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NORFOLK SOUTHERN CORP (NSC)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 revenue was $3.024B, GAAP operating ratio 62.6%, and diluted EPS $3.23; adjusted OR was 64.9% and adjusted diluted EPS $3.04, with insurance recoveries again exceeding incident costs (+$43M net) .
  • Versus Q3 2024, revenue declined slightly ($3.051B → $3.024B) and adjusted OR rose (63.4% → 64.9%) as coal pricing and lower fuel surcharge revenue pressured RPU, partly offset by ~$20M contract recoveries and continued productivity gains .
  • Management guided 2025 to ~3% revenue growth, ~150 bps OR improvement (top end of multi‑year target), ~$2.2B capex, and resumption of share repurchases as balance sheet restoration completes in 2025 .
  • Rail operations and service quality improved materially: system speed +10% YoY, intermodal +3.1%, merchandise +11%, unit trains +17%; car miles per car day +13%, enabling cost takeout (~$300M in 2024) and share recapture opportunities .

What Went Well and What Went Wrong

What Went Well

  • Sustained operational momentum: “network is running fast; terminals are more efficient; service metrics are steady,” driving volume (+3%) and record RPU less fuel metrics in 38 of 39 quarters in merchandise and automotive .
  • Productivity and cost takeout: ~390 bps YoY adjusted OR improvement in Q4 and ~160 bps FY adjusted OR improvement, with ~$300M cost savings in 2024, broad‑based across labor, fuel efficiency, purchased services and materials .
  • Incident recoveries: For the third consecutive quarter, insurance recoveries related to the Eastern Ohio incident exceeded incremental costs; 2024 recognized $650M in recoveries and ~$2.2B total costs to date .

What Went Wrong

  • Revenue pressure from fuel and coal: Railway operating revenues down 2% YoY in Q4; excluding fuel surcharge, revenue up 2% but overall RPU declined, with coal revenue down 9% amid lower seaborne prices and reduced utility burn on low natural gas prices .
  • Mix headwinds and intermodal rate pressure: Domestic intermodal rates remained under pressure given low truck pricing; premium segment challenged; merchandise growth offset by declines in automotive, metals and energy markets .
  • Sequential margin normalization: Adjusted OR rose from Q3 to Q4 (63.4% → 64.9%), with fewer one‑time tailwinds (e.g., line sale gains) and seasonal factors; depreciation up on larger asset base .

Financial Results

Quarter-over-Quarter and Year-over-Year Comparisons

MetricQ2 2024Q3 2024Q4 2024Q4 2023
Revenue ($USD Billions)$3.044 $3.051 $3.024 $3.073
Income from Railway Operations ($USD Billions, GAAP)$1.131 $1.596 $1.131 $0.808
Operating Ratio (GAAP)62.8% 47.7% 62.6% 73.7%
Operating Ratio (Adjusted)65.1% 63.4% 64.9% 68.8%
Diluted EPS (GAAP)$3.25 $4.85 $3.23 $2.32
Diluted EPS (Adjusted)$3.06 $3.25 $3.04 $2.83

Notes: Q3 GAAP OR and EPS include large railway line sale gains ($380M); Q4 includes $53M additional line sale gains and net incident insurance benefit .

Segment Revenue Breakdown

Segment Revenue ($USD Billions)Q2 2024Q3 2024Q4 2024
Merchandise$1.904 $1.861 $1.842
Intermodal$0.742 $0.763 $0.792
Coal$0.398 $0.427 $0.390
Total$3.044 $3.051 $3.024

Key Non-GAAP Adjustments (Q4 2024)

Adjustment ImpactIncome from Railway Ops ($MM)OR (%)EPS ($)
Reported (GAAP)$1,131 62.6% $3.23
Railway line sales(53) +1.8 pts (0.17)
Eastern Ohio incident (net)(43) +1.4 pts (0.14)
Restructuring & other+27 (0.9) pts +0.09
Shareholder advisory costs——+0.03
Adjusted$1,062 64.9% $3.04

KPIs and Operational Metrics

KPIQ2 2024Q3 2024Q4 2024Trend
Total Volume YoY+5% +7% +3% Moderating
System Speed—+9% train speed; car velocity +13% YoY +10% system; intermodal +3.1%; merchandise +11%; unit +17% Improving
Car Miles per Car Day——+13% YoY Improving
Fuel EfficiencyEnergy mgmt rollout; fleet rightsizing —Improved with fewer stops, optimized HPT, distributed power Improving

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Adjusted OR (FY)FY 2024~66% (reaffirmed in Q2) 65.8% actual Better than guided
OR improvement (annual)Multi‑year100–150 bps per year baseline ~150 bps for 2025 (top end) Maintained at high end
Revenue growthFY 2025—~3% growth (volume + core pricing; fuel/coal headwinds) New
CapexFY 2025—~$2.2B New
Share repurchasesFY 2025Paused in 2024 (no repurchases) Resume in 2025 as balance sheet restored Raised (resume)
Cost takeoutFY 2025$150M target Aiming to exceed $150M Raised (targeted >$150M)
DividendQ1 2025—$1.35 per share declared (payable Feb 20, 2025) Maintained/confirmed

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 & Q3)Current Period (Q4)Trend
Safety & Operational ExcellenceStored >500 locos; car velocity +6% QoQ; reservation system launching System speed +10% YoY; intermodal +3.1%; car miles per car day +13%; strong service product Improving
Tariffs/MacroEast Coast port uncertainty; intermodal yields near bottom; truck capacity excess Tariff uncertainty; intermodal headwinds likely; domestic economy still resilient Uncertain, manageable
Coal Pricing/DemandCoal revenue down; export met price pressure; utility stockpiles; nat gas low Coal volume -1%; revenue -9% YoY; bearish met coal outlook; watch nat gas and stockpiles Weakening
Eastern Ohio IncidentInsurance recoveries > costs in Q2 ($65M net) Recoveries > costs again in Q4 (+$43M net); $650M recoveries in 2024 Ongoing recoveries
Technology/ProcessIntermodal reservation system; war rooms; need‑for‑speed Energy management systems; mechanical war room; automation in fuel distribution Expanding
Capital AllocationProperty gains ~$25M in Q2; potential asset sales 2025 capex ~$2.2B; share repurchases resume; deleveraging Improving flexibility

Management Commentary

  • “We closed 2024 with another quarter of solid performance... Our network is running fast; our terminals are more efficient; and service metrics are steady.” — Mark George, President & CEO .
  • “Our PSR 2.0 approach is delivering simultaneous efficiency and service improvements... year‑over‑year, our system speed improved by 10%.” — John Orr, COO .
  • “Overall volume for the fourth quarter improved 3% year‑over‑year... RPU less fuel finished up 2% due to a lift from contract recoveries and rate true‑ups.” — Ed Elkins, CMO .
  • “Adjusting for items, OR was 64.9%, and EPS came to $3.04... we have now recorded over $750M in total insurance recoveries.” — Jason Zampi, CFO .
  • “We are planning on 3% revenue growth... productivity translates to margin expansion of 150 bps... CapEx will be in the $2.2B range... resume share repurchases in 2025.” — Mark George .

Q&A Highlights

  • Productivity buckets and runway: Management targets cost efficiencies across compensation (less overtime), materials, fuel, and purchased services; sees path toward ~60% OR with economic recovery .
  • Revenue growth mix: ~3% FY25 revenue guided via volume and core pricing; coal and fuel headwinds; labor productivity to continue improving .
  • Buybacks: Balance sheet repair via profitability, insurance recoveries, and line sales enables measured resumption of share repurchases in 2025 .
  • Coal outlook and pricing: Seaborne met coal prices under pressure; expect softer RPU; new coal customer volumes start in Q2 2025 .
  • Tariffs: Management sees tariff effects as a net wash for volume over time and emphasizes network nimbleness .
  • Industrial development: Active pipeline adding ~150,000 incremental carloads over time, with 8 new locations and 4 expansions in Q4; benefits spread through 2025 .

Estimates Context

  • Wall Street consensus (S&P Global Capital IQ) estimates for Q4 2024 were unavailable during this session due to data access limits. As a result, comparisons to consensus EPS and revenue could not be included. If needed, we can update this section once access is restored.

Key Takeaways for Investors

  • Operational flywheel intact: Speed, dwell, and asset utilization improvements are translating into sustained OR gains and cost takeout; expect continued margin expansion in 2025 (target ~150 bps) .
  • Revenue quality: Ex‑fuel revenue grew 2% YoY on volume growth despite coal and fuel headwinds; intermodal rate pressure persists but appears nearer to bottom, with contract recoveries aiding Q4 .
  • Non‑GAAP clarity: Q4 adjusted OR 64.9% and adjusted EPS $3.04, excluding line sales, incident impacts, restructuring, and advisory costs; recurring insurance recoveries a tailwind .
  • 2025 capital and buybacks: ~$2.2B capex with balance sheet restoration enabling resumption of share repurchases — a potential sentiment catalyst .
  • Coal headwind watch: Seaborne met coal pricing and utility stockpiles/nat gas prices remain key drivers; model conservative coal RPU near term .
  • Near‑term trading: Expect focus on execution against FY25 3% revenue and 150 bps OR improvement guide, and visibility on buyback cadence; monitor intermodal pricing and tariff developments .
  • Medium‑term thesis: If service quality sustains and merchandise/intermodal share recapture advances, multi‑year OR convergence toward peers remains credible, with optionality from industrial development pipeline .

Additional Relevant Press Releases (Q4 2024)

  • Dividend declared: $1.35 per share, payable Feb 20, 2025 .
  • Q4 results press release mirrors 8‑K highlights (revenue $3.0B, OR 62.6%, EPS $3.23; adjusted OR 64.9%, adjusted EPS $3.04) .

Prior Quarters (for Trend Analysis)

  • Q3 2024: Adjusted OR 63.4%; adjusted EPS $3.25; revenue $3.051B; line sale gains $380M; insurance recoveries exceeded costs by $159M .
  • Q2 2024: Adjusted OR 65.1%; adjusted EPS $3.06; revenue $3.044B; insurance recoveries exceeded costs by $65M; reaffirmed FY24 adjusted OR ~66% (achieved 65.8%) .