“Norfolk Southern delivered another quarter of strong results on safety, service, and productivity through a dynamic freight market,” said Mark George, President and CEO of the Class I railroad, which on Oct. 23 posted third-quarter 2025 results, including income from railway operations of $1.1 billion, an operating ratio of 63.3%, and diluted earnings per share of $3.30, each of which was adjusted to exclude expenses related to its potential merger with Union Pacific; restructuring and other charges; and the effects of the 2023 East Palestine, Ohio, derailment.
“The entire Thoroughbred team pulled together to serve our customers, achieve an all-time record in fuel efficiency, delivered on key productivity initiatives, and executed a noteworthy land sale that will ultimately deliver rail volumes for years to come,” Mark George continued. “I’m proud of the way our team is performing with discipline and focus—driving results and strengthening our foundation for long term success.”
Following are highlights of NS’s third-quarter 2025 results:
- Railway operating revenues came in at $3.1 billion, an increase of $52 million, or 2%, from the same quarter last year, on flat volumes, according to the railroad. Fuel surcharge revenue declined $30 million compared with third-quarter 2024, which NS said represents a 1% headwind to overall revenues.
- Income from railway operations was $1.1 billion, a fall-off of $498 million, from third-quarter 2024, which included a $380 million benefit from two railway line sales in the states of Virginia and North Carolina, NS noted. Adjusting for merger-related expenses*, restructuring and other charges, and the effects of the Eastern Ohio incident, NS reported income from railway operations was $1.1 billion, up $21 million, or 2%, aided by $65 million incremental land sales, compared to adjusted third-quarter 2024. (*In third-quarter 2025, NS incurred $15 million in merger-related expenses, which it said were “primarily related to third-party advisor fees, legal fees, and costs associated with employee retention arrangements.)
- Operating ratio in third-quarter 2025 was 64.6% vs. 47.7% in the prior-year period, which included the aforementioned railway line sales. Adjusting for merger-related expenses, restructuring and other charges, and the effects of the Eastern Ohio incident, NS said the operating ratio for the quarter was 63.3%. This represents 10 basis points of improvement from adjusted third-quarter 2024 which was 63.4%
- Diluted earnings per share were $3.16, down from $4.85 in third-quarter 2024, which included the aforementioned railway line sales. According to NS, adjusting for merger-related expenses, restructuring and other charges, and the effects of the Eastern Ohio incident, diluted earnings per share were $3.30, up $0.05, or 2%, compared with adjusted third-quarter 2024.
UP presented its financial report earlier on Oct. 23. “Our third-quarter results serve as a proof point that we are successfully executing on our strategy,” said CEO Jim Vena. “We have a historic opportunity with the Norfolk Southern to create [the United States’] first transcontinental railroad. As we work toward regulatory approval, our team is focused and driving continued improvements in our pursuit of what’s possible.”
Concurrent with 3Q25 earnings, Vena sent a letter to all UP employees outlining the benefits of merging with NS, stating that it “will allow us to move [products] in a faster manner, which will make American goods more competitive, open more markets and provide more jobs.” He reiterated his pledge that company is “guaranteeing a job for every unionized employee that’s working for the two companies on the day the deal closes.” And while he “personally thinks that [the STB] taking the prescribed length of time to review the application is excessive,” he believes the STB “will listen to its constituents and thoroughly examine our application, which will show the combination enhances competition and is in the public interest.”
In a post-earnings call conversation with Railway Age Editor-in-Chief William C. Vantuono, Vena outlined some of the joint initiatives UP and NS have embarked upon to ensure that, operationally, integrating the two railroads will go smoothly. Glitches are bound to occur, he acknowledged, but pointed to his own involvement with mergers during his time with CN, where he spent most of his career, working on the acquisitions of Illinois Central and Wisconsin Central, among other railroads. Read Vantuono’s report here.
TD Cowen: ‘Feeling the Competitive Heat’
By Jason H. Seidl, Elliot Alper and Uday Khanapurkar
Third-quarter 2025 results missed consensus though roughly in line with our lowered forecast. Fourth-quarter estimates lowered as top line pressure will be driven by softer demand and share loss to rival rails. Pricing holding steady and cost-out driving efficiencies though likely not enough to drive margin improvement in the fourth quarter. PT moves to $314. Reiterate Buy.
Takeaways:
- NS reported third-quarter adjusted EPS of $3.30, which included a $0.22 benefit from $65 million in incremental land sales year-over-year. Excluding this, results were slightly better than our $3.05, which we had lowered significantly into the print but missed the consensus forecast of $3.19 with top-line pressure intensifying toward the end of the quarter.
- Top-line pressure to become more evident in the fourth quarter as NS is starting to see intermodal business diversion to its Eastern competitor’s new single-line service. NS expects this pressure to persist through 2026 but further volume reconfigurations are likely as UP and NS integrate networks in 2027 assuming STB approval (which we place at 90% probability). Management expects volumes to return incrementally over a few bid cycles. We believe this is reasonable given the well-understood advantages that a merged network has over interline agreements.
- Excluding the land sale in the third quarter, total operating expenses declined LSD in the quarter as NS works to take out costs out of the network, now expecting about $200 million of cost-outs in 2025. Productivity measures around labor and fuel should continue to pay dividends despite a challenged demand environment. Fourth-quarter opex guidance of $2.05 billion at the midpoint should pressure OR sequentially and y/y as cost controls unlikely to drive margin improvement with softer carloadings expected. NS should continue to move heavier trains with less crews (though ticking up in the fourth quarter) with more fuel efficiency going forward; the network appears balanced with service improvements visible.
- Pricing expected to hold steady but mix headwinds anticipated to impact yields in the fourth quarter. NS sees coal yields holding flat sequentially constituting persistent y/y declines, as weak export yields offsetting domestic coal strength. High yielding automotive volumes are expected to lose steam in the fourth quarter owing to issues with a particular supplier. Growth in natural gas, sand and scrap metal also to drive mix pressure.
- Our PT moves to $314 as we peg valuation to deal dynamics with UP (Buy, $220.04), namely 1:1 shares (using our $257 UP PT) and $88.82/share in cash while discounting back. We continue to believe there is a 90% chance the Surface Transportation Board will approve the merger, though next catalyst will be UP’s filing with the STB expected in early December.
Further Reading:
- ‘Network Improvements Power a Better Future for Passenger Rail’ – John Orr, NS
- Preserving the Past, Powering the Future: NS Helps Reunite Georgia’s Railroad History
- Norfolk Southern Powers Past 1,000th Locomotive Modernization
- NS, UP Leveraging Louisville
- For NS, Four ‘Strategic Moves’
- Mechanical Marvel
- UP, NS Notify STB of Intent to File Merger Application
- UP + NS: What Comes Next?
- Union Pacific + Norfolk Southern: It’s Official
