Norfolk Southern (NYSE:NSC) FY Conference September 10, 2025 10:00 AM ET Company ParticipantsRavi Shanker - Managing DirectorMark George - President, CEO & DirectorClaude Elkins - EVP & CCOGuilherme Ávila - PartnerRavi ShankerWelcome, everyone, to the 13th Annual Laguna Conference. I'm your producer and alumni. I'm Ravi Sharker-Moggessan, Eastern Conspiration Airlines Analyst. For the next three days, you guys are going to hear from the capstone industry across all industrial verticals. Obviously, very impo ...

Summary of the Conference Call on America's First Transcontinental Railroad Industry and Companies Involved - **Industry**: Rail Transportation - **Companies**: Union Pacific Corporation and Norfolk Southern Corporation Core Points and Arguments 1. **Historic Merger Announcement**: The call announced the merger between Union Pacific and Norfolk Southern, creating America's first transcontinental railroad valued at over CAD 250 billion, which is expected to generate significant value for stakeholders and the nation [5][6][14]. 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 American manufacturing and economic growth [9][12][22]. 3. **Operational Efficiency**: The combined network will reduce transit times by 24 to 48 hours for approximately 1 million carloads, improving service reliability and reducing costs for customers [20][21][78]. 4. **Environmental Benefits**: The merger is projected to remove over 550 trucks from highways per intermodal train, enhancing fuel efficiency and reducing highway congestion [11][12]. 5. **Job Security**: All union employees from both companies will retain their jobs post-merger, with the expectation of job creation due to business growth [13]. 6. **Financial Projections**: The combined company is projected to have revenues of $36.4 billion and EBITDA of approximately $18 billion, with an operating ratio of 62.1% [28]. 7. **Synergy Estimates**: The merger is expected to unlock $2.75 billion in annualized synergies by the third year post-close, with $1.75 billion from revenue growth and $1 billion from cost efficiencies [31][32]. 8. **Capital Investment**: An estimated $5.6 billion will be invested in capital improvements by 2025 to support safety and operational efficiency [21]. 9. **Regulatory Approval**: The transaction is subject to review by the Surface Transportation Board and requires approval from both companies' shareholders [36][38]. Additional Important Content 1. **Cultural Alignment**: Both companies emphasize their shared commitment to safety, performance, and operational excellence, which is crucial for a successful integration [41][42]. 2. **Technological Advancements**: The merger will leverage state-of-the-art technology from both companies to enhance safety and efficiency, improving customer experience through better shipment visibility [27]. 3. **Market Competitiveness**: The combined network will enhance competition against other transportation modes, particularly trucks, by providing a more efficient and reliable service [22][23]. 4. **Long-term Vision**: The merger is seen as a step towards reversing the trend of rail losing market share to trucks, with a focus on capturing long-haul freight business [58][115]. 5. **Integration Strategy**: The companies plan to use the review period to prepare for a seamless integration, ensuring minimal disruption to services [85][86]. This summary encapsulates the key points discussed during the conference call regarding the merger of Union Pacific and Norfolk Southern, highlighting the anticipated benefits, financial projections, and strategic plans for integration.

Financial Data and Key Metrics Changes - Union Pacific reported second quarter earnings per share of $3.15, with adjusted earnings per share at $3.30, reflecting a 12% increase compared to last year's adjusted results [4][10] - Operating revenue reached $6.2 billion, a 2% improvement year-over-year, while freight revenue set a record at $5.8 billion, increasing by 4% [6][10] - The adjusted operating ratio improved to 58.1%, a 230 basis point enhancement from last year's adjusted results [4][10] Business Line Data and Key Metrics Changes - Bulk segment revenue increased by 10% with an 11% rise in volume, driven by strong coal demand and export shipments [16][20] - Industrial segment revenue rose by 4% on a 3% increase in volume, with solid rock shipments and industrial chemicals, although forest products remained soft [18][20] - Premium revenue decreased by 4% despite a 1% increase in volume, attributed to a mix of increased international intermodal shipments and lower fuel surcharges [19][20] Market Data and Key Metrics Changes - The company experienced a 30% surge in coal and renewable shipments, demonstrating its operational agility [25][30] - Intermodal volumes showed year-over-year growth, although automotive volumes declined due to reduced OEM production [19][20] - The company anticipates continued softness in the autos market and lower asset sales impacting other revenue in the third quarter [12][13] Company Strategy and Development Direction - Union Pacific is focused on maintaining operational excellence, safety, and service quality while exploring growth opportunities across its diverse franchise [13][20] - The company reaffirmed its three-year targets introduced in September, aiming for high single to low double-digit EPS growth [13][34] - The capital deployment strategy remains unchanged, with a commitment to delivering value for stakeholders [13][34] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to handle volume growth while improving safety and service performance [5][10] - The company expects volume to moderate in the second half of 2025, with a focus on operational improvements and cost control [12][13] - Management highlighted the importance of adapting to market changes and leveraging technology for efficiency [30][31] Other Important Information - Union Pacific and Norfolk Southern are engaged in advanced discussions regarding a potential business combination, with no further comments until an agreement is reached [35][36] - The company announced a 3% dividend increase, marking the nineteenth consecutive year of annual increases [11] Q&A Session All Questions and Answers Question: Why consider a potential business combination now? - Management emphasized the importance of adapting to technological changes and maintaining operational efficiency, suggesting that the discussions are part of a broader strategy to enhance capabilities [39][41] Question: Thoughts on reciprocal switching and open access for shippers? - Management reiterated the commitment to providing high-level service and innovative solutions to meet diverse customer needs, regardless of regulatory changes [48][52] Question: Feedback from shippers regarding consolidation? - Management stated that negotiations are private and emphasized the importance of maintaining confidentiality during discussions [84][88] Question: Progress on automation and regulatory changes? - Management noted positive momentum in discussions with the FRA regarding automation and safety technologies, highlighting ongoing efforts to improve operational efficiency [112][115] Question: Long-term outlook for revenue growth and intermodal partnerships? - Management expressed optimism about the intermodal business, citing strong service products and competitive positioning in the market [136][138]