Executive Summary

Q1 2025 delivered slight topline and adjusted EPS beats vs S&P Global consensus, driven by volume resilience and productivity savings despite $35M weather restoration costs; management reiterated FY25 targets of ~3% revenue growth and 150 bps OR improvement while flagging macro/tariff uncertainty . EPS and revenue beats vs S&P consensus by ~0.5% and ~0.9%, respectively (S&P Global)*
Non-GAAP adjustments: Insurance recoveries from the Eastern Ohio incident exceeded costs, lifting GAAP EPS by $0.62 and improving the OR by 620 bps; adjusted EPS was $2.69 (+8% YoY) and adjusted OR 67.9% (−200 bps YoY) .
Commercially, merchandise pricing remained firm (RPU ex fuel +4% YoY), intermodal volume grew 3% with pricing stabilizing alongside trucking, while export coal pricing weighed on mix .
Operations: PSR 2.0 and network resiliency continue to unlock cost takeout; total insurance recoveries are nearing $1B with < $100M coverage remaining, and labor productivity savings of ~$55M were realized in Q1 . CFO indicated the rest of FY25 needs sub-64% OR to hit the 150 bps target and Q2 OR should be better than normal seasonality off Q1 .
Potential stock reaction catalysts: reiterated FY guide, visible cost takeout runway, small beats vs consensus, and commentary that Q2 OR should run better than typical seasonality (S&P Global; management commentary) *

What Went Well and What Went Wrong

What Went Well
- Adjusted EPS growth (+8% YoY to $2.69) and adjusted OR improvement (67.9%, −200 bps YoY) despite severe winter storms; volumes +1% YoY and revenues ex fuel +2% .
- Productivity and safety: labor productivity savings (~$55M), improved fuel efficiency; injury frequency −13% YoY and train accident frequency −43% YoY; record fuel efficiency for a fourth straight quarter .
- Commercial traction: merchandise RPU ex fuel +4% YoY; intermodal volumes +3% YoY with pricing stabilization as truck rates bottom; management cites share gains on service reliability .
What Went Wrong
- Weather disruptions: $35M storm restoration costs, adding ~120 bps to adjusted OR .
- Coal headwinds: lower seaborne met coal prices pressured RPU less fuel (−3% YoY) and remain a multi-quarter headwind .
- Macro/tariffs uncertainty: management reiterated FY guide but highlighted potential demand/mix impacts and broader recession risks; fuel surcharge headwinds continued to mask underlying revenue strength .

Financial Results

Headline results vs prior quarters (GAAP and non-GAAP where noted)

Metric	Q3 2024	Q4 2024	Q1 2025
Revenue ($B)	$3.05	$3.024	$2.993
Income from Railway Operations ($B)	$1.60 (GAAP)	$1.131 (GAAP)	$1.146 (GAAP)
Operating Ratio (GAAP)	47.7%	62.6%	61.7%
Adjusted Operating Ratio	63.4%	64.9%	67.9%
Diluted EPS (GAAP)	$4.85	$3.23	$3.31
Adjusted Diluted EPS	$3.25	$3.04	$2.69

Q1 2025 actual vs S&P Global consensus (Street)

EPS (Adjusted): $2.69 vs $2.676 consensus; beat by ~$0.01 (0.5%)*
Revenue: $2.993B vs $2.967B consensus; beat by ~$0.026B (0.9%)*
of Estimates: EPS (22), Revenue (17)*

Values retrieved from S&P Global.

Segment revenue mix (Q1 2025 vs Q1 2024)

Segment Revenue ($M)	Q1 2024	Q1 2025
Merchandise	$1,863	$1,863
Intermodal	$745	$760
Coal	$396	$370
Total	$3,004	$2,993

Key KPIs and non-GAAP metrics

KPI	Q1 2024	Q1 2025
Revenues less fuel surcharge ($B)	$2.744	$2.791
Volume growth YoY	—	+1%
Intermodal volume YoY	—	+3%
RPU ex fuel (total) YoY	—	+1%
Merchandise RPU ex fuel YoY	—	+4%
Coal RPU ex fuel YoY	—	−3%
Eastern Ohio incident net impact	$(592)M cost	+$185M net recovery
Storm restoration costs	—	$35M
Labor productivity savings	—	~$55M

Non-GAAP reconciliation highlights (Q1 2025)

GAAP EPS $3.31; minus $0.62 incident benefit = adjusted EPS $2.69 .
GAAP OR 61.7%; +620 bps incident effect = adjusted OR 67.9% .

Guidance Changes

Metric	Period	Previous Guidance (Q4 2024 call)	Current Guidance (Q1 2025)	Change
Revenue growth	FY 2025	~3% growth	Reiterated ~3% growth	Maintained
OR improvement	FY 2025	~150 bps improvement (top end of 100–150 bps LT baseline)	Reiterated ~150 bps; remainder of year needs <64% OR; Q2 better than normal seasonality	Maintained (added cadence color)
Cost takeout	FY 2025	≥$150M; intent to exceed	Reiterated ≥$150M; momentum continues	Maintained
CapEx	FY 2025	~$2.2B	Unchanged (no update in Q1 call)	Maintained
Share repurchases	FY 2025	Resume in 2025 as balance sheet restored	Resumed; ~$250M repurchased in Q1 via buyback execution	Improved (execution underway)
Dividend	Near-term	$1.35 per share declared 4/22/25	$1.35 per share	Maintained

Earnings Call Themes & Trends

Topic	Q3 2024 (Prior-2)	Q4 2024 (Prior-1)	Q1 2025 (Current)	Trend
Operating ratio/Cost takeout	Adjusted OR 63.4%; strong productivity; stored 500+ locomotives; OR path reaffirmed	2024 adj OR 65.8% (−160 bps YoY); $~300M cost takeout; 2025 target ≥$150M	Adj OR 67.9% incl. 120 bps storm headwind; remainder of year needs <64%; momentum continues	Improving; cadence clarity
Weather/Resiliency	Hurricane Helene impact; rapid recovery	Sustained resiliency; Q1 2025 plan to tighten standards	18 storms; $35M restoration; fast recovery; safety improvements	Resilient despite severe weather
Commercial/Share gains	Intermodal growth; merchandise RPU ex fuel record; early share recapture	Volume +3%; intermodal/AG-led; 38/39 qtrs merchandise RPU ex fuel record	Merchandise pricing strong; intermodal +3%; ongoing share gains and highway conversions	Positive, broadening
Coal	Export pricing down; mix headwind	Weak coal pricing and rates; utility stockpiles high	Coal RPU ex fuel −3% YoY; met coal pressure persists	Persistent headwind
Tariffs/Macro	Port disruption transient; cautious outlook	2025 plan reflects uncertainty; 3% rev guide	Reiterated guide; watch autos/metals; uncertain tariff effects	Uncertain
Technology/Process	Intermodal reservation system rollout; asset productivity	War rooms, speed/fuel programs; next-phase plan in Q1	PSR 2.0 “zero-based plan”; fuel initiatives; IT cost focus	Scaling

Management Commentary

“Despite…18 storms…we delivered 8% EPS growth on an adjusted basis, driven in part by $55 million of labor productivity savings.” — CEO Mark George .
“Insurance recoveries…resulted in a net benefit of $185 million…Total insurance recoveries to date are nearing $1 billion with less than $100 million of coverage remaining.” — CFO Jason Zampi .
“We are reiterating our full year 3% revenue growth guide and 150 basis points of OR improvement while acknowledging uncertainty…we will calibrate and communicate…accordingly.” — CEO Mark George .
“Merchandise RPU less fuel +4%…intermodal RPU less fuel up slightly…coal RPU less fuel down 3% on lower export prices.” — CCO Ed Elkins .

Q&A Highlights

OR cadence: To hit FY25 targets, the remainder of the year needs to run below 64% OR; Q2 should be better than normal seasonality off 67.9% adjusted in Q1 .
Pricing/yields: Merchandise pricing strength on improved service; intermodal pricing flattish with truck; export coal pricing remains a drag .
Cost levers and headcount: Multiple cost buckets across labor, fuel, purchase services; headcount targeted roughly flat vs Q4 exit, with attrition-based flexibility if demand softens .
Land sales: Still modeling $30–40M for FY25, lumpy by quarter .
Highway conversions and service: Intermodal reservation system fostering reliability; customers pursuing cost savings via rail; evidence of share gains and stickiness .

Estimates Context

Q1 2025 vs S&P Global consensus: Adjusted EPS $2.69 vs $2.676 (+0.5%); Revenue $2.993B vs $2.967B (+0.9%); EPS estimates (22), Revenue estimates (17).*
Values retrieved from S&P Global.

Key Takeaways for Investors

Reiterated FY25 framework (3% revenue growth; ~150 bps OR improvement) alongside clear OR cadence commentary increases visibility; watch for Q2 OR to run better than normal seasonality off Q1 adjusted OR 67.9% .
Underlying revenue quality improving: revenues ex fuel +2% on +1% volume; merchandise pricing is firm and intermodal volumes growing despite truck price pressure .
Productivity runway intact: $55M labor productivity in Q1, record fuel efficiency, and broad-based cost actions support exceeding the ≥$150M FY25 cost target .
Coal remains the principal earnings headwind; modeling should reflect weaker seaborne met pricing and utility stockpile dynamics, partially offset by thermal opportunities .
Balance sheet/capital return: Dividend maintained at $1.35; share repurchases resumed (~$250M in Q1) while management continues balance sheet repair .
Weather resiliency and PSR 2.0 execution are tangible: rapid recovery from 18 storms and improved safety/service metrics underpin share gains and pricing power .
Risk factors: macro slowdown and tariff uncertainty could pressure volumes; management is scenario-planning with emphasis on agility and controllable cost levers .

Additional items in the quarter

Dividend: $1.35 per share declared April 22, 2025 .
Sustainability initiative: RailGreen program launches to offer verified emissions reduction certificates linked to biofuel use .

Notes on non-GAAP

Adjusted EPS removes net insurance benefit from the Eastern Ohio incident ($0.62 per share), and adjusted OR adds back 620 bps; use adjusted metrics for run-rate trend analysis .

Citations: 8-K and exhibits: Q1 2025 call: Q4 2024 PR/call: Q3 2024 PR/call: Other press releases: Dividend ; RailGreen

*Values retrieved from S&P Global.

NORFOLK SOUTHERN CORP (NSC)·Q1 2025 Earnings Summary