Norfolk Southern halts profit slide as costs weigh
The railroad’s adjusted earnings per share fell just 1% as volume declines eased.
Norfolk Southern (NSC) arrested a year-long profit decline in the first quarter, reporting adjusted earnings that slipped only 1% as cost pressures and merger expenses continued to erode margins.
The result marked a sharp deceleration in the rate of decline after a 6% increase in adjusted earnings in the prior quarter and a 35% drop in the third quarter of 2025. Revenue held steady at $3.0 billion, ending a two-quarter streak of year-over-year declines.
Earnings per share on a GAAP basis fell 27% to $2.43, while adjusted diluted EPS dipped to $2.65 from $2.68 a year earlier. Income from railway operations under GAAP tumbled 23% to $877 million, though adjusted operating income edged down just 2% to $939 million after excluding $52 million in merger-related costs and a $10 million net expense tied to the 2023 Eastern Ohio derailment.
Volume declined 1% after dropping 4% in the fourth quarter, the smallest contraction in three quarters. Merchandise revenue rose 1% to $1.885 billion, offsetting a 1% decline in intermodal and a 2% drop in coal. Fuel surcharge revenue, which had acted as a $134 million headwind for full-year 2025, was not quantified for the quarter.
The adjusted operating ratio worsened to 68.7% from 67.9% a year earlier, an 80-basis-point deterioration that followed a 40-basis-point improvement in the fourth quarter. Productivity savings exceeded the company’s raised target of $200 million for 2025, reaching $215 million, but failed to fully counter rising labor and merger integration costs.
Norfolk Southern offered no updated guidance for 2026. The company said it expects the pending merger with Union Pacific to close in early 2027, delivering $133 million in annual capital synergies and requiring $2.1 billion in incremental investment. Share repurchases remained suspended; the company bought no stock in the quarter after spending $533 million in the first nine months of 2025.
The railroad named Brian Barr as its new chief operating officer, replacing John Orr, who retired effective July 1.