiency target to approximately $600 million by 2026 [10][24] - The company is investing in technology and operational analytics to improve inspection and reliability across its network [12][13] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the uncertain macroeconomic environment and the challenges posed by competitor reactions to the merger [23] - The company remains optimistic about its long-term growth potential, particularly with the upcoming merger and ongoing investments in infrastructure [24] - Management emphasized the importance of maintaining strong safety performance and service quality as top priorities [84] Other Important Information - The company recorded a significant land sale at the end of the quarter, contributing positively to financial results [20] - Claims expenses were elevated due to unfavorable developments from previous years, despite improvements in safety metrics [21] Q&A Session Summary Question: Impact of merger-related business losses - Management indicated that the impact is primarily confined to intermodal and is expected to persist until the merger closes, with efforts underway to retain customers [27][28] Question: Cost structure management in a challenging environment - Management highlighted the importance of maintaining productivity and efficiency while being cautious about cost control, especially in light of potential share loss [35][36] Question: Coal RPU pressure and future expectations - Management clarified that while coal RPU is expected to remain under pressure year-over-year, it may stabilize on a sequential basis [44][46] Question: Competitive responses and customer retention - Management expressed confidence in retaining business with key customers due to the strength of their intermodal network and service offerings [52][56] Question: Revenue erosion and volume loss risks - Management acknowledged the risk of further volume loss but emphasized ongoing efforts to market and retain business [96]

Financial Data and Key Metrics Changes - Revenue for Q3 2025 increased by 2% year-over-year, but was below expectations by approximately $75 million due to macro headwinds and competitor responses to the merger announcement [14][20] - The operating ratio for the quarter was reported at 63.3, reflecting a 10-basis point improvement year-over-year [19][24] - Earnings per share for the quarter were $3.30, indicating a stable bottom line despite revenue challenges [19] Business Line Data and Key Metrics Changes - Merchandise volume grew by 6% year-over-year, driven by strong performance in auto, chemical, metals, and construction markets [14] - Intermodal volumes decreased by 2%, impacted by trade uncertainties and competitor reactions to the merger announcement [15][16] - Coal revenue less fuel declined by 7%, primarily due to weakening seaborne coal prices, although utility demand remained strong [15][17] Market Data and Key Metrics Changes - The overall market environment remains dynamic, with expectations of softer import demand and continued pressure on coal prices [16][17] - Manufacturing activity is expected to grow, but vehicle production may face challenges due to disruptions at key material suppliers [16] - The intermodal segment is experiencing volume pressure, particularly in the Southeast, as competitors respond to the merger announcement [17][18] Company Strategy and Development Direction - The company is focused on maintaining safety and service while preparing for growth, particularly in light of the proposed merger with Union Pacific [7][24] - Norfolk Southern is committed to enhancing productivity and efficiency, raising its cumulative efficiency target to approximately $600 million by 2026 [10][24] - The company is investing in technology and operational analytics to improve inspection and reliability across its network [12][66] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the uncertain macroeconomic environment and the potential for unpredictable demand fluctuations in the coming quarters [23][24] - The company remains optimistic about future growth opportunities, particularly post-merger, which is expected to enhance service offerings and operational efficiency [23][24] - Management emphasized the importance of maintaining strong safety performance and customer service as top priorities [84][85] Other Important Information - The company recorded a significant land sale of $65 million, which helped offset some adverse impacts on revenue [20] - Claims expenses were elevated due to unfavorable developments from previous years, despite improvements in safety initiatives [21][80] Q&A Session Summary Question: Impact of merger-related business losses - Management indicated that the business losses related to the merger are primarily confined to intermodal and are expected to persist until the merger closes [27][28] Question: Cost structure management in a challenging environment - Management highlighted the need for careful management of costs while maintaining service quality, with a focus on productivity and fuel efficiency [35][36] Question: Coal RPU pressure and future expectations - Management clarified that while coal RPU pressure is expected to persist year-over-year, it may stabilize on a sequential basis [44][46] Question: Competitive responses and business retention - Management expressed confidence in retaining business with key customers due to superior service and network advantages, despite competitive pressures [52][56] Question: Revenue run rate and potential risks - Management acknowledged the risk of further volume loss but emphasized efforts to regain business through improved service and direct engagement with customers [96]

Financial Data and Key Metrics Changes - The operating ratio for the quarter was reported at 63.3%, reflecting a 10 basis point improvement year over year [28] - Revenue increased by 2% year over year, but the company expected approximately $75 million more revenue than reported due to macro headwinds and competitor responses [28][29] - Earnings per share were reported at $3.3 [28] Business Line Data and Key Metrics Changes - Merchandise volume grew by 6% year over year, driven by increases in auto, chemical, metals, and construction sectors [20] - Intermodal volumes decreased by 2%, impacted by trade uncertainties and competitor responses to the merger announcement [21][22] - Coal revenue per unit (RPU) decreased by 7%, primarily due to weakening seaborne coal prices [22] Market Data and Key Metrics Changes - The company noted a mixed outlook for manufacturing activity, with vehicle production expected to be challenged due to supplier disruptions [23] - Strong fracking activity in the Marcellus Utica Basin is supporting demand for natural gas liquids and sand [23] - The intermodal market is expected to face softer import demand due to tariff volatility and oversupplied truck capacity [24] Company Strategy and Development Direction - The company is focused on maintaining safety and service while preparing for growth, particularly in light of the proposed merger with Union Pacific [8][32] - Norfolk Southern is committed to enhancing its operational efficiency, raising its efficiency target to approximately $600 million by 2026 [15][33] - The company is investing in technology and training to improve inspection and reliability across its network [16] Management's Comments on Operating Environment and Future Outlook - Management acknowledged that the macro environment remains uncertain, with unpredictable demand and competitive dynamics expected to create fluctuations in revenue [31] - The company is optimistic about future growth opportunities post-merger, emphasizing the importance of maintaining strong safety performance and service quality [32][33] - Management expressed confidence in their ability to regain lost business and improve service offerings despite current challenges [68][110] Other Important Information - The company achieved a quarterly record in fuel efficiency, with a 5% year-over-year gain [15] - A significant land sale at the end of the quarter contributed positively to financial results, totaling $65 million more than the previous year [29] Q&A Session Summary Question: Impact of merger-related business losses - Management confirmed that the business losses related to the merger primarily affected intermodal services and are expected to continue impacting revenue [35][36] Question: Cost structure management in a challenging environment - Management emphasized the importance of maintaining productivity and efficiency while managing costs, particularly in light of potential share loss [47][48] Question: Coal RPU pressure and future expectations - Management indicated that coal RPU is expected to remain under pressure, with year-over-year declines anticipated to persist [60][62] Question: Competitive responses and market dynamics - Management discussed the competitive landscape, noting that Norfolk Southern's strong service and network capabilities position it well to retain business despite challenges [66][68] Question: Integration risks from the merger - Management outlined strategies to mitigate integration risks, focusing on maintaining service quality and operational efficiency during the merger process [124]