Norfolk Southern profits top estimates as productivity offsets merger headwinds

Norfolk Southern (NYSE:NSC) reported fourth-quarter earnings that surpassed Wall Street expectations, bolstered by significant productivity gains even as the railroad giant faces the complex financial and regulatory hurdles of its proposed $85 billion merger with Union Pacific.

The Atlanta-based company posted net income of $644 million, or $2.87 per share, for the period ended Dec. 31, 2025.

On an adjusted basis—which excludes costs related to the pending merger and remaining expenses from the 2023 Eastern Ohio incident—earnings reached $3.22 per share.

This comfortably beat the $2.78 analyst consensus, marking a 6% increase over adjusted results from the same period last year.

However, revenue for the quarter landed at $2.97 billion, falling slightly short of the $3 billion anticipated by analysts, as a 4% decline in total volume outweighed a modest 2% rise in revenue per unit.

For the full year 2025, Norfolk Southern generated a profit of $2.87 billion, or $12.75 per share, on revenues of $12.18 billion.

The firm achieved an adjusted operating ratio of 65%, an 80-basis-point improvement that reflects the team’s success in capturing over $215 million in annual productivity savings. Despite the leaner operation, the company faced significant segment-specific challenges: while merchandise revenue grew 2%, intermodal revenue fell 6% due to heightened competition, and coal revenue dropped 11% on weak seaborne pricing.

Looking ahead to 2026, CEO Mark George described the demand environment as "unclear," but emphasized that the railroad has built a "strong foundation for growth."

The company issued 2026 expense guidance of $8.2 billion to $8.4 billion and raised its cumulative three-year cost-takeout target to $650 million.

As the Surface Transportation Board reviews the Union Pacific merger application, Norfolk Southern is prioritizing service reliability and capital discipline, with plans to reduce annual capital expenditures to $1.9 billion in the coming year.