Norfolk Southern (NSC -3.23%), one of the United States’ leading freight rail operators, released its second quarter 2025 earnings on July 29, 2025. The company reported GAAP revenue of $3.1 billion, missing analyst forecasts by $18 million, and adjusted (non-GAAP) earnings per share of $3.29, just below the $3.31 consensus. Despite missing both GAAP revenue and non-GAAP earnings expectations, the quarter featured year-over-year improvement across key operating and profitability metrics. Management underscored productivity gains and margin expansion but lowered its FY2025 revenue growth outlook in response to evolving economic headwinds.
| Metric | Q2 2025 | Q2 2025 Estimate | Q2 2024 | Y/Y Change |
|---|---|---|---|---|
| EPS (Non-GAAP) | $3.29 | $3.31 | $3.06 | 7.5% |
| Revenue (GAAP) | $3.1 billion | $3.13 billion | $3.04 billion | 2.3% |
| Revenue – less fuel surcharges (Non-GAAP) | $2.9 billion | $2.79 billion | 4.4% | |
| Income from railway operations | $1.2 billion | $1.13 billion | 6.2% | |
| Adjusted operating ratio | 63.4% | 65.1% | (1.7 pp) |
Source: Analyst estimates for the quarter provided by FactSet.
Business Overview and Strategic Focus
Norfolk Southern is a major freight railroad operating approximately 19,200 route miles across 22 U.S. states and the District of Columbia. The company connects key manufacturing regions, ports, and distribution centers, transporting goods such as industrial materials, finished products, and energy resources.
Its business focuses on two main product families: intermodal shipments, which involve moving cargo using multiple transportation modes such as ship, rail, and truck, and merchandise freight, which covers a diverse set of commodities including chemicals, metals, agriculture, and automotive products. Intermodal shipments accounted for about 25% of total railway revenue in 2024, while merchandise freight comprised approximately 62% of total railway operating revenue in 2024. Success for Norfolk Southern relies on maintaining network reach, service reliability, and ongoing investment in its rail infrastructure while navigating regulatory and competitive pressures.
Quarterly Performance and Notable Developments
During the second quarter, Norfolk Southern’s revenue rose 2.2% compared to the same period in 2024, with overall shipment volumes up 3%. Revenue excluding fuel surcharges, a non-GAAP measure that provides clearer visibility into pricing and core demand by removing fuel price volatility, grew 4% compared to Q2 2024. Adjusted earnings per share increased 8%, reflecting improved operations and cost control.
The company achieved a significant improvement in its adjusted operating ratio, which fell to 63.4% from 65.1% in Q2 2024. The operating ratio is used in the railroad industry to measure operating expenses as a percentage of revenue — lower values signal better efficiency and profitability. This improvement was driven by strong productivity initiatives and a focus on cost discipline. Management highlighted that the full-year 2025 productivity savings target was raised to at least $175 million, up from $150 million.
Segment details were not extensively broken out in the company’s release, but management commentary indicated continued momentum in merchandise freight, particularly in chemicals, along with share gains over the past three quarters. Intermodal volumes grew as well. The quarter benefited from continued insurance recoveries related to the Eastern Ohio incident, resulting in a net positive effect as recoveries outpaced incremental costs in Q1 2025.
Strategically, the company moved closer to a transformative merger with Union Pacific, which, if completed, would potentially create the country’s first transcontinental rail network. Norfolk Southern shareholders are set to receive one Union Pacific share plus $88.82 in cash per share, for an implied value of $320 per share based on Union Pacific’s closing stock price on July 16, 2025. However, management cautioned that the outcome depends on regulatory review by the U.S. Surface Transportation Board and other agencies, which could impose conditions or impact the deal timeline.
Outlook and What to Watch Next
Management updated its financial guidance for 2025, now projecting revenue growth of 2-3%, down from the previous expectation of 3%. The adjusted operating ratio is forecast to improve by 100-150 basis points in 2025 compared to 2024, demonstrating continued commitment to cost control. However, leadership noted that early Q3 2025 revenue trends had been softer than expected, reflecting a cautious outlook on near-term demand.
Looking ahead, investors should monitor regulatory progress on the proposed Union Pacific merger, which carries significant potential but also introduces uncertainties. Key factors to watch will be volume trends in Norfolk Southern’s core merchandise and intermodal freight business, as well as the sustainability of recent margin and cost improvements. The company also faces ongoing challenges related to export coal demand and broader economic developments that could affect shipping volumes and pricing.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
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