Industry Overview - The Zacks Transportation sector is diverse, including airlines, railroads, package delivery companies, and truckers, with S&P 500 members expected to see a 7.2% year-over-year decline in fourth-quarter 2025 earnings, while revenues are estimated to increase by 1.9% [1] Earnings Expectations - Several companies in the sector, such as Canadian National Railway, Expeditors International of Washington, and GXO Logistics, are anticipated to report better-than-expected earnings despite challenges like weak freight demand, tariff-related uncertainty, inflation, and supply-chain disruptions [2] Positive Factors Influencing Performance - A decline in oil prices, which fell by 7% during the October-December period, is beneficial for the transportation sector as fuel is a major operating expense, supporting margin expansion [3] - Ongoing cost-control measures amid soft freight demand are expected to enhance profitability, while the strength of e-commerce continues to be a significant tailwind for the sector [4] - U.S. airlines are experiencing steady air travel demand, which is encouraging despite economic headwinds, with increased passenger volumes during the Thanksgiving holiday likely boosting top-line performance [4] Company-Specific Insights - Canadian National Railway has an Earnings ESP of +0.49% and is scheduled to report on January 30, with strong performance expected from its Grain & Fertilizers segment [9][10] - Expeditors International has an Earnings ESP of +0.34% and is set to report on February 24, with cost-cutting efforts likely mitigating the impact of weak volumes [11][12] - GXO Logistics holds an Earnings ESP of +0.67% and will report on February 10, with increased e-commerce and cost-cutting measures expected to positively influence results [13][14]

Core Insights - Norfolk Southern experienced a decline in intermodal volume, revenue, and profits in the fourth quarter due to heightened competition, particularly from CSX, which formed an intermodal alliance with BNSF Railway [1][2] Financial Performance - Quarterly operating income fell 17% to $937 million, while revenue decreased 2% to $3 billion. Adjusted for one-time items, operating income was down 3% to $1 billion, and earnings per share declined 11% to $2.87, but increased 6% to $3.22 on an adjusted basis [4] - The operating ratio for the fourth quarter was 68.5%, up from 62.6% in the fourth quarter of 2024, with an adjusted operating ratio of 65.3% [5] Volume and Traffic - Intermodal volume dropped by 7%, leading to a 4% decline in overall traffic. However, merchandise and coal business saw a 1% increase for the quarter [1][5] - Despite the decline in intermodal traffic, Norfolk Southern managed to move 3% more gross ton-miles in 2025 with 4% fewer employees [2] Strategic Initiatives - Norfolk Southern and Union Pacific plan to file a revised merger application with the Surface Transportation Board in March, which, if approved, would create the first transcontinental railroad [3] - The company is actively seeking to optimize revenue and attract quality carloads, with initiatives such as the UP-NS interline service and the launch of double-stack service to New England [6]

Revenue Performance - Union Pacific and CSX both experienced annual revenue declines of 1 percent, with Union Pacific reporting $6.1 billion and CSX $3.5 billion in operating revenue, as poor volumes offset pricing gains and higher revenues from fuel surcharges [1] - Revenue carloads at Union Pacific fell 4 percent to 2.1 million, while CSX saw a 1 percent increase in volumes to 1.6 million units [2] Net Income and Profitability - Despite the decline in volume, Union Pacific's net income increased by 5 percent to $1.8 billion, while CSX's net income decreased by 2 percent to $720 million [2] Operational Challenges - Both railroads are recovering from disruptions caused by Winter Storm Fern, with Union Pacific expecting full recovery by Thursday and areas in southern states like Texas, Louisiana, and Arkansas being 70 percent recovered [3] - CSX is actively working to restore operations, with some terminals and corridors operating at reduced capacity due to road conditions and crew availability, although all intermodal terminals have reopened [4] Future Outlook - Looking ahead to 2026, both Union Pacific and CSX anticipate a year focused on execution and cost discipline rather than a significant rebound in freight volumes [5] - Union Pacific is targeting mid-single-digit earnings-per-share (EPS) growth off its 2025 base, with a three-year annual growth target of high-single-digit to low-double-digit EPS growth through 2027, alongside planned capital expenditures of $3.3 billion next year [6] - Margin expansion for Union Pacific may not primarily come from rate increases, as rail inflation is expected to rise by 4 percent in 2026; instead, the focus will be on productivity gains such as improved asset utilization and workforce efficiency [7]

Q4 2025 EARNINGS CALL January 29, 2026 FORWARD-LOOKING STATEMENTS / NON-GAAP MEASURES This presentation and the related materials contain "forward-looking statements" within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, as amended. These statements relate to future events or future performance of Norfolk Southern Corporation (NYSE: NSC) ("Norfolk Southern," "NS," the "Company," "we," "our," or "us") and involve known and unknown risks, uncertainties, an ...

Norfolk Southern today reported fourth quarter income fell 17% to $937 million on revenue that was down 2% to $3 billion, as freight volumes declined 4% from a year ago. Diluted earnings per share were $2.87, down 36 cents, or 11%, compared to fourth quarter 2024. Taking out expenses related to the proposed merger with Union Pacific (NYSE: UNP) and ongoing costs of the East Palestine, Ohio, derailment, per share earnings were $3.22, up 6%, y/y. The Atlanta-based company (NYSE: NSC) said current quarter ...

Core Insights - Canadian Pacific Kansas City Limited (CP) is recognized as one of the 20 most profitable stocks over the last 20 years, ranking ninth on the list [1] - Scotiabank has raised its price target for CP from C$119 to C$124 while maintaining an Outperform rating [1] Group 1: Company Developments - CP is set to receive 70 Tier 4 locomotives from Wabtec and 30 from Progress Rail as part of its ongoing fleet renewal [2] - The company is investing approximately $800 million in U.S. manufacturing for this multi-year locomotive fleet renewal [2] - CP has already completed the purchase of 100 Tier 4 locomotives from Wabtec, with additional deliveries expected in 2026 [2] Group 2: Industry Position - CP operates a leading North American rail network that connects Canada, the United States, and Mexico, providing efficient freight transportation services [3]

Core Insights - Norfolk Southern reported lower income and revenue in the fourth quarter, indicating challenges in the current macroeconomic environment [1] Financial Performance - The company experienced a decline in both income and revenue during the fourth quarter [1] - Chief Executive Mark George described the operating environment as volatile and challenging [1]

Core Insights - Canadian Pacific Kansas City (CP) reported revenue of $2.81 billion for the quarter ended December 2025, reflecting a year-over-year increase of 1.6% but a surprise of -1.79% compared to the Zacks Consensus Estimate of $2.87 billion [1] - The earnings per share (EPS) for the same period was $0.95, which is an increase from $0.92 a year ago, but fell short of the consensus estimate of $0.99, resulting in an EPS surprise of -4.04% [1] Financial Performance Metrics - Revenue ton-miles (RTMs) for Intermodal was reported at 9.34 billion, below the average estimate of 9.64 billion from four analysts [4] - Total carloads were 1.13 million, slightly below the average estimate of 1.14 million [4] - The core adjusted operating ratio was 55.9%, better than the estimated 56.4% by four analysts [4] Segment Performance - Carloads in the Energy, chemicals, and plastics segment were 139.1 thousand, compared to the average estimate of 140.84 thousand [4] - Carloads for Grain were reported at 162.2 thousand, below the average estimate of 164.46 thousand [4] - Carloads for Coal were 127.6 thousand, exceeding the average estimate of 124.24 thousand [4]

Core Insights - The company anticipates a record Canadian grain harvest of 85 million metric tons for 2026, surpassing the previous record of 78 million metric tons, which is expected to drive volume growth [1] - Management projects mid-single-digit volume growth and low double-digit earnings growth for 2026, attributing this to company-specific factors rather than macroeconomic conditions [2] Financial Performance - For the full year 2025, revenue increased by 4% to CAD 15.1 billion, with a core adjusted operating ratio (OR) improving by 140 basis points to 59.9%, described as the "industry best" [3][7] - In Q4, revenue was CAD 3.9 billion, up 1% year-over-year, with a core adjusted OR of 55.9%, an improvement of 120 basis points, and core adjusted diluted EPS of CAD 1.33, up 3% from the previous year [4][7] Operational Metrics - Operational and safety metrics showed significant improvement, with network speed and locomotive productivity approximately 13% higher compared to 2023, and the company earned Amtrak's A-plus "Best Carrier" designation for the 10th consecutive year [5][9] - The company reported a Q4 FRA train accident frequency of 0.91, which is 12% better than the previous year, while personal injuries increased by 22% to 1.05 [10][11] Market and Segment Performance - The company experienced resilience in its business segments, with grain strength offsetting softness in other areas, leading to a 1% revenue increase despite flat revenue ton-miles [12] - Specific segment performances included a 4% revenue increase in grain, a 2% decline in potash, and a 3% increase in intermodal revenue driven by growth with ocean carrier partners [15] Capital Allocation and Future Plans - The company announced a 5% share buyback program for 2026 and plans to add 100 new locomotives, while reducing capital expenditures by 15% to CAD 2.65 billion [6][8][16] - Management expects continued growth in intermodal services, particularly with the MMX and planned SMX products, contributing to the volume growth outlook [2][6][17] Regulatory and Trade Considerations - Management addressed potential regulatory impacts, stating that reciprocal switching proposals should be fair and consider unintended consequences, while expressing confidence in the ongoing trilateral trade despite uncertainties [18][19]

Financial Data and Key Metrics Changes - For Q4 2025, revenue was CAD 3.9 billion, up 1% year-over-year, with an operating ratio of 55.9, reflecting a 120 basis points improvement. Earnings per share (EPS) was CAD 1.33, up 3% compared to the previous year [6][29] - For the full year 2025, revenue reached CAD 15.1 billion, an increase of 4%, with a volume growth of 4%. The operating ratio improved by 140 basis points to 59.9, and core EPS was CAD 4.61, up 8% [7][30] Business Line Data and Key Metrics Changes - In the bulk segment, grain revenues increased by 4% on 2% volume growth, driven by a record Canadian grain harvest of 85 million metric tons, up 20% from the previous year [20][22] - Potash revenues decreased by 2% despite a 2% volume growth, while coal revenue increased by 2% with a 1% decline in volumes [22][23] - The merchandise segment saw energy, chemicals, and plastics revenue down 3% on a 5% volume decline, while forest products revenue declined by 13% on a 12% decrease in volumes [23][24] Market Data and Key Metrics Changes - The intermodal segment experienced a revenue increase of 3% with a 4% volume growth, supported by strong performance from international intermodal volumes [26] - The automotive franchise reported a revenue decline of 3% despite a 1% volume growth, impacted by production slowdowns and supply chain challenges [25] Company Strategy and Development Direction - The company aims for mid-single-digit volume growth in 2026, driven by strong bulk business and unique growth drivers, including record grain harvests [8][10] - Continued investment in capital, including the addition of 100 new locomotives in 2026, is planned to support growth and improve operational efficiency [11][17] - The company is focused on executing its Precision Scheduled Railroading (PSR) model to maintain competitive advantages and improve margins [8][28] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the growth outlook for 2026, emphasizing the strength of the grain harvest and the company's ability to control costs and execute its operational model [8][34] - The management acknowledged potential headwinds from macroeconomic conditions and trade policies but remains focused on what can be controlled [34] Other Important Information - The company announced a new 5% share repurchase program for 2026, reflecting confidence in its share price and commitment to returning cash to shareholders [33][34] - The company achieved record safety performance, with a train accident frequency of 0.91, which is 12% better than the previous year [15][16] Q&A Session Summary Question: Volume growth assumptions for 2026 - Management acknowledged challenges in Q1 but expressed confidence in mid-single-digit growth driven by grain and intermodal sectors, with synergies from previous wins contributing to this outlook [38][39] Question: Impact of reciprocal switching proposals - Management indicated that if service quality is maintained, there should be no concern regarding reciprocal switching proposals, emphasizing the importance of providing good service [46][47] Question: Operating ratio potential with mid-single-digit RTM growth - Management discussed the goal of achieving continuous improvement in operating ratio, targeting around 100 basis points improvement per year, supported by strong pricing and volume growth [51][56] Question: Revenue and volume mix for 2026 - Management highlighted potential headwinds in early 2026 due to tariffs and macroeconomic factors but expects stabilization and growth as the year progresses [60][62]