Norfolk Southern Corporation
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Financial statements
data from SEC XBRL filings. Values are as-reported; restatements supersede originals. Values reported in .
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis should be read in conjunction with the Consolidated Financial Statements and Notes.
OVERVIEW
Since 1827, Norfolk Southern Corporation and its predecessor companies have safely moved the goods and materials that drive the U.S. economy. Our dedicated team members deliver a wide variety of commodities annually for our customers, from agriculture to consumer products, and help them reduce carbon emissions by shipping via rail. We have the most extensive intermodal network in the eastern U.S. Our network serves a majority of the country's population and manufacturing base, with connections to every major container port on the Atlantic coast as well as major ports along the Gulf Coast and Great Lakes.
On July 28, 2025, we entered into a Merger Agreement with Union Pacific, marking a transformational step toward creating America’s first transcontinental railroad – an outcome we believe will unlock new opportunities for our customers, employees, and the broader U.S. economy. By integrating two complementary networks, we believe the merged company will be positioned to deliver more efficient, reliable, and sustainable freight service across the nation. See Note 1 for additional information on the proposed transaction.
Our performance in the third quarter reflected revenue growth that drove an increase in earnings. Higher fuel prices significantly impacted both railway operating revenues and expenses in the quarter. Our financial results were further impacted by lower gains from property sales, the absence of insurance recoveries related to the Eastern Ohio incident, and higher merger-related expenses. For the third quarter, we achieved an operating ratio (a measure of the amount of operating revenues consumed by operating expenses) of 67.4%, and an adjusted operating ratio of 65.4% (see our non-GAAP reconciliations beginning on page 26). We remain committed to being a safe, productive, resilient, and efficient railroad with industry-competitive margins.
SUMMARIZED RESULTS OF OPERATIONS
| Third Quarter | First Nine Months | ||||||||||||||||||||||||||||||||||
| 2026 | 2025 | % change | 2026 | 2025 | % change | ||||||||||||||||||||||||||||||
| ($ in millions, except per share amounts) | |||||||||||||||||||||||||||||||||||
| Railway operating revenues | $ | 3,526 | $ | 3,103 | 14% | $ | 9,989 | $ | 9,206 | 9% | |||||||||||||||||||||||||
| Railway operating expenses | $ | 2,376 | $ | 2,005 | 19% | $ | 6,838 | $ | 5,787 | 18% | |||||||||||||||||||||||||
| Income from railway operations | $ | 1,150 | $ | 1,098 | 5% | $ | 3,151 | $ | 3,419 | (8%) | |||||||||||||||||||||||||
| Net income | $ | 759 | $ | 711 | 7% | $ | 2,040 | $ | 2,229 | (8%) | |||||||||||||||||||||||||
| Diluted earnings per share | $ | 3.37 | $ | 3.16 | 7% | $ | 9.06 | $ | 9.88 | (8%) | |||||||||||||||||||||||||
| Railway operating ratio (percent) | 67.4 | 64.6 | 4% | 68.5 | 62.9 | 9% | |||||||||||||||||||||||||||||
Income from railway operations, net income, and diluted earnings per share increased in the third quarter but decreased for the first nine months. Railway operating revenues were higher in both periods, driven by increased average revenue per unit, reflecting higher fuel surcharge revenue, and increased volume. Railway operating expenses increased in both periods, reflecting inflationary pressures inclusive of higher fuel costs, increased merger-related expenses, and lower gains from property sales. The absence of insurance recoveries related to the Eastern Ohio incident recognized in 2025 influenced both periods and significantly contributed to the decline in income from railway operations, net income, and diluted earnings per share for the first nine months of 2026.
The following tables adjust our GAAP financial results for the third quarters and first nine months of 2026 and 2025 to exclude merger-related expenses and the overall impact on operating expenses resulting from costs and
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recoveries associated with the Incident. The adjusted results for the third quarter of 2025 and first nine months of 2026 and 2025 also exclude restructuring and other charges. The income tax effects of these non-GAAP adjustments were calculated based on the applicable tax rates to which the non-GAAP adjustments related. We use these non-GAAP financial measures internally and believe this information provides useful supplemental information to investors to facilitate making period-to-period comparisons by excluding these items. While we believe that these non-GAAP financial measures are useful in evaluating our business, this information should be considered as supplemental in nature and is not meant to be considered in isolation from, or as a substitute for, the related financial information prepared in accordance with GAAP. In addition, these non-GAAP financial measures may not be the same as similar measures presented by other companies.
| Non-GAAP Reconciliation for Third Quarter 2026 | ||||||||||||||||||||||||||||||||||||
| Reported (GAAP) | Merger-Related Expenses | Eastern Ohio Incident | Adjusted (non-GAAP) | |||||||||||||||||||||||||||||||||
| ($ in millions, except per share amounts) | ||||||||||||||||||||||||||||||||||||
| Railway operating expenses | $ | 2,376 | $ | (42) | $ | (28) | $ | 2,306 | ||||||||||||||||||||||||||||
| Income from railway operations | $ | 1,150 | $ | 42 | $ | 28 | $ | 1,220 | ||||||||||||||||||||||||||||
| Net income | $ | 759 | $ | 35 | $ | 21 | $ | 815 | ||||||||||||||||||||||||||||
| Diluted earnings per share | $ | 3.37 | $ | 0.16 | $ | 0.09 | $ | 3.62 | ||||||||||||||||||||||||||||
| Railway operating ratio (percent) | 67.4 | (1.2) | (0.8) | 65.4 | ||||||||||||||||||||||||||||||||
| Non-GAAP Reconciliation for Third Quarter 2025 | ||||||||||||||||||||||||||||||||||
| Reported (GAAP) | Merger - Related Expenses | Restructuring and Other Charges | Eastern Ohio Incident | Adjusted (non-GAAP) | ||||||||||||||||||||||||||||||
| ($ in millions, except per share amounts) | ||||||||||||||||||||||||||||||||||
| Railway operating expenses | $ | 2,005 | $ | (15) | $ | (12) | $ | (13) | $ | 1,965 | ||||||||||||||||||||||||
| Income from railway operations | $ | 1,098 | $ | 15 | $ | 12 | $ | 13 | $ | 1,138 | ||||||||||||||||||||||||
| Net income | $ | 711 | $ | 11 | $ | 9 | $ | 10 | $ | 741 | ||||||||||||||||||||||||
| Diluted earnings per share | $ | 3.16 | $ | 0.05 | $ | 0.04 | $ | 0.05 | $ | 3.30 | ||||||||||||||||||||||||
| Railway operating ratio (percent) | 64.6 | (0.5) | (0.4) | (0.4) | 63.3 | |||||||||||||||||||||||||||||
In the table below, references to the results for the third quarters of 2026 and 2025 and related comparisons use the adjusted, non-GAAP results from the reconciliations in the previous tables.
| Adjusted (non-GAAP) | |||||||||||||||||
| Third Quarter | |||||||||||||||||
| 2026 | 2025 | % change | |||||||||||||||
| ($ in millions, except per share amounts) | |||||||||||||||||
| Railway operating expenses | $ | 2,306 | $ | 1,965 | 17% | ||||||||||||
| Income from railway operations | $ | 1,220 | $ | 1,138 | 7% | ||||||||||||
| Net income | $ | 815 | $ | 741 | 10% | ||||||||||||
| Diluted earnings per share | $ | 3.62 | $ | 3.30 | 10% | ||||||||||||
| Railway operating ratio (percent) | 65.4 | 63.3 | 3% | ||||||||||||||
26
| Non-GAAP Reconciliation for First Nine Months 2026 | ||||||||||||||||||||||||||||||||||||||
| Reported (GAAP) | Merger-Related Expenses | Restructuring and Other Charges | Eastern Ohio Incident | Adjusted (non-GAAP) | ||||||||||||||||||||||||||||||||||
| ($ in millions, except per share amounts) | ||||||||||||||||||||||||||||||||||||||
| Railway operating expenses | $ | 6,838 | $ | (145) | $ | (6) | $ | (53) | $ | 6,634 | ||||||||||||||||||||||||||||
| Income from railway operations | $ | 3,151 | $ | 145 | $ | 6 | $ | 53 | $ | 3,355 | ||||||||||||||||||||||||||||
| Net income | $ | 2,040 | $ | 120 | $ | 5 | $ | 40 | $ | 2,205 | ||||||||||||||||||||||||||||
| Diluted earnings per share | $ | 9.06 | $ | 0.53 | $ | 0.02 | $ | 0.18 | $ | 9.79 | ||||||||||||||||||||||||||||
| Railway operating ratio (percent) | 68.5 | (1.5) | (0.1) | (0.5) | 66.4 | |||||||||||||||||||||||||||||||||
| Non-GAAP Reconciliation for First Nine Months 2025 | ||||||||||||||||||||||||||||||||||
| Reported (GAAP) | Merger - Related Expenses | Restructuring and Other Charges | Eastern Ohio Incident | Adjusted (non-GAAP) | ||||||||||||||||||||||||||||||
| ($ in millions, except per share amounts) | ||||||||||||||||||||||||||||||||||
| Railway operating expenses | $ | 5,787 | $ | (15) | $ | (22) | $ | 219 | $ | 5,969 | ||||||||||||||||||||||||
| Income from railway operations | $ | 3,419 | $ | 15 | $ | 22 | $ | (219) | $ | 3,237 | ||||||||||||||||||||||||
| Net income | $ | 2,229 | $ | 11 | $ | 17 | $ | (166) | $ | 2,091 | ||||||||||||||||||||||||
| Diluted earnings per share | $ | 9.88 | $ | 0.05 | $ | 0.07 | $ | (0.73) | $ | 9.27 | ||||||||||||||||||||||||
| Railway operating ratio (percent) | 62.9 | (0.2) | (0.3) | 2.4 | 64.8 | |||||||||||||||||||||||||||||
In the table below, references to the results for the first nine months of 2026 and 2025 and related comparisons use the adjusted, non-GAAP results from the reconciliations in the previous tables.
| Adjusted (non-GAAP) | |||||||||||||||||
| First Nine Months | |||||||||||||||||
| 2026 | 2025 | % change | |||||||||||||||
| ($ in millions, except per share amounts) | |||||||||||||||||
| Railway operating expenses | $ | 6,634 | $ | 5,969 | 11% | ||||||||||||
| Income from railway operations | $ | 3,355 | $ | 3,237 | 4% | ||||||||||||
| Net income | $ | 2,205 | $ | 2,091 | 5% | ||||||||||||
| Diluted earnings per share | $ | 9.79 | $ | 9.27 | 6% | ||||||||||||
| Railway operating ratio (percent) | 66.4 | 64.8 | 2% | ||||||||||||||
On an adjusted basis, income from railway operations, net income, and diluted earnings per share increased in the third quarter and first nine months due to higher railway operating revenues, driven by higher average revenue per unit, primarily driven by increased fuel surcharge revenue, and increased volume. Partially offsetting the increase in revenues were higher adjusted railway operating expenses, reflecting higher fuel prices, inflation, and lower gains from property sales.
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DETAILED RESULTS OF OPERATIONS
Railway Operating Revenues
The following tables present a comparison of revenues ($ in millions), units (in thousands), and average revenue per unit ($ per unit) by commodity group.
| Third Quarter | First Nine Months | |||||||||||||||||||||||||||||||||
| Revenues | 2026 | 2025 | % change | 2026 | 2025 | % change | ||||||||||||||||||||||||||||
| Merchandise: | ||||||||||||||||||||||||||||||||||
| Agriculture, forest and consumer products | $ | 696 | $ | 630 | 10% | $ | 1,994 | $ | 1,911 | 4% | ||||||||||||||||||||||||
| Chemicals | 658 | 569 | 16% | 1,871 | 1,650 | 13% | ||||||||||||||||||||||||||||
| Metals and construction | 516 | 448 | 15% | 1,409 | 1,320 | 7% | ||||||||||||||||||||||||||||
| Automotive | 318 | 322 | (1%) | 932 | 923 | 1% | ||||||||||||||||||||||||||||
| Merchandise | 2,188 | 1,969 | 11% | 6,206 | 5,804 | 7% | ||||||||||||||||||||||||||||
| Intermodal | 919 | 759 | 21% | 2,576 | 2,262 | 14% | ||||||||||||||||||||||||||||
| Coal | 419 | 375 | 12% | 1,207 | 1,140 | 6% | ||||||||||||||||||||||||||||
| Total | $ | 3,526 | $ | 3,103 | 14% | $ | 9,989 | $ | 9,206 | 9% | ||||||||||||||||||||||||
| Units | |||||||||||||||||||||||||||||||
| Merchandise: | |||||||||||||||||||||||||||||||
| Agriculture, forest and consumer products | 186.7 | 182.5 | 2% | 552.3 | 552.5 | —% | |||||||||||||||||||||||||
| Chemicals | 154.0 | 141.3 | 9% | 449.0 | 412.4 | 9% | |||||||||||||||||||||||||
| Metals and construction | 175.4 | 168.0 | 4% | 489.9 | 487.4 | 1% | |||||||||||||||||||||||||
| Automotive | 95.4 | 103.3 | (8%) | 288.8 | 295.6 | (2%) | |||||||||||||||||||||||||
| Merchandise | 611.5 | 595.1 | 3% | 1,780.0 | 1,747.9 | 2% | |||||||||||||||||||||||||
| Intermodal | 1,060.6 | 1,032.1 | 3% | 3,105.3 | 3,065.9 | 1% | |||||||||||||||||||||||||
| Coal | 181.4 | 176.7 | 3% | 547.5 | 523.1 | 5% | |||||||||||||||||||||||||
| Total | 1,853.5 | 1,803.9 | 3% | 5,432.8 | 5,336.9 | 2% | |||||||||||||||||||||||||
| Revenue per Unit | |||||||||||||||||||||||||||||
| Merchandise: | |||||||||||||||||||||||||||||
| Agriculture, forest and consumer products | $ | 3,728 | $ | 3,453 | 8% | $ | 3,611 | $ | 3,458 | 4% | |||||||||||||||||||
| Chemicals | 4,277 | 4,028 | 6% | 4,168 | 4,001 | 4% | |||||||||||||||||||||||
| Metals and construction | 2,944 | 2,672 | 10% | 2,876 | 2,710 | 6% | |||||||||||||||||||||||
| Automotive | 3,325 | 3,115 | 7% | 3,225 | 3,122 | 3% | |||||||||||||||||||||||
| Merchandise | 3,579 | 3,310 | 8% | 3,487 | 3,321 | 5% | |||||||||||||||||||||||
| Intermodal | 866 | 735 | 18% | 829 | 738 | 12% | |||||||||||||||||||||||
| Coal | 2,311 | 2,120 | 9% | 2,205 | 2,179 | 1% | |||||||||||||||||||||||
| Total | 1,902 | 1,721 | 11% | 1,839 | 1,725 | 7% | |||||||||||||||||||||||
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Railway operating revenues increased $423 million and $783 million in the third quarter and first nine months, respectively. The table below reflects the components of the revenue change by major commodity group ($ in millions).
| Third Quarter | First Nine Months | ||||||||||||||||||||||||||||||||||
| Merchandise | Intermodal | Coal | Merchandise | Intermodal | Coal | ||||||||||||||||||||||||||||||
| Increase (Decrease) | |||||||||||||||||||||||||||||||||||
| Volume | $ | 54 | $ | 21 | $ | 10 | $ | 107 | $ | 29 | $ | 53 | |||||||||||||||||||||||
| Fuel surcharge revenue | 119 | 114 | 27 | 198 | 241 | 41 | |||||||||||||||||||||||||||||
| Rate, mix and other | 46 | 25 | 7 | ||||||||||||||||||||||||||||||||
Next expected filings
- ~2027-02-08 10-K expected by 2027-03-18 (in 103 days)
- ~2027-04-23 10-Q expected by 2027-05-09 (in 177 days)
- ~2027-07-22 10-Q expected by 2027-08-07 (in 267 days)
- ~2027-10-21 10-Q expected by 2027-11-06 (in 358 days)
Predicted from historical filing cadence; not an SEC commitment.
Recent SEC filings
- 2026-10-22 8-K Earnings Release; Regulation FD Disclosure; Financial Statements and Exhibits
- 2026-10-22 10-Q Quarterly Report
- 2026-07-23 8-K Earnings Release; Regulation FD Disclosure; Financial Statements and Exhibits
- 2026-07-23 10-Q Quarterly Report
- 2026-06-01 8-K Officer/Director Change; Regulation FD Disclosure; Financial Statements and Exhibits
- 2026-04-24 8-K Earnings Release; Regulation FD Disclosure; Financial Statements and Exhibits
- 2026-04-24 10-Q Quarterly Report
- 2026-04-02 8-K Material Agreement Entered; Financial Statements and Exhibits
- 2026-02-09 10-K Annual Report
- 2026-01-29 8-K Earnings Release; Regulation FD Disclosure; Financial Statements and Exhibits
- 2025-11-17 8-K Shareholder Vote Results; Other Events; Financial Statements and Exhibits
- 2025-11-06 8-K Other Events
- 2025-10-23 10-Q Quarterly Report
- 2025-10-23 8-K Earnings Release; Regulation FD Disclosure; Financial Statements and Exhibits
- 2025-09-29 8-K Officer/Director Change; Financial Statements and Exhibits