NSC · Q1 2026 Earnings

Cautious

Norfolk Southern

Reported April 24, 2026

30-second summary

Revenue $2.998B (+0.2% YoY) and adjusted EPS $2.65 (GAAP $2.43, with $52M merger and $10M Eastern Ohio adjustments) — the standalone story is more nuanced than the headline: merchandise revenue +1.2% on +1% volume, intermodal revenue -1.5% on -4% volume with RPU +3%, and coal revenue -1.6% but volume +9% as utility demand inflects. Management reaffirmed the FY2026 OpEx envelope ($8.2–$8.4B), capex ($1.9B), and the $150M+ cost takeout commitment — but still refuses to issue forward revenue or EPS guidance, which tells you everything about the top-line visibility. The constructive read is that coal volume is decisively inflecting positive on utility strength and the intermodal merger bolus is annualizing — the segment narrative is no longer "everything is contracting."

Headline numbers

EPS

Q1 FY2026

$2.43

-2.8% vs est.

Revenue

Q1 FY2026

$3.00B

+0.2% YoY

-0.1% vs est.

Free cash flow

Q1 FY2026

$-0.04B

Operating margin

Q1 FY2026

29.3%

Key financials

Q1 FY2026

Metric	Q1 FY2026	YoY	Q4 FY2025	QoQ
Revenue	$3.00B	+0.2%	$2.97B	+0.8%
EPS	$2.43	—	$2.87	-15.3%
Operating margin	29.3%	—	31.5%	-225bps
Free cash flow	$-0.04B	—	—	—

Guidance

Company reaffirmed operating expense and capex guidance while raising full-year cost takeout savings commitment by $50M to $150M, demonstrating disciplined cost management amid a cautious macro backdrop.

Guidance is issued for the full year only, refreshed each quarter. Prior and new below are the same FY updated this quarter.

Actuals vs prior guidance

Metric	Period	Prior guide	Actual	Δ	Result
Revenue	Q1 FY2026	—	$2.998 billion	in-line	Met
EPS (GAAP)	Q1 FY2026	—	$2.43	in-line	Met

Changes to prior guidance

Metric	Period	Prior guide	New guide	Δ	Result
Cost Takeout Savings Commitment	FY2026	$100 million	$150 million	+$50 million	Raised

Reaffirmed unchanged this quarter: Operating Expenses (Cost Base) ($8.2 billion to $8.4 billion), Capital Expenditures ($1.9 billion)

Segment KPIs

Q1 FY2026

Segment	Q1 FY2026	YoY
Merchandise	$1.885B	+1.2%
Intermodal	$0.749B	-1.4%
Coal	$0.364B	-1.6%

Other KPIs

Q1 FY2026

Segment	Q1 FY2026
Income from Railway Operations	$877 million
Compensation and Benefits Expense	$740 million
Fuel Expense	$256 million
Merger-Related Expenses	$52 million

Management tone

Narrative arc: Q2 FY2025 deal euphoria → Q3 FY2025 defensive cost pivot → Q4 FY2025 capital retrenchment → Q1 FY2026 cost-execution conviction with sharpened merger confidence.

Two quarters ago intermodal revenue was -5.7% and management refused to quantify the merger drag until pressed; this quarter intermodal revenue is -1.5% and Ed framed the competitive response as "primarily an intermodal story that is playing out as anticipated." The shift from defensive disclosure under analyst pressure to volunteered framing that the bolus is annualizing is the most important tonal change in the file — it signals management believes the worst of the share-loss bleed is now behind them.

One quarter ago management characterized the macro as "hard to read" and the merger as a headwind alongside winter and tariffs. This quarter Ed declined to call the freight recession over but volunteered specific green-shoot data — 12 industrial projects online in Q1 worth ~70k loads at full ramp, an active 400-project industrial development pipeline beginning to move, and a "few dozen more" expected to come across the finish line in 2026. The framing has moved from "we cannot guide" to "we can see the funnel," even as management still won't print a revenue number.

Mark's merger-approval confidence sharpened materially. The verbatim Q&A anchor: he feels "better than even five months ago" on approval odds, citing customer conversations and a revised application filing by April 30th with a "much stronger set of data." Q4 FY2025 management characterized the STB rejection as procedurally normal; Q1 FY2026 management characterizes the resubmission window as confidence-building. This is the first quarter where merger probability commentary moves in a positive direction since the Q2 FY2025 announcement.

The cost-mitigation narrative deepened from headline targets to a specific playbook. John walked through zero-based planning (~200 train starts affected in 2025, similar pipeline for 2026), PSR 2.0 equipment-rent reductions, precision fueling driving an all-time first-quarter fuel-efficiency record, and crew-base demographic management across 90 distinct crew bases. Jason quantified ~$500M+ of productivity over the last two years, with $150M+ planned for 2026 on top. Management is now selling the cost lever at the operational-execution level, not just the headline number.

Q&A highlights

Chris Weatherby · Wells Fargo

Clarification on normal OR seasonality from 1Q to 2Q, and question about competitive activity in intermodal following the merger announcement—has most already occurred or is it still playing out?

Jason explained normal sequential OR improvement of ~200 basis points despite headwinds (inflation ~4%, $35M prior-year land sale, merger-related revenue losses, fuel headwinds). Ed confirmed competitive response is primarily an intermodal story that is playing out as anticipated; NS is competing aggressively across modes.

Expected ~200 basis points sequential OR improvement from 1Q to 2QPrior-year $35M land sale not expected to recur in 2QCompetitive merger responses primarily contained within intermodalFuel headwinds continuing into 2Q

Scott Group · Wolf Research

Questioned why merchandise pricing (RPU ex-fuel) was flat despite strong core price, and asked Mark for confidence assessment on merger approval given months of feedback gathering.

Ed explained merchandise RPU ex-fuel is near a record quarter, with flat result driven by deliberate growth in lower-rated commodities (frax sand, NGLs). Core pricing remains aggressive. Mark expressed increased confidence in merger approval based on customer conversations and fact-based clarification of merger benefits; revised application will strengthen the case with better data.

Merchandise RPU ex-fuel near all-time record for the quarterGrowth in lower-rated chemical commodities offsetting core price gainsRevised merger application filing by April 30th with stronger supporting dataMark feels 'better than even five months ago' on merger approval odds

Brian Assenbeck · J.P. Morgan

Asked for specific breakdown of fuel and weather costs; questioned rationale for increased confidence in 2026 market segments (vehicle manufacturing, warehouse) in outlook.

Jason quantified fuel impact: $31M YoY price increase, $40M+ in March alone due to 45% per-gallon price increase. Storm costs: $13-15M in quarter. Ed elaborated on optimism across segments: intermodal benefiting from higher truck fuel costs and constrained driver supply; coal utility segment from electricity demand and restocking; industrial projects with 12 online in Q1 worth 70k loads at full ramp, pipeline of similar scale for full year.

Fuel price $31M higher YoY; March price surge 45% above prior yearStorm costs $13–15M in Q112 industrial projects online in Q1, worth ~70,000 loads at full rampPipeline of similar project scale for remainder of 2026

Jonathan Chappell · Evercore ISI

Two-part question: (1) Can 6% YoY fuel consumption decline continue given sequential decline is unusual; is this new base? (2) Headcount down 300 in 1Q after tight 19.3-19.4K range all of 2025—what drove it and will it be ~300 per quarter going forward?

John acknowledged sequential improvement has some accounting adjustments but is driven by fuel consumption management and precision fueling, part of multi-year program; unlikely to be a straight line due to pricing volatility. On headcount: restructuring of train starts via zero-based planning affecting ~200 starts in 2025, similar pipeline in 2026; crew count tied to specific 90 crew bases and demographic retirement projections, not aggregate number; balance between growth absorption and attrition management makes hiring forecast 'probably the single biggest debate' internally.

Fuel efficiency gains driven by precision fueling and locomotive reliability improvementsZero-based planning affected ~200 train starts; similar pipeline for 202690 different crew bases across network, each requiring specific qualificationsHeadcount decisions complex due to location-specific employment market conditions and 6-month hiring/training lead time

Richard Harney · Deutsche Bank

How is NS offsetting 5% inflation with only 1% cost increase; which cost buckets show most success and where is there more potential? Also asked Ed for broader macro assessment given manufacturing project wins.

Jason highlighted fuel efficiency (FQ 2026 all-time record, 5% YoY improvement, 3% prior year) and labor productivity as largest components of $500M+ two-year productivity. John detailed zero-based planning reducing crew starts, PSR 2.0 yielding lower equipment rents, improved locomotive utilization, and purchase services discipline. On macro, Ed cautious—cannot call freight recession over yet due to unresolved housing/interest rate/inflation uncertainties; however, sees green shoots in manufacturing IPI, 3-month manufacturing strength, auto demand/supply improvement, and chemicals/plastics component growth.

1Q 2026 fuel efficiency all-time first-quarter recordTwo-year cumulative productivity ~$500M+; 2026 target $150M+Zero-based planning version 3 in 2026 focusing on crew starts and train configurationsIPI up; 3 straight months manufacturing above water

Answers to last quarter's watch list

Whether FY2026 OpEx tracks the low end ($8.2B) or high end ($8.4B) of the range. Reaffirmed at $8.2–$8.4B with no narrowing. Q1 adjusted OpEx (~$2.06B excluding $52M merger and $10M Eastern Ohio) annualizes to ~$8.24B, comfortably within the guide. Management explicitly stated Q1 is "in line with our cost guidance for 2026.".

Continue monitoring

STB resubmission status and any STB statement on the augmented application. Mark cited an April 30th revised application filing with stronger supporting data and characterized his approval confidence as "better than even five months ago." No STB statement on the application itself yet.

Continue monitoring

Whether intermodal revenue declines decelerate from -5.7%. Decisively yes — intermodal printed -1% revenue YoY in Q1 vs. -5.7% in Q4 FY2025. Ed framed the competitive response as "playing out as anticipated" and "primarily an intermodal story," consistent with the bolus annualizing.

Resolved positively

Whether merchandise growth stabilizes above +2%. No — merchandise decelerated to +1% volume and revenue YoY from +2.1% in Q4 FY2025 and +5.8% in Q3 FY2025. However, the "sole-offset thesis broken" framing from last quarter is partially rebutted by coal volume +9%; the segment-mix picture is more complex than "every segment contracting." Status: Resolved negatively on merchandise, but offset by coal volume inflection

Land-sale normalization at $30–40M vs. $150M+ in FY2025. Jason confirmed a $35M prior-year land-sale comparison in Q2 FY2025 that will not recur in Q2 FY2026 — consistent with the FY2026 $30–40M framework.

Resolved positively

Whether the $150M FY2026 cost takeout gets raised again. Reaffirmed at $150M+; not raised. Consistent with the prior-quarter hypothesis that $150M may be near the ceiling of what management is willing to commit to. Status: Resolved negatively (no further raise) — though execution intensity stepped up in the cost-playbook commentary.

Capex discipline at $1.9B holds or erodes. Reaffirmed at $1.9B with no mid-year add-back signal.

Resolved positively

What to watch into next quarter

Whether Q2 FY2026 delivers the ~200bps sequential OR improvement management guided to in Q&A, given that this is the first explicitly quantified forward margin commitment of the year. A miss against this specific number would be a credibility hit on cost-execution confidence.

Whether coal volume strength sustains and whether export RPU stabilizes. Coal volume +9% on utility was the clearest positive volume inflection in Q1; watch for whether utility restocking continues and whether seaborne thermal opens up further on the Iran/LNG dislocation Ed cited.

Whether merchandise revenue stabilizes or continues decelerating below +1%. A flat-to-negative print would mean merchandise momentum is fading even as coal volume inflects.

STB action on the April 30th revised application. A formal acceptance for review would materially advance the merger timeline; a second rejection or extended completeness review would push close beyond the current implicit window.

Whether the FY2026 OpEx range narrows or holds at $8.2–$8.4B as half-year visibility builds, particularly given the fuel-price overhang Mark explicitly flagged as a potential pressure point.

Headcount trajectory. Management called hiring "the single biggest debate" internally — watch whether the qualified T&E base continues stepping down (confirming the zero-based playbook is the dominant force) or stabilizes (signaling demand visibility improved).

Industrial project pipeline conversion. Ed cited 12 projects online in Q1 worth ~70k loads at full ramp out of a 400-project pipeline. Watch for a project-count update in Q2 — this is the most specific volume-growth lever management has disclosed.

Whether management finally issues a forward revenue or EPS bracket. Three consecutive quarters without one. The first standalone revenue or EPS guide of FY2026 would itself be a tonal shift; continued absence confirms top-line visibility remains absent.

Sources

Norfolk Southern Q1 FY2026 press release / 8-K exhibit, SEC EDGAR — https://www.sec.gov/Archives/edgar/data/702165/000119312526175084/nsc-ex99_2.htm
Norfolk Southern Q1 FY2026 earnings call Q&A (analyst exchanges as extracted).
Tapebrief Norfolk Southern Q4 FY2025 brief (internal, for cross-quarter comparison).
Tapebrief Norfolk Southern Q3 FY2025 brief (internal, for cross-quarter comparison).
Tapebrief Norfolk Southern Q2 FY2025 brief (internal, for cross-quarter comparison).

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