“In the first quarter, our team stayed focused on what we could control, operating with discipline amid volatile volumes, severe winter weather, and a rapidly shifting macroeconomic environment including the dramatic rise in fuel prices in March,” Norfolk Southern (NS) President and CEO Mark George said in his railroad’s latest quarterly financial and operations report on April 24.
“Despite these challenges, our employees safely delivered a solid service product, managed costs effectively, and earned the continued trust of our customers,” Mark George continued. “As conditions improved, we captured momentum exiting the quarter, reinforcing the strength of our operating foundation and the dedication of the entire Norfolk Southern team.”
The Class I re-iterated its 2026 guidance.
NS 1Q26 vs. 1Q25
In its first-quarter 2026 report, NS noted that results “reflect disciplined execution on safety, service, and cost control through a dynamic first quarter.”
According to the Class I railroad:
- Railway operating revenue came in at $2.998 billion in first-quarter 2026, up $5 million, or flat compared with first-quarter 2025, on a volume decline of 1% year-over-year.
- Income from railway operations for first-quarter 2026 was $877 million, down $269 million, or 23%, compared with the same quarter last year.
- Operating ratio was 70.7% in first-quarter 2026 vs. 61.7% in first-quarter 2025.
- Diluted earnings per share were $2.43 in first-quarter 2026, down $0.88, or 27%, compared with first-quarter 2025.
Adjusting the first-quarter 2026 results to exclude the 2026 expenses related to the potential merger with Union Pacific and to the effects of the 2023 East Palestine, Ohio, train derailment on 2025 and 2026, NS reported:
- First-quarter income from railway operations was $939 million, down $22 million, or 2%, from adjusted first-quarter 2025.
- Operating ratio was 68.7%, 80 basis points higher than first-quarter 2025.
- Diluted earnings per share were $2.65, down $0.04, or 1%, from first-quarter 2025.
Operations Overview
NS provided the following updates on safety and the network:
2026 Outlook
NS reported that it is “focused on freight growth,” pointing to its newly announced partnership with Jaguar Transport Holdings, LLC, which it said “highlights our focus on creating innovative deal structures that drive growth to the franchise [and] [d]elivering new capabilities that drive compelling value for customers.”
NS said it is “re-iterating 2026 guidance.” This includes:
• “Prioritiz[ing] Safety and Service:
- “Continued momentum on safety culture and performance.
- “Deliver consistent and reliable service.
• “Disciplined Execution and Cost Control:
- “2026 Adjusted Operating Expense expected to be $8.2 billion–$8.4 billion.” NS noted that “[p]rolonged high fuel prices would likely impact OpEx outlook.”
• “Capex Expected to be $1.9 billion in 2026:
- “Lowering capital spending from 2025 by approximately $300 million or 14%.
- “Continues to support reliability and capability of our network.”
TD COWEN: ‘Cost Discipline Despite Building Headwinds’
By Wall Street Contributing Editor Jason Seidl, Elliot Alper and Uday Khanapurkar
Norfolk Southern (NSC) beat Q1 estimates and (like other US Class I Peers) was incrementally optimistic on multiple end markets including manufacturing, autos, and domestic intermodal. NSC remains very diligent on its cost discipline despite inflation/fuel costs working against them, though we modestly lower our near-term estimates. PT to $337, reiterate Buy.
TD Cowen Takeaways:
■ Adjusted EPS of $2.65 beat our $2.41 estimate and consensus of $2.49, with an adjusted OR of 68.7%, up ~80bps YoY (beat our 71.1% estimate). Inflation and fuel created an estimated ~280bps OR headwind, largely mitigated through productivity and higher RPU.
■ Total volume declined ~1% driven primarily by intermodal softness and merger-related losses. February storms materially disrupted operations, but NSC exited the quarter with improving momentum in March. Revenue was flat YoY, while RPU increased ~2%, reflecting solid core pricing and favorable mix. Management reiterated confidence in merchandise pricing, noting strong core price realization despite mix dilution from faster growth in lower rated chemical commodities.
■ Cost control continues to be story in 2026; NSC delivered >$30mm of labor and fuel productivity savings in the quarter, staying on track for $150mm+ of productivity gains in 2026, on top of >$500mm realized over the past two years. Headcount and crew productivity continue to improve, along with fuel efficiency gains. NSC continues to expect 2026 opex to be $8.2bn-$8.4bn, though acknowledged that higher fuel prices could impact this outlook. Despite inflation/fuel into Q2 being a headwind, NSC expects to see 200bps of margin improvement sequentially, lower than our previous forecast.
■ Intermodal was pressured in 1Q but the tone is improving, driven by domestic non-premium intermodal, citing tightening truck capacity, rising highway fuel costs, and improving service reliability as potential catalysts into peak season. While core demand in Q1 was weak, there has been incremental optimism on the consumer from management teams through earnings as we move into 2H that should position the rails well for IM growth.
■ NSC reiterated what UNP ($271.26, Buy) stated this week, that the revised filing is on track for April 30. Management spoke to stronger data, clearer articulation of public benefits, and improving customer receptivity. While acknowledging ongoing competitive responses, management expressed increased confidence versus the initial filing. Based on UNP’s commentary from its call, we don’t expect them to come out with material concessions in its filing, but we continue to believe that they will do everything the STB asked for and then some in the refiled application.
■ Our PT moves to $337, which pegs valuation to pending deal dynamics. We increase our 2026 EPS estimate to $12.25 from $12.10.
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