Q2 2026 Norfolk Southern Corp Earnings Call

July 23, 2026

Speaker #1: Good morning, ladies and gentlemen, and welcome to the Norfolk Southern Corp. Q2 2026 earnings conference call. At this time, all participant lines are in listen-only mode.

Operator: Good morning, ladies and gentlemen, and welcome to the Norfolk Southern Corporation Q2 2026 Earnings Conference Call. At this time, all participant lines are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. Also note that this call is being recorded on Thursday, 23 July 2026. I would like to turn the conference over to Luke Nichols. Please go ahead, sir.

Speaker #1: Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require media assistance, please press star zero for the operator.

Speaker #1: Also note that this call is being recorded on Thursday, July 23, 2026. I would now like to turn the conference over to Luke Nichols.

Speaker #1: Please go ahead, sir.

Speaker #2: Thank you, and good morning, everyone. Please note that during today's call, we will make certain forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

Luke Nichols: Thank you. Good morning, everyone. Please note that during today's call, we will make certain forward-looking statements within the meaning of the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995. These statements relate to future events or future performance of Norfolk Southern Corporation, which are subject to risks and uncertainties and may differ materially from actual results. Please refer to our annual and quarterly reports filed with the SEC for full discussion of those risks and uncertainties we view as most important. Our presentation slides are available at norfolksouthern.com in the investor section, along with a reconciliation of any non-GAAP measures used today to the comparable GAAP measures, including adjusted or non-GAAP operating ratio. Please note that all references to our prospective operating ratio during today's call are being provided on an adjusted basis. Turning to slide three.

Speaker #2: These statements relate to future events or future performance of Norfolk Southern Corporation, which are subject to risks and uncertainties and may differ materially from actual results.

Speaker #2: Please refer to our annual and quarterly reports filed with the SEC for full discussion of those risks and uncertainties we view as most important.

Speaker #2: Our presentation slides are available at NorfolkSouthern.com in the Investor section, along with the reconciliation of any non-GAAP measures used today to the comparable GAAP measures, including adjusted or non-GAAP operating ratio.

Speaker #2: Please note that all references to our prospective operating ratio during today's call are being provided on an adjusted basis. Turning to slide 3, I'll now turn the call over to Norfolk Southern's President and Chief Executive Officer, Mark George.

Luke Nichols: I'll now turn the call over to Norfolk Southern's President and Chief Executive Officer, Mark George.

Speaker #3: Good morning, everyone, and thanks for joining us. Here in Atlanta with me are Brian Barr, our chief operating officer, Ed Elkins, our chief commercial officer, and Jason Zampi, our chief financial officer.

Mark George: Good morning, everyone, and thanks for joining us. Here in Atlanta with me are Brian Barr, our Chief Operating Officer, Ed Elkins, our Chief Commercial Officer, and Jason Zampi, our Chief Financial Officer. Look, a lot's changed since our last call, most importantly, the sharp inflection in volumes initially catalyzed by the Iran conflict that bolstered our energy markets. That strength has now spread into other markets, including domestic intermodal and industrial products. With that backdrop, we delivered a strong Q2 with results that exceeded our own expectations, starting with strong volume and revenue growth, culminating in 7% net income and EPS growth. The results are thanks to the dedication of our railroaders, and a special shout-out to our commercial team, who stayed close to our customers during this dynamic environment.

Speaker #3: Luke, a lot's changed since our last call. Most importantly, the sharp inflection in volumes. Initially, catalyzed by the Iran conflict that bolstered our energy markets, and that strength has now spread into other markets, including domestic intermodal and industrial products.

Speaker #3: With that backdrop, we delivered a strong second quarter with results that exceeded our own expectations. Starting with strong volume and revenue growth, culminating in 7% net income and EPS growth.

Speaker #3: The results are thanks to the dedication of our railroaders and a special shout-out to our commercial team who stayed close to our customers during this dynamic environment.

Speaker #3: As demand strengthened in several markets, our team continued to focus on operating safely while serving our customers. Absorbing the higher volumes coming out of the winter disruptions, put pressure on the network, but we've addressed these issues head-on.

Mark George: As demand strengthened in several markets, our team continued to focus on operating safely while serving our customers. Absorbing the higher volumes coming out of the winter disruptions put pressure on the network, but we've addressed these issues head on. Our team has worked hard to execute with urgency and discipline. We already drove acceleration of the network here in July, and we will continue to progress. Brian will give more detail on these actions in his remarks. Bottom line, I'm holding our team to a high standard. Our customers count on us to maintain consistent, reliable service, and as such, we have to be resilient. Whether it's bouncing back from weather events or absorbing volume surges, we need to deliver the service our customers expect from Norfolk Southern. Our priorities remain clear: safety, service, disciplined cost control, and earning the trust of our customers.

Speaker #3: Our team has worked hard to execute with urgency and discipline. We already drove acceleration of the network here in July, and we will continue to progress.

Speaker #3: Brian will give more detail on these actions in his remarks. Bottom line, I'm holding our team to a high standard. Our customers count on us to maintain consistent, reliable service and as such, we have to be resilient.

Speaker #3: Whether it's bouncing back from weather events or absorbing volume surges, we need to deliver the service our customers expect from Norfolk Southern. Our priorities remain clear: safety, service, discipline, cost control, and earning the trust of our customers.

Speaker #3: Those priorities guided our decisions throughout the quarter and will continue to guide the company moving forward. Now, before we move on, I'd like to touch on the recent appointment of Brian.

Mark George: Those priorities guided our decisions throughout Q2 and will continue to guide the company moving forward. Now, before we move on, I'd like to touch on the recent appointment of Brian as our chief operating officer. While he may be a new face to many of you, he's certainly not new to Norfolk Southern. Over the last 2 years, he's led our mechanical organization, where his team helped deliver industry-leading locomotive fleet reliability, and he played an important role in optimizing network performance while earning the trust and respect of our organization. He has had a long and successful history on the transportation side as well at our eastern pier, and he started his career at Conrail, so he knows our network well. It's another example of the leadership depth we have across the organization and our commitment to developing strong operators who are ready to lead.

Speaker #3: As our Chief Operating Officer, while he may be a new face to many of you, he's certainly not new to Norfolk Southern. Over the last two years, he's led our mechanical organization, where his team helped deliver industry-leading locomotive fleet reliability, and he played an important role in optimizing network performance.

Speaker #3: While earning the trust and respect of our organization. He has had a long and successful history on the transportation side as well, at our Eastern Pier, and he started his career at Conrail.

Speaker #3: So he knows our network well. It's another example of the leadership depth we have across the organization, and our commitment to developing strong operators who are ready to lead.

Speaker #3: In his new role, he's building on the progress he himself helped us deliver, now leading the broader operations organization with a strong foundation in safety and a shared commitment to creating a faster, more reliable network, while continuing to innovate and drive more productivity.

Mark George: In his new role, he's building on the progress he himself helped us deliver. Now leading the broader operations organization with a strong foundation in safety and a shared commitment to creating a faster, more reliable network while continuing to innovate and drive more productivity. With that, let me turn it over to Brian to discuss our operational results in more detail.

Speaker #3: So with that, let me turn it over to Brian to discuss our operational results in more detail.

Speaker #4: Thanks, Mark. And good morning, everyone. It's my privilege to be with you today. Before I begin, I want to recognize the men and women of Norfolk Southern.

Brian Barr: Thanks, Mark. Good morning, everyone. It's my privilege to be with you today. Before I begin, I want to recognize the men and women of Norfolk Southern. They worked through a challenging quarter, continued serving our customers, and remain committed to operating safely. NS railroaders are the heartbeat of this network, and their efforts continue to propel our results. Successful railroading demands doing the simple things exceptionally well. I have learned that throughout my career, including my time working directly for Hunter Harrison. Planning and execution are built on discipline, accountability, and staying relentlessly focused on the operating plan. The reality is, railroading is a grind. Doing the small things over and over again very well. That is what delivers results. Those principles still apply today, which is why I am spending as much time as possible in the field, leading from the front, not the top.

Speaker #4: They worked through a challenging quarter, continued serving our customers, and remained committed to operating safely. NS railroaders are the heartbeat of this network, and their efforts continue to propel our results.

Speaker #4: Successful railroading demands doing the simple things exceptionally well. I have learned that throughout my career, including my time working directly for Hunter Harrison. Planning and execution are built on discipline, accountability, and staying relentlessly focused on the operating plan.

Speaker #4: The reality is, railroading is a grind—doing the small things over and over again, very well. That is what delivers results. Those principles still apply today.

Speaker #4: Which is why I am spending as much time as possible in the field. Leading from the front, not the top. Working with our teams, understanding challenges firsthand, and driving the actions necessary to improve service and strengthen network performance.

Brian Barr: Working with our teams, understanding challenges firsthand, driving the actions necessary to improve service and strengthen network performance. This is not about changing our operating strategy, it's about continuously improving our results. The primary levers for improving service and productivity across the network are running the plan, aligning the resources with demand, improving terminal performance, and eliminating unnecessary variability. We've got more work to do. We know it. Turning to slide five, to be the best-run railroad, you have to be the safest. Safety remains the foundation of Norfolk Southern. Our teams delivered another quarter of strong safety performance with continued improvements in FRA accident and personal injury rates. Let me be very clear, safety has no finish line. This is not about ratios, it's about our employees. No matter how strong our results are, we approach every incident with humility and discipline.

Speaker #4: This is not about changing our operating strategy. It's about continuously improving our results. The primary levers for improving service and productivity across the network are running the plan, aligning the resources with demand, improving terminal performance, and eliminating unnecessary variability.

Speaker #4: We've got more work to do, and we know it. Turning to slide 5: To be the best-run railroad, you have to be the safest.

Speaker #4: Safety remains the foundation of Norfolk Southern. Our teams delivered another quarter of strong safety performance with continued improvements in FRA accident and personal injury rates.

Speaker #4: Let me be very clear: safety has no finish line. This is not about ratios; it's about our employees. No matter how strong our results are, we approach every incident with humility and discipline.

Speaker #4: As you can see on the slide, the first half comparisons for our FRA personal injury index accident rates and mainline accident rates are all improving.

Brian Barr: As you can see on the slide, the H1 comparisons for our FRA personal injury index, accident rates, and mainline accident rates are all improving. Specifically in the quarter, our personal injury index was down 16% year over year. I want to acknowledge my former department, mechanical, for going two consecutive months injury-free. A significant step for an entire department operating in shops and yards across our entire network. Our accident rate was down approximately 25% in the quarter year over year, while our near-best-in-class mainline accident rate remained flat. We're proud of the progress. We're not satisfied, as we still have work to do. Strong safety performance drives strong operating performance. Discipline, accountability, consistent execution, the two go hand-in-hand. Turning to slide six, demand remained strong throughout the quarter.

Speaker #4: Specifically in the quarter, our personal injury index was down 16% year over year. I want to acknowledge my former department mechanical for going two consecutive months injury-free.

Speaker #4: A significant step for an entire department operating in shops and yards across our entire network. Our accident rate was down approximately 25% in the quarter year over year.

Speaker #4: While our near best-in-class mainline accident rate remained flat. We're proud of the progress, but we're not satisfied as we still have work to do.

Speaker #4: Strong safety performance drives ves strong operating performance. Discipline, accountability, and consistent execution. The two go hand in hand. Turning to slide 6, demand remains strong throughout the quarter.

Speaker #4: At the same time, recovering from several network disruptions while supporting that level of volume placed additional pressure on crew resources, and create a variability in portions of the network.

Brian Barr: At the same time, recovering from several network disruptions while supporting that level of volume placed additional pressure on crew resources and created variability in portions of the network. We have a clear understanding of what we need to do to create real resilience and deliver on our strategy, improve originations, reduce terminal dwell, increase velocity, run the railroad to plan. That's where our attention is focused. When we do those things consistently, velocity improves, the network becomes more fluid, and the railroad performs at a very high level. I'm highly confident in our team, and many of the actions we have taken in these past six weeks are already starting to demonstrate tangible benefits. In the last month, on-time originations have increased 20%. Terminal performance is improving as we have balanced our resources, which is leading to a reduction in terminal dwell.

Speaker #4: We have a clear understanding of what we need to do to create real resilience and deliver on our strategy. Improve originations, reduce terminal dwell, increase velocity, run the railroad to plan.

Speaker #4: That's where our attention is focused. When we do those things consistently, velocity improves, the network becomes more fluid, and the railroad performs at a very high level.

Speaker #4: I'm highly confident in our team, and many of the actions we have taken in these past six weeks are already starting to demonstrate tangible benefits.

Speaker #4: In the last month, on-time originations have increased 20%. Terminal performance is improving as we have balanced our resources, which is leading to a reduction in terminal dwell.

Speaker #4: And train velocity is rising as we are reducing recruits and getting the railroad back on plan. Our priority remains executing the fundamentals exceptionally well.

Brian Barr: Train velocity is rising as we are reducing recrews and getting the railroad back on plan. Our priority remains executing the fundamentals exceptionally well. Turning to slide seven, operating safely and efficiently, optimizing asset utilization, driving cost discipline, delivering consistently for customers, and developing our team of railroaders will drive our long-term success. We remain committed to at least $150 million in cost takeout during 2026, which will deliver at least $650 million in cumulative savings over the three-year period, exceeding our original target. One of the most powerful levers we have is velocity. When the railroad moves quickly and consistently, service improves and cost comes out of the system. Recrews decline, crew productivity increases, terminal congestion eases, asset utilization improves, locomotives cycle more efficiently and spend less time sitting in yards.

Speaker #4: Turning to slide 7: Operating safely and efficiently, optimizing asset utilization, driving cost discipline, delivering consistently for customers, and developing our team of railroaders will drive our long-term success.

Speaker #4: We remain committed to at least 150 million in cost takeout during 2026. Which will deliver at least 650 million in cumulative savings over the three-year period, exceeding our original target.

Speaker #4: One of the most powerful levers we have is velocity. When the railroad moves quickly, and consistently, service improves, and cost comes out of the system.

Speaker #4: Recruits decline, crew productivity increases, terminal congestion eases, asset utilization improves, locomotives cycle more efficiently, and spend less time sitting in yards. The more efficiently we move freight across the network, the more value we create for our customers and shareholders.

Brian Barr: The more efficiently we move freight across the network, the more value we create for our customers and shareholders. The opportunity in front of us is straightforward. Pair disciplined execution with the strong commercial momentum Ed and his team continue to generate across the business. That combination is how we improve service, grow the franchise, and create long-term value. I am exceptionally confident in our team and the potential of this railroad. There is no shortage of talent, experience, or commitment across our organization. We know where the opportunities are, we know what needs to improve, and we have the people and resolve to get it done. When we do those things consistently, the results will follow. With that, I'll turn it over to Ed.

Speaker #4: The opportunity in front of us is straightforward. Paired discipline execution with the strong commercial momentum Ed and his team continue to generate across the business.

Speaker #4: That combination is how we improve service, grow the franchise, and create long-term value. I am exceptionally confident in our team and the potential of this railroad.

Speaker #4: There is no shortage of talent, experience, or commitment across our organization. We know where the opportunities are. We know what needs to improve. And we have the people and resolve to get it done.

Speaker #4: When we do those things consistently, the results will follow. With that, I'll turn it over to Ed.

Speaker #1: Hey, thanks a lot, Brian. And good morning, everyone. Let's move to slide number 9. We can see that fuel surcharge was a major factor in the second quarter helping to blunt some of the fuel expense pressures.

Ed Elkins: Hey, thanks a lot, Brian, good morning, everyone. Let's move to slide number nine. We can see that fuel surcharge was a major factor in Q2, helping to blunt some of the fuel expense pressures. Now, if you look past these headline numbers, you'll see that even without fuel, we achieved record revenue in the quarter. Volume increased 4% year over year, driven by strength in several commodity markets that benefited from elevated global energy prices, as well as very favorable trucking market dynamics that bolstered our intermodal business. RPU less fuel was up 1% as steady pricing was partially offset by some high-level mix. Within merchandise, volume increased 2% and revenue less fuel achieved another record, increasing 4% from a year ago, driven by continued gains in energy demand in our chemicals markets. RPU less fuel grew 3% year over year, supported by price and mix.

Speaker #1: Now, if you look past these headline numbers, you'll see that even without fuel, we achieved record revenue in the quarter. Volume increased 4% year over year.

Speaker #1: Driven by strength in several commodity markets that benefited from elevated global energy prices as well as very favorable trucking market dynamics that bolstered our intermodal business.

Speaker #1: RPU less fuel was up 1% as steady pricing was partially offset by some high-level mix. Within merchandise, volume increased 2% and revenue less fuel achieved another record, increasing 4% from a year ago driven by continued gains in energy demand in our chemicals markets.

Speaker #1: RPU, less fuel, grew 3% year over year, supported by price and mix. In our intermodal business, volumes increased 5%. This reflected firm consumer demand and highway market conditions that increased demand for intermodal, in addition to recent business wins, particularly within our domestic segment.

Ed Elkins: In our intermodal business, volumes increased 5%, this reflected firm consumer demand, highway market conditions that increased demand for intermodal, and recent business wins, particularly within our domestic segment. Overall, intermodal revenue less fuel increased substantially by 7%, and RPU less fuel increased 1%, marking the beginning of a positive shift in intermodal pricing. Turning to coal, volume increased 3%, benefiting from the continued ramp-up of our new metallurgical coal export customer, as well as incremental export thermal business opportunities, reflecting volatile global energy markets. RPU less fuel increased 1% due to favorable seaborne coal pricing, and this was partially offset by some negative mix within the commodity group. On slide 10, we highlight several dynamic factors that are influencing our market outlook. The war in Iran impacted many energy-related commodities in Q2.

Speaker #1: So overall, intermodal revenue, less fuel, increased substantially by 7%. And RPU, less fuel, increased 1%, marking the beginning of a positive shift in intermodal pricing.

Speaker #1: Turning to coal, volume benefiting from the continued ramp-up of our new metallurgical coal export customer as well as incremental export thermal business opportunities reflecting volatile global energy markets.

Speaker #1: RPU, less fuel, increased 1% due to favorable seaborne coal pricing, and this was partially offset by some negative mix within the commodity group. On slide 10, we highlight several dynamic factors that are influencing our market outlook.

Speaker #1: The war in Iran impacted many energy-related commodities in the second quarter. These impacts could carry forward for the duration of the conflict, bringing volume and revenue opportunities.

Ed Elkins: These impacts could carry forward for the duration of the conflict, bringing volume and revenue opportunities. Overall, we're positive on the growth potential across the markets that we serve. Now, as you would expect, however, energy prices, the consumer, and interest rates all remain wild cards and factors that we will be monitoring. In merchandise, we have a subdued but positive outlook for vehicle production. Industrial activity has shown solid momentum, with manufacturing continuing its expansion for the sixth consecutive month, we maintain a cautious but optimistic outlook despite volatility and a shifting economic landscape. Additionally, specifically, we could continue to see near-term opportunities in markets like natural gas liquids, export plastics, and crude oil. Turning to our intermodal markets, the truck market has turned positive, with drive-in rates turning upward and capacity continues to tighten as demand is also firming.

Speaker #1: Overall, we're positive on the growth potential across the markets that we serve. Now, as you would expect, however, energy prices, the consumer, and interest rates all remain wild cards and factors that we will be monitoring.

Speaker #1: In merchandise, we have a subdued but positive outlook for vehicle production. Industrial activity has shown solid momentum, with manufacturing continuing its expansion for the sixth consecutive month.

Speaker #1: And we maintain a cautious but optimistic outlook despite volatility and a shifting economic landscape. Additionally, and specifically, we could continue to see near-term opportunities in markets like natural gas liquids, export plastics, and crude oil.

Speaker #1: Turning to our intermodal markets, the truck market has turned positive with dry van rates trending upward and capacity continues to tighten as demand is also firming.

Speaker #1: Demand has been supportive for our domestic and premium segments in the near term, as new orders are rising and retail sales have shown some modest growth.

Ed Elkins: Demand has been supportive for our domestic and premium segments in the near term, as new orders are rising and retail sales have shown some modest growth. This has been partially offset by tariff and trade uncertainty that's going to continue to weigh on international volumes. Taken together, we have a bullish view of intermodal, an outlook which is only reinforced by elevated fuel prices that will continue to make truck conversion more attractive to our customers. Considering coal, we expect to see continued overall strength led by our export and metallurgical coal business. While our outlook for utility coal remains positive due to growing electricity demand and a favorable regulatory backdrop, natural gas prices and growing renewable energy production does create some uncertainty for utilities heading into H2. Now, let's look at slide 11, where industrial development remains a key strategic priority for Norfolk Southern.

Speaker #1: This has been partially offset by tariff and trade uncertainty that's going to continue to weigh on international volumes. Taken together, we have a bullish view of intermodal and outlook which is only reinforced by elevated fuel prices that will continue to make truck conversion more attractive to our customers.

Speaker #1: Considering coal, we expect to see continued overall strength led by our export metallurgical coal business. And while our outlook for utility coal remains positive due to growing electricity demand and a favorable regulatory backdrop, natural gas prices and growing renewable energy production do create some uncertainty for utilities heading into the second half.

Speaker #1: Now, let's look at slide 11, where industrial development remains a key strategic priority for Norfolk Southern. Our project pipeline continues to gain momentum, with the number of new manufacturing facilities and expansion projects that are expected to enter the design and construction phase in 2026 projected to be nearly double last year's level.

Ed Elkins: Our project pipeline continues to gain momentum with the number of new manufacturing facilities and expansion projects that are expected to enter the design and construction phase in 2026, projected to be nearly double last year's level. As you would expect, we're also projecting substantially more carload potential to materialize as a result across multiple commodity groups. All of this bodes well for the long-term value of our network and for the American economy. To highlight just a few examples, Sodecia Aapico JV joint venture will build a new manufacturing facility in Orangeburg County, South Carolina, to produce ladder frames for Scout Motors. Additionally, Virginia Transformer, the largest transformer manufacturer in North America, will build a state-of-the-art power transformer plant in Muscle Shoals, Alabama, to support growing demand in heavy manufacturing, mining, energy infrastructure, grid expansion, and behind-the-meter power generation in the USA.

Speaker #1: And as you would expect, we're also projecting substantially more carload potential to materialize as a result across multiple commodity groups. All of this bodes well for the American economy.

Speaker #1: To highlight just a few examples: DCO, APICO, and Joint Venture will build a new manufacturing facility in Orangeburg County, South Carolina, to produce ladder frames for Scout Motors.

Speaker #1: Additionally, Virginia Transformer, the largest transformer manufacturer in North America, will build a state-of-the-art power transformer plant in Muscle Shoals, Alabama, to support growing demand in heavy manufacturing, mining, energy infrastructure, grid expansion, and behind-the-meter power generation in the U.S.

Speaker #1: And lastly, Sylvie Materials is constructing new cement terminals in Columbus, Ohio; Piedmont, South Carolina; Greensboro, North Carolina; and in Charlotte, North Carolina, to support increased construction demand.

Ed Elkins: Lastly, Silvi Materials is constructing a new cement terminal in Columbus, Ohio, Piedmont, South Carolina, Greensboro, North Carolina, and in Charlotte, North Carolina, to support increased construction demand. As always, finally, we want to thank all of our customers for their continued partnership and business. The entire NS team is aligned around delivering the service that our customers need every day, building trust as a vital partner in their supply chains. With that, I'll turn it over to Jason Zampi to review financial results.

Speaker #1: As always, and finally, we want to thank all of our customers for their continued partnership and business. The entire NS team is aligned around delivering the service that our customers need every day.

Speaker #1: Building trust as a vital partner in their supply chains. And with that, I'll turn it over to Jason Zampi to review financial results.

Speaker #2: Thanks, Ed. I'll start on slide 13 with the reconciliation of our gap results to the adjusted numbers that I will speak to today. We incurred $51 million in merger-related expenses during the quarter, while total costs related to the Eastern Ohio incident were $15 million.

Jason Zampi: Thanks, Ed. I'll start on slide 13 with the reconciliation of our GAAP results to the adjusted numbers that I will speak to today. We incurred $51 million in merger-related expenses during the quarter, while total costs related to the Eastern Ohio incident were $15 million. Additionally, we incurred $6 million of restructuring costs. Adjusting for these items, the operating ratio for the quarter was 65.5, and earnings per share was $3.52. Moving to slide 14, you'll find the comparison of our adjusted results versus last year. As expected, higher fuel prices were a significant driver of both the revenue and expense increases. Overall, the operating ratio increased 210 basis points versus last year, with fuel price headwinds driving an approximate 110 basis point increase. In addition, inflationary pressures drove another 190 basis point headwind compared to last year.

Speaker #2: Additionally, we incurred $6 million of restructuring costs. Adjusting for these items, the operating ratio for the quarter was 65.5 and earnings per share was $3.52.

Speaker #2: Moving to slide 14, you'll find the comparison of our adjusted results versus last year. As expected, higher fuel prices were a significant driver of both the revenue and expense increases.

Speaker #2: Overall, the operating ratio increased 210 basis points versus last year, with fuel price headwinds driving an approximate 110 basis point increase. In addition, inflationary pressures drove another 190 basis point headwind compared to last year.

Speaker #2: That said, higher volumes in RPU in the quarter helped mitigate these expenses, leading to a 5% improvement in operating income. Last quarter, we had highlighted our expectation to match normal operating ratio sequential seasonality of 200 basis points despite the known fuel pressures.

Jason Zampi: That said, higher volumes in RPU in the quarter helped mitigate these expenses, leading to a 5% improvement in operating income. Last quarter, we had highlighted our expectation to match normal operating ratio sequential seasonality of 200 basis points despite the known fuel pressures. The team did a great job capitalizing on the sustained volume trends in the quarter while managing our controllable costs to deliver a 320 basis point sequential improvement. Taking a closer look at our expense profile for the quarter on slide 15, costs were up 15%, over two-thirds of which was driven by the substantial rise in fuel expense this quarter. In addition, inflationary pressures continued, notably as you see in comp and benefits, but also within purchase services and materials. Volumetric and some network fluidity related costs drove increases in overtime, rents, and materials.

Speaker #2: The team did a great job capitalizing on the sustained volume trends in the quarter, while managing our controllable costs to deliver a 320-basis-point sequential improvement.

Speaker #2: Taking a closer look at our expense profile for the quarter on Slide 15, costs were up 15%, over two-thirds of which was driven by the substantial rise in fuel expense this quarter.

Speaker #2: In addition, inflationary pressures continued, notably as you see in comp and benefits, but also within purchased services and materials. Finally, volumetric and some network fluidity-related costs drove increases in overtime, rents, and materials.

Speaker #2: So to summarize our financial results on slide 16, despite the cost headwinds we faced, higher fuel prices, inflationary pressures, and volumetric expenses, we drove a 5% increase in operating income.

Jason Zampi: To summarize our financial results on slide 16, despite the cost headwinds we faced, higher fuel prices, inflationary pressures, and volumetric expenses, we drove a 5% increase in operating income. Importantly, we also delivered a 7% increase in both net income and earnings per share in the quarter. We are pleased to see the continued strength in volumes, we will continue to focus on opportunities to improve our service product, which will generate incremental revenue and drive cost efficiency. Mark, I'll turn it back over to you.

Speaker #2: Importantly, we also delivered a 7% increase in both net income and earnings per share in the quarter. We are pleased to see the continued strength in volumes, and we will continue to focus on opportunities to improve our service product, which will generate incremental revenue and drive cost efficiency.

Speaker #2: Mark, I'll turn it back over to you.

Speaker #1: Okay, thanks, Jason. All right, closing on slide 18. As we move into the second half of the year, our priorities remain clear. First, we will continue to focus on operating a safe and reliable railroad.

Mark George: Okay. Thanks, Jason. All right. Closing on slide 18, as we move into H2 of the year, our priorities remain clear. First, we will continue to focus on operating a safe and reliable railroad. As Brian said, safety is paramount. Our metrics are good relative to history, but we will never be satisfied or done seeking improvements. Second, we remain focused on disciplined execution. There's more work to do to fortify service, but we are making progress and are driving improvements across the network that you'll notice in the weekly data. The stronger than expected results we delivered this quarter reflect the hard work of our team, delivering continued productivity improvements and managing through a dynamic operating environment, all while positioning the company for long-term success. Looking ahead, as Ed laid out, we remain optimistic about the demand environment.

Speaker #1: As Brian said, safety is paramount. Our metrics are good relative to history, but we will never be satisfied or done seeking improvements. Second, we remain focused on disciplined execution.

Speaker #1: There's more work to do to fortify service, but we are making progress and are driving improvements across the network that you'll notice in the weekly data.

Speaker #1: The stronger-than-expected results we delivered this quarter reflect the hard work of our team, delivering continued productivity improvements and managing through a dynamic operating environment, all while positioning the company for long-term success.

Speaker #1: Looking ahead, as Ed laid out, we remain optimistic about the demand environment. We are seeing encouraging trends across key markets, including domestic intermodal, chemicals, and coal.

Mark George: We are seeing encouraging trends across key markets, including domestic intermodal, chemicals, and coal. While there's uncertainty in the broader economy, we are well-positioned to capitalize on profitable growth opportunities while continuing to improve operational performance. Regarding the financial guidance, our original OPEX guidance was $8.2 billion to $8.4 billion, which we are updating to account for the large swing in fuel, estimated to be $400 to 500 million of incremental expense compared to our view at the beginning of the year. Our new 2026 operating expense outlook is $8.8 to 8.9 billion. Neutralizing for the fuel impact, our core operating costs are trending toward the higher end of the prior range due to a stronger volume outlook. Overall, I am pleased with our team's cost performance in this dynamic and volatile environment.

Speaker #1: And while there is uncertainty in the broader economy, we are well positioned to capitalize on profitable growth opportunities, while continuing to improve operational performance.

Speaker #1: Now, regarding the financial guidance, our original OPEX guidance was $8.2 billion to $8.4 billion, which we are updating to account for the large swing in fuel, estimated to be $400 to $500 million of incremental expense compared to our view at the beginning of the year.

Speaker #1: So our new 2026 operating expense outlook is 8.8 to 8.9 billion dollars. Now, neutralizing for the fuel impact, our core operating costs are trending toward the higher end of the prior range, due to a stronger volume outlook.

Speaker #1: But overall, I am pleased with our team's cost performance and this dynamic and volatile environment. Our capex guidance of approximately $1.9 billion this year is unchanged.

Mark George: Our CapEx guidance of approximately $1.9 billion this year is unchanged. We are maintaining discipline while continuing to invest in the safety, reliability, and capacity of our network. Finally, while we are fully focused on running the business and serving our customers every day, we continue to make progress on the proposed combination with Union Pacific. We are even more confident about the unique opportunity to strengthen America's supply chain, delivering greater value for customers and communities with single line frictionless service that will create benefits for all stakeholders. You'll have seen our agreement with CN, which is a win-win-win scenario that further enhances competition in the freight rail space on top of the additional enhancement features that we will be presenting in the STB response here shortly. With that, we'll open the call to questions. Operator?

Speaker #1: We are maintaining discipline while continuing to invest in the safety, reliability, and capacity of our network. And finally, while we are fully focused on running the business and serving our customers every day, we continue to make progress on the proposed combination with Union Pacific.

Speaker #1: We are even more confident about the unique opportunity to strengthen America's supply chain, delivering greater value for customers and communities with single-line, frictionless service that will create benefits for all stakeholders.

Speaker #1: You'll have seen our agreement with CN, which is a win-win-win scenario that further enhances competition in the freight rail space, on top of the additional enhancement features that we will be presenting in the STB response here shortly.

Speaker #1: And with that, we'll open the call to questions. Operator?

Speaker #3: Yes, sir. Ladies and gentlemen, if you do have any questions, please press star, followed by 1 on your touch-tone phone. You will then hear a prompt that your hand has been raised.

Operator: Yes, sir. Ladies and gentlemen, if you do have any questions, please press star followed by one on your touchtone phone. You will then hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by two. If using a speakerphone, you'll need to lift the land handset first before pressing any keys. We also ask that out of consideration to other callers on the line today, as well as time allotted, that you please limit yourself to 1 question. Thank you. Your first question will be from Chris Wetherbee at Wells Fargo. Please go ahead.

Speaker #3: In should you wish to decline from the polling process, please press star, followed by 2. And if using your speakerphone, you will need to lift the handset first before pressing any keys.

Speaker #3: And we also ask that out of consideration to other callers on the line today, as well as time allotted, that you please limit yourself to one question.

Speaker #3: Thank you. And your first question will be from Chris Wetherby. At Wells Fargo, please go ahead.

Speaker #2: Hey, thanks. Good morning, guys. Maybe I could start with a question just on the pricing environment and the opportunity that maybe you guys can see. You know, we tend to think about this or truck markets being a little bit more of an interplay with the rails in the eastern part of the U.S., and obviously you have a very robust intermodal franchise.

Chris Wetherbee: Hey. Thanks. Good morning, guys. Maybe I could start with a question just on sort of the pricing environment and the opportunity that maybe you guys can see. You know, we tend to think about the sort of truck markets being a little bit more of an interplay with the rails in the eastern part of the US, and obviously you have a very robust intermodal franchise. I guess as we think about the tightness we're seeing in the truck market, can you talk about how we might see that sort of transition into pricing opportunity for you, both in the intermodal side of the business, but also merchandise as well?

Speaker #2: So I guess as we think about the tightness we're seeing in the truck market, can you talk about how we might see that sort of transition into pricing opportunity for you both in the intermodal side of the business, but also merchandise as well?

Speaker #1: Thanks, Chris. Ed?

Mark George: Thanks, Chris. Ed?

Speaker #4: Sure, and it's a great question—and one that we're, you know, dealing with every day here. It's really an encouraging freight environment right now, not only for truck freight and competing with the highway, but also in general for freight in the U.S.

Ed Elkins: Sure. It's a great question and one that we're, you know, dealing with every day here. It's really an encouraging freight environment right now, not only for truck freight and competing with the highway, but also in general for freight in the US. You know, I look at a few key indicators, and all of them have improved themselves since the beginning of the year when we really laid out our plan. That includes GDP as well as manufacturing and housing starts, shockingly, which has also improved in terms of outlook.

Speaker #4: You know, I'll look at a few key indicators, and all of them have improved themselves since the beginning of the year, when we really laid out our plan.

Speaker #4: That includes GDP as well as manufacturing and housing start shockingly, which is also improved in terms of outlook. And when I think about manufacturing, you know, we've seen six months of sequential improvement now in the ISM manufacturing index.

Ed Elkins: When I think about manufacturing, we've seen six months of sequential improvement now in the ISM Manufacturing Index, and that's the best post-COVID performance that we've seen. I think that's very encouraging for the US economy. You couple that with what I just talked about regarding industrial development and what we're seeing with our pipeline moving, and I feel like that also bodes very well. Thinking of trucking specifically, you look at outbound tender rejections, right? Up at around 15% now on average, I think, across all truck types across the US. That is a multi-year high in and of itself. Then we look at flat bed rejections, which are a subset of that. That's about 40% right now, which is about as high as I've ever seen it. That means construction, really. I think that bodes well in general.

Speaker #4: And that's the best post-COVID performance that we've seen, so I think that's very encouraging. For the US economy, you couple that with what I just talked about regarding industrial development, what we're seeing with our pipeline moving, and I feel like that also bodes very well.

Speaker #4: Thinking of trucking specifically, you look at outbound tender rejections, right? They're up at around 15% now on average, I think, across all truck types across the U.S.

Speaker #4: That is a multi-year high in and of itself. And then we look at flatbed rejections, which are a subset of that. That's about 40% right now, which is about as high as I've ever seen it.

Speaker #4: That means construction, really. And so I think that bodes well in general. And then, of course, we've talked about fuel, as have other people.

Ed Elkins: Of course, we've talked about fuel, as have other people. That, too, sets the stage for our intermodal business, but also our merchandise and bulk franchises to compete very ably. We are very optimistic for the outlook going forward, both in terms of volume opportunity, but also the opportunity to price in several key markets.

Speaker #4: That too, sets the stage for our intermodal business, but also our merchandise and bulk franchises to compete very ably. So we are very optimistic for the outlook going forward, both in terms of volume opportunity, but also the opportunity to price in several key markets.

Speaker #1: All right. Thanks, Chris. Next question?

Mark George: All right. Thanks, Chris. Next question.

Speaker #3: Next question will be from Scott Group at Wolf Research. Please go ahead.

Operator: Next question will be from Scott Group at Wolfe Research. Please go ahead.

Speaker #1: Hey, thanks. Good morning. So it sounds like you're confident about making progress on the service side. I'm just wondering, do you feel like you need to add a lot of headcount and other resources in order to get that service improvement?

David Brown: Hey, thanks. Good morning. It sounds like you're confident about making progress on the service side. I'm just wondering, do you feel like you need to add a lot of headcount and other resources in order to get that service improvement? Maybe just along those lines, I don't know, Jason, if you have any thoughts about how to think about the just near term cost and margin trends into Q3 and Q4.

Scott Group: Hey, thanks. Good morning. It sounds like you're confident about making progress on the service side. I'm just wondering, do you feel like you need to add a lot of headcount and other resources in order to get that service improvement? Maybe just along those lines, I don't know, Jason, if you have any thoughts about how to think about the just near term cost and margin trends into Q3 and Q4.

Speaker #1: And so maybe just along those lines, like, I don't know, Jason, if you have any thoughts about, like, how to think about the just near-term cost and margin trends into Q3 and Q4.

Speaker #2: Yeah, I'd start first regarding headcount. I think, you know, overall system-wide, you know, we're probably at an area where we can absorb volume, but we do have pockets where we are a little bit tight on T&E.

Mark George: Yeah, I'd start first regarding headcount. I think, overall, system wide, we're probably at an area where we can absorb volume, but we do have pockets where we are a little bit tight on T&E. Those are the areas where we're focusing on. We probably have a little bit more hiring to do there. Again, we have to continue to hire to replace attrition because we do run at around 8% attrition a year out of our T&E rank. We're always going to be hiring system wide, but we've got a handful of core locations that we probably need to augment, and that's where we're putting our more immediate focus. Brian, I don't know if you have any other comments on that.

Speaker #2: So that's those are the areas where we're focusing on. So we probably have a little bit more hiring to do there, but again, we have to continue to hire to replace attrition, because we do run at around 8% attrition a year, out of our T&E rank.

Speaker #2: So, we're always going to be hiring system-wide, but we've got a handful of core locations that we probably need to augment, and that's where we're putting our more immediate focus.

Speaker #2: Brian, I don't know if you have any other comments on that.

Speaker #4: Yeah, so going through the operations here, I mean, where we're at in the second quarter in transitioning to the third quarter now, we're seeing improvements in originations where we're up 20% right now from where we were in the second quarter.

Brian Barr: Yeah. Going through the operations here, where we're at in Q2 and transitioning to Q3 now, we're seeing improvements in originations where we're up 20% right now from where we were in Q2. We're seeing improvements in the velocity, the car miles per day. As we go through the operation, that's really generating some efficiencies for us where there won't be a massive add to resources other than the natural attrition that occurs on H2 of this year, going into 2027. There doesn't need to be an add. We're really running the plan, refining our processes, getting back to basic fundamental railroading of on time, over the road to help us pick up speed.

Speaker #4: We're seeing improvements in the velocity car miles per day. So as we go through the operation, that's really generating some efficiencies for us, where there won't be a massive add to resources, other than the natural attrition that occurs on the second half of this year, you know, going into 2027.

Speaker #4: But there doesn't need to be an add. We're really running the plan, refining our processes, getting back to basic fundamental railroading of on time over the road to help us pick up speed.

Speaker #1: You’ve got to remember, Scott, when you slow a network down—which is what happened to us for a couple of reasons—it requires more resources to dig back out.

Mark George: You got to remember, Scott, when you slow a network down, which is what happened to us for a couple reasons, it requires more resources to dig back out. The quicker we can accelerate the network, the fewer additional incremental resources you actually need to add. It actually frees up resources on the human side and on the locomotive side. These are encouraging trends that Brian has driven here in the past month and a half or so, to actually spool the network up a little bit. We're in less deficit than we otherwise would be if we were still stuck in that, call it 18 mile an hour range, 19 mile an hour range. Jason, is there something you want to add?

Speaker #1: So, the quicker we can accelerate the network, the fewer additional incremental resources you actually need to add. It actually frees up resources on the human side and on the locomotive side.

Speaker #1: So these are encouraging trends that Brian has driven here in the past month and a half or so to actually spool the network up a little bit, so we're in less deficit than we otherwise would be if we were still stuck in that, call it 18-mile-an-hour range, 19-mile-an-hour range.

Speaker #1: Jason, is there something you would like to add?

Jason Zampi: Yeah, I think, Scott, the last part of your question, just kind of talking about what we should think about from margins here on out. Obviously, like we talked, we're pleased where we finished Q2, outperforming both historical seasonality and our own expectations. What I would say, if you think about Q3, typical seasonality on average, call it flat to 50 basis points worse as you move from Q2 to Q3. Two things I'd call out here specifically. First, we've talked about that fuel price headwind that we've been experiencing here in Q2, and that switching to a tailwind in Q3. That's both true from a year over year and a sequential perspective. We will have that benefit sequentially going from second to third.

Speaker #2: Yeah, I think, Scott, the last part of your question, just kind of talking about what we should think about from margins, you know, here on out—obviously, like we talked, we're pleased with where we finished the second quarter.

Speaker #2: Outperforming both historical seasonality and our own expectations. But what I would say—if you think about the third quarter, typical seasonality on average is, call it, flat to 50 basis points worse as you move from the second quarter to the third quarter.

Speaker #2: But two things I'd call out here specifically. First, you know, we've talked about that fuel price headwind that we've been experiencing here in the second quarter, and that switching to a tailwind in the third quarter.

Speaker #2: That's both true from a year-over-year and a sequential perspective. So we will have that benefit sequentially going from second to third. However, we do have some, you know, almost about a 4% wage increase that's going into effect, that, excuse me, did go into effect in July here.

Jason Zampi: However, we do have almost about a 4% wage increase that, excuse me, did go into effect in July here. That will temper a little bit of that tailwind. You put that all together, I think we're at a place where we believe we can beat that normal sequential seasonality, and I'd put that up to 100 basis points better than normal.

Speaker #2: So, that will temper a little bit of that tailwind. So, you put that all together, you know, I think we're at a place where we believe we can beat that normal sequential seasonality.

Speaker #2: And I'd put that, you know, up to 100 basis points better than normal.

Speaker #1: Okay, thanks a lot, Scott. Next question.

Mark George: Okay. Thanks a lot, Scott. Next question.

Speaker #3: From Brian Assenbeck at JPMorgan Chase. Please go ahead.

Operator: From Brian Ossenbeck at JPMorgan Chase. Please go ahead.

Speaker #5: Hey, good morning. Thanks for taking the question. Maybe just a follow-up for Ed. I mean, looking at the RPUX fuel not a whole lot of movement so far.

Brian Ossenbeck: Hey, good morning. Thanks for taking the question. Maybe just a follow-up for Ed. Looking at the RPU ex fuel, not a whole lot of movement so far in the quarter. Maybe you can give us a sense in terms of how the cadence progresses with some of these renewals, maybe some of the tighter truck market environments starting to flow through the numbers. Then, I guess, when you try to balance that out with volume, it was a little while ago, we heard about the flexible freight and trying to get freight off the highway and keep it. Maybe you can give us an update in terms of how that's progressing, because clearly the market's gotten a lot stronger since I think the last time you laid out that framework.

Speaker #5: In the quarter, so maybe you can give us a sense, in terms of how the cadence progresses with some of these renewals—maybe some of the tighter truck market environment starting to flow through the numbers.

Speaker #5: And then I guess when you try to balance that out with volume, it was a little while ago we heard about the flexible freight and trying to get freight off the highway and keep it.

Speaker #5: Maybe you can give us an update in terms of how that's progressing, because clearly the market's gotten a lot stronger since, I think, the last time you laid out that framework.

Speaker #5: Thank you.

Mark George: Thank you.

Speaker #4: Yeah, for sure. And I appreciate the question. You know, I think, as I said earlier, it's a very optimistic freight market out there, and I think we have the right tools in place to really be able to capitalize on that and deliver value for our customers.

Ed Elkins: Yeah, for sure, appreciate the question. I think, as I said earlier, it is a very optimistic freight market out there. I think we have the right tools in place to really be able to capitalize from that and deliver value for our customers. When I think about price right now on the highway, you are hearing it from some of our customers and probably some of your other channel checks, that it is a really good environment. Spot price has been putting pressure upward now for several months, and that is exactly what it takes to drive that contract price, which is longer term, up as well. I typically say you need 3 to 6 months of upward pressure to start moving that line up, or downward pressure to move it down.

Speaker #4: So when I think about price right now on the highway, you’re hearing it from some of our customers—and probably some of your other channel checks—that it’s a really good environment.

Speaker #4: Spot price has been putting upward pressure now for several months, and that's exactly what it takes to drive that contract price—which is longer-term—up as well.

Speaker #4: I typically say you need 3 to 6 months of upward pressure to start moving that line up or downward pressure to move it down.

Speaker #4: We're solidly in a place where there's upward pressure being applied now on the highway, and that will flow through over time into our long-term contracts, as well as our short-term contracts, with our interval customers and with others.

Ed Elkins: We are solidly in a place where there is upward pressure being applied now on the highway, and that will flow through over time into our long-term contracts as well as our short-term contracts, with our intermodal customers and with others. We see, I think I have talked to you guys a lot over the past 4 years about a coiled spring and all that stuff. Well, we are right here ready to uncoil now, I think as the year progresses and we move into 2027, a lot of the work that we have done over the past 3 or 4 years to really restructure our contracts to make us more responsive to that pressure that I was talking about from the spot price into the contract price is going to manifest itself.

Speaker #4: So we see, and I think I’ve talked to you guys a lot over the past four years, about a cold spring and all that stuff.

Speaker #4: Well, we're right here, ready to uncoil now. And I think as the year progresses and we move into '27, a lot of the work that we've done over the past three or four years to really restructure our contracts to make us more responsive to that pressure that I was talking about from the spot price into the contract price is going to manifest itself.

Speaker #1: All right. Thanks a lot, Brian. Next question, please.

Mark George: All right. Thanks a lot, Brian. Next question, please.

Operator: From Jason Seidl at TD Cowen. Please go ahead.

Speaker #3: Jason Seidel at PD Cowen. Please go ahead.

Speaker #6: Thank you, operator. Mark and team, hope you guys are well. As we, how should we think about the intermodal conversions that are coming off the highway?

Jason Seidl: Thank you, operator. Mark and team, hope you guys are well. How should we think about the intermodal conversions that are coming off the highway? In other words, when you guys take this business back to the rails, how long, in general, are you tying it up for? Is it tied up for a full year? Is it tied up for longer than that or maybe shorter than that, in general?

Speaker #6: In other words, when you guys take this business back to the rails, how long in general are you tying it up for? Is it tied up for a full year?

Speaker #6: Is it tied up for longer than that, or maybe shorter than that? In general.

Speaker #1: Thanks, Jason. I think we're doing really well today. Ed, why don't you respond to that?

Mark George: Thanks, Jason. I think we're doing really well today. Ed, why don't you respond to that?

Speaker #4: For sure. Yeah, you know, it's really our customers on the intermodal side who are out there selling our service—and theirs—to the BCOs, the beneficial cargo owners.

Ed Elkins: For sure. Yeah. It's really our customers on the intermodal side who are out there selling our service and theirs to the BCOs, the beneficial owners. Typically, what we would see is an annual bid cycle. Sometimes there's a few that are multi-year and some that are what we call mini bids, which might last for a shorter period of time. Typically, we think in annual pulses for those customer commitments. As I do that, what I'm really thinking about is how do we deliver value alongside our partners on the intermodal side so that that one-year commitment maybe turns into a generational commitment because the service is good and the value is outstanding. That's really what we're focused on.

Speaker #4: Typically, you know, what we would see is an annual bid cycle, sometimes there's a few that are multi-year, and some that are what we call mini-bids, which might last for a shorter period of time.

Speaker #4: But typically, you know, we think an annual pulse is for those customer commitments. And as I do that, what I'm really thinking about is how do we deliver value alongside our partners on the intermodal side so that that one-year commitment maybe turns into, you know, a generational commitment because the service is good and the value is outstanding.

Speaker #4: And that's really what we're focused on.

Speaker #1: Jason, thanks again. Next question, please.

Mark George: Jason, thanks again. Next question, please.

Speaker #3: Jonathan Chappelle at Evercore ISI. Please go ahead.

Operator: Jonathan Chappell at Evercore ISI. Please go ahead.

Speaker #5: Thank you. Good morning. Mark, you called out some of the strengthening in the demand environment and the weekly volumes. Certainly seem to be pretty consistent and consistently improving.

Jonathan Chappell: Thank you.

Mark George: Hey, John.

Jonathan Chappell: Good morning. Mark, you called out some of the strengthening in the demand environment. The weekly volumes certainly seem to be pretty consistent and consistently improving. We've reached the anniversary date of the announced merger. I know there was a lot of share shift or share loss, honestly, in the early stages of that. Has that ended at this point? Do you feel like you're at a point now where you start winning some of that business back, even given the uncertainty in the timing of the review process?

Speaker #5: We've reached kind of the anniversary date of the announced merger, and I know there was a lot of share shift or share loss, honestly.

Speaker #5: In the early stages of that, has that ended at this point? And do you feel like you're at a point now where you could start winning some of that business back, even given the uncertainty and the timing of the review process?

Speaker #4: Yeah, actually, great question. We did have some losses right out of the gate there, which we’re going to be lapping here in September. So I would say that the bulk of what those losses were, were probably experienced between September and November.

Mark George: Yeah, actually, great question. We did have some losses right out of the gate there, which we're going to be lapping here in September. I would say that the bulk of what those losses were probably experienced between September and November, September, December.

Speaker #4: September, December. And frankly, I think we've had a pretty good run since then. I'm not sure that we're going to recapture those specific things that were lost, but we are growing in other areas that are really helping to offset and compensate for them.

Mark George: Frankly, I think we've had a pretty good run since then. I'm not sure that we're going to recapture those specific things that were lost. We are growing in other areas that are really helping to offset and compensate for it. We'll largely be lapping that here in the Q4. Ed, you want to add anything to that?

Speaker #4: But we'll largely be lapping that here in the fourth quarter. But Ed, you want to add anything to that?

Speaker #2: Sure. You know, when you look and when you talk to our customers about where they're growing and where you've heard from them about where they're growing on their recent calls, you know, the action is mostly in the east, which is really good because our network is superbly positioned to take advantage of that.

Ed Elkins: Sure. When you look and when you talk to our customers about where they're growing and where you've heard from them about where they're growing on their recent calls, the action is mostly in the east, which is really good because our network is superbly positioned to take advantage of that. I think that's why you're seeing this share conversion and the opportunity that's there, specifically on our local network, alongside our transcontinental connections, that's really driving a lot of that growth. I'm confident, just like Mark is, that over time, we're going to get that business back because I think our network delivers the most value. In the meantime, we're continuing to accumulate share from the highway from other places.

Speaker #2: And I think that's why you're seeing this share conversion, and the opportunity that's there specifically on our local network, alongside our transcontinental connections. That's really driving a lot of that growth.

Speaker #2: So I'm confident, just like Mark is, that over time we're going to get that business back because I think our network delivers the most value in the meantime.

Speaker #2: We're continuing to accumulate share on the highway from other places.

Speaker #1: Thanks, Jonathan. Next question.

Mark George: Thanks, Jonathan. Next question?

Operator: From David Vernon at Bernstein. Please go ahead.

Speaker #3: From David Vernon at Bernstein. Please go ahead.

Speaker #1: Hey, David.

Mark George: Hey, David.

Speaker #7: Fair. Sorry, having some trouble with the mute button. So, Ed, I wanted to get your perspective on what you're seeing in the activity book for you guys from an industrial perspective.

David Vernon: We are sorry, troubles with the mute button. Ed, I wanted to get your perspective on sort of what you're seeing in the activity book for you guys from an industrial perspective. I think a lot of our investors are keenly focused on whether we're starting to see some broadening of industrial activity outside of AI and data center build-out. I'd love to get your perspective on that. If you could also share what the underlying volume growth rate is in intermodal X, some of the declines that you had from some of the merger actions before. The volume numbers there are coming in above three, probably stronger than I would've thought they would've been at the beginning of the year, just given what we're talking about with the competitive share losses. Any commentary there would be helpful. Thanks, guys.

Speaker #7: I think a lot of our investors are keenly focused on whether we're starting to see some broadening of industrial activity outside of AI and data center buildout.

Speaker #7: So I'd love to get your perspective on that. And if you could also share kind of what the underlying sort of volume growth rate is in intermodal X, some of the declines that you had from some of the merger actions before, the volume numbers there coming in above three, probably stronger than I would have thought they would have been at the beginning of the year, just given what we're talking about with the competitive share losses.

Speaker #7: So any commentary there would be helpful. Thanks, guys.

Speaker #4: Sure. You know, thanks for the question. If you look back to that slide we presented that showed the acceleration, I think that really tells the story right there.

Ed Elkins: Sure. Thanks for the question. If you look back to that slide we presented that showed the acceleration, I think that really tells the story right there. We have maintained a robust pipeline over the past couple of years of economic activity in terms of industrial development. What we try to do is watch as activity moves its way through the pipeline from being a prospective investment to one that we believe is actually turning into freight. We've seen that pipeline accelerate over the past six months. I would probably argue that it was decelerating for the past year before that, mostly because of trade uncertainty, tariff uncertainty, a lot of economic uncertainty, which was probably impeding customers from making those investments.

Speaker #4: We have maintained a robust pipeline over the past couple of years of economic activity in terms of industrial development. And what we try to do is watch as that activity moves its way through the pipeline, from being a prospective investment to one that we believe is actually turning into freight.

Speaker #4: And so we've seen that pipeline accelerate over the past six months. I would probably argue that it was decelerating for the past year before that, mostly because of trade uncertainty, tariff uncertainty, and a lot of economic uncertainty, which was probably impeding customers from making those investments.

Speaker #4: But probably through a combination, and this is conjecture on my part, through a combination of they've waited so long they can't wait anymore, plus getting signals from the market that it is a safe investment, despite all the uncertainty, we've seen a real acceleration in that pipeline, which we think is encouraging, of course, both for our network and for the American economy.

Ed Elkins: Probably through a combination, and this is conjecture on my part, through a combination of they've waited so long they can't wait anymore, plus getting signals from the market that it is a safe investment despite all the uncertainty. We've seen a real acceleration in that pipeline, which we think is encouraging, of course, both for our network and for the American economy. I think this goes beyond data centers. It really is new manufacturing capacity coming online, either in the form of expansions for our existing facilities or new facilities actually being located there. Feel very good about that, and we look forward to seeing that continue. On the intermodal side, we think there's still plenty of room to run in terms of opportunity and our ability to absorb that volume over time here. We have a good intermodal network.

Speaker #4: I think this goes beyond data centers. It really is new manufacturing capacity coming online, either in the form of expansions for our existing facilities or new facilities actually being located there.

Speaker #4: So I feel very good about that, and we look forward to seeing that continue. On the intermodal side, you know, we think there's still plenty of room to run in terms of opportunity and our ability to absorb that volume over time here.

Speaker #4: We have a good intermodal network. Brian has made some real strides in terms of delivering that value and re-accelerating the network. And we're being aggressive in terms of making sure that our customers, as they go out and sell that freight, have a real solid place to land it.

Ed Elkins: Brian has made some real strides in terms of delivering that value and re-accelerating the network. We're being aggressive in terms of making sure that our customers, as they go out and sell that freight, have a real solid place to land it.

Speaker #1: But I think, you know, with regard to how much headwind were the share losses to our intermodal, we say it's about three points.

Mark George: I think, with regard to how much headwind were the share losses to our intermodal, we say it's about three points-

Speaker #4: That's right.

Ed Elkins: That's right.

Speaker #1: In the quarter, right? So, if not for those share losses, we would have had three points more growth.

Mark George: In the quarter, right?

Ed Elkins: Yeah.

Mark George: If not for those share losses, we would have had 3 points more growth.

Speaker #4: 100%.

Ed Elkins: 100%.

Speaker #1: Okay. Thank you. Appreciate it, David. Next question, please.

Mark George: Okay. Thank you. Appreciate it, David. Next question, please.

Speaker #3: From Ravi Shankar at Morgan Stanley. Please go ahead.

Operator: From Ravi Shanker at Morgan Stanley. Please go ahead.

Speaker #6: Hi, team. This is Madison on for Ravi. I was just wondering, if in the results you guys saw any pull forward of import volumes, and if you're expecting any bounce in volumes after the August tariff deadline?

[Analyst] (Morgan Stanley): Hi, team. This is Madison on for Ravi. I was just wondering if, in the results, you guys saw any pull forward of import volumes, and if you're expecting any bounce in volumes after the August tariff deadline.

Speaker #4: Very good question. I would say I would argue that we probably have seen a little bit of pull forward throughout the beginning portions of this year, the first half.

Ed Elkins: Very good question. I would say, I would argue that we probably have seen a little bit of pull forward throughout the beginning portions of this year, H1. It's probably too early for me to determine whether or not we're seeing any additional activity predicated off new tariff implementations or regimens coming online.

Speaker #4: It's probably too early for me to determine whether or not we're seeing any additional activity predicated off new tariff implementations or regimens coming online.

Speaker #1: Okay. Thanks for that question. Appreciate it, Madison. Next question, please.

Mark George: Okay. Thanks for that question. Appreciate it, Madison. Next question, please.

Speaker #3: Stephanie Moore at Jefferies, please go ahead.

Operator: Stephanie Moore at Jefferies. Please go ahead.

Speaker #6: Great. Good morning. Thank you. Maybe touching on a couple of questions that were asked, but maybe asked a little bit differently. You talk a lot about the, maybe, resurgence in industrial activity and, to your point, some of those major projects getting to a more accelerating phase.

Stephanie Moore: Great. Good morning. Thank you. Maybe touching on a couple of questions that were asked, but maybe asked a little bit differently. You talk a lot about the maybe resurgence in industrial activity and, to your point, some of those major projects getting to a more accelerating phase. That being said, given there is a lot of noise and conversations obviously going on around what the network will look like post-merger, if the merger goes through, I can imagine it creates maybe some uncertainty for your customers. To the extent that you've obviously seen really good progress across a lot of your industrial customers, maybe talk a little bit about the response from others that maybe are taking a little bit of a pause, if they are, just given maybe some of the uncertainty deal related. Thanks.

Speaker #6: That being said, given there is a lot of noise and conversations, obviously, going on around what the network will look like post-merger, if the merger goes through, I can imagine it creates maybe some uncertainty for your customers.

Speaker #6: So, to the extent that you've obviously seen really good progress across a lot of your industrial customers, maybe talk a little bit about the response from others that maybe are taking a little bit of a pause, if they are, just given maybe some of the uncertainty—deal-related things.

Speaker #1: Hey, thanks, Stephanie. Look, I think, honestly, the merger is giving a lot of the potential customers here some hope, and so it's definitely not slowing things down.

Mark George: Hey, thanks, Stephanie. Look, I think honestly, the merger is giving a lot of the potential customers here some hope. It's definitely not slowing things down. If anything, it's accelerating things because they know that they're going to need maybe 18 to 24 months before they're live, so they want to be ready to take advantage of the new network. Ed, why don't you add more color, please?

Speaker #1: If anything, it's accelerating things because they know that they're going to need maybe 18 to 24 months before they're live. So they want to be ready to take advantage of the new network.

Speaker #1: But Ed, why don't you add more color, please?

Speaker #4: No, I agree. And it's been talked about plenty of times before, but I'll say it one last time, and that is, you know, removing interchange friction, removing the impediments to a transcontinental network here is good thing for customers.

Ed Elkins: No, I agree. It's been talked about plenty of times before, I'll say it one last time, and that is, removing interchange friction, removing the impediments to a transcontinental network here, is good thing for customers. I think it's a remarkably good thing for new customers who are investing today in a network that we believe is going to be even better and more powerful going forward.

Speaker #4: And I think it's a remarkably good thing for new customers who are investing today in a network that we believe is going to be even better and more powerful going forward.

Speaker #1: Yeah, it actually has the opposite effect, Stephanie. It's not paralyzing decision-making; if anything, it's accelerating decision-making. So, thanks for the question. Next one, operator.

Mark George: Yeah. It actually has the opposite effect, Stephanie. It's not paralyzing decision-making. If anything, it's accelerating decision-making. Thanks for the question. Next one, operator.

Speaker #3: Vasco Majors at Stevens. Please go ahead.

Operator: Bascome Majors at Stephens. Please go ahead.

Speaker #1: Hey, Vasco.

Mark George: Hey, Bascome.

Speaker #5: Hey, good morning, and thanks for taking my questions. Brian, I wanted to see if you could go a little more into the sequential shift in the customer-facing side of the metrics, particularly where the merch plan compliance dropped about 10 points or so quarter over quarter. But you did talk about, you know, directionally, a lot of the service metrics improving.

Bascome Majors: Hey, good morning, and thanks for taking my questions. Brian, I wanted to see if you could go a little more into the sequential shift in the customer-facing side of the metrics, particularly where the merch plan compliance dropped about 10 points or so quarter, per quarter, you did talk about directionally a lot of the service metrics improving, both client facing and the ones that we can see into the end of the quarter and now.

Speaker #5: Both client-facing and the ones that we can see into the end of the quarter and now.

Speaker #4: Yeah, absolutely. So, the merch plan compliance there year over year, we were down 12.8% and 13.9% sequentially. Here, right now, in the third quarter, we're seeing a 6.62% improvement currently from where we finished the second quarter.

Brian Barr: Yeah, absolutely. The merch plan compliance there year-over-year, we were down 12.8%, 13.9% sequentially. Here right now in Q3, we're 6.62% improvement currently from where we finished Q2. We have a lot of activity around the car movement, and I spoke of the improvement in the originations and the velocity. Just to give you a perspective, we went out and white boarded a terminal there in Chattanooga the month of June. Going through that, we took 150 cars a day out of Chattanooga that were coming off interchange and from other locations on the network. We were able to take that handling out at Chattanooga

Speaker #4: We have a lot of activity around the car movement. And I spoke of the improvement in the originations and the velocity, but just to give you a perspective, we went out and whiteboarded a terminal there in Chattanooga.

Speaker #4: In the month of June, we took 150 cars a day out of Chattanooga that were coming off interchange and from other locations.

Speaker #4: On the network, we were able to take that handling out at Chattanooga. So we were processing the cars there, moving them up the network, and processing them a second time.

Brian Barr: We weren't processing the cars there, moving them up the network, process them a second time. With removing that handling, we were able to surge those cars deeper into the network, speed them up. That helped Chattanooga pick up their originations. It improved their terminal dwell, and it helps us provide the resources for the entire South as Chattanooga and Birmingham, where we've done similar things occur, which then carries the traffic to the north. We're finding activity like that all across the network, and we're opportunity ripe for those events as we're creating blocks in even areas in the north at Bellevue and at Elkhart. We're generating those blocks because we're running on time, because we're processing more rapidly than we were in H1, is allowing us to create capacity.

Speaker #4: With removing that handling, we were able to surge those cars deeper into the network and speed them up. That helped Chattanooga pick up their originations.

Speaker #4: It improved their terminal dwell, and it helps us provide the resources for the entire South as Chattanooga and Birmingham, where we've done similar things, occur.

Speaker #4: Which then carries the traffic to the North. So we're finding activity like that all across the network, and we're opportunistically ripe for those events.

Speaker #4: As we're creating blocks in even areas in the North at a Bellevue and an Elkhart, where generating those blocks because we're running on time, because we're processing more rapidly than we were in the first half of the year, is allowing us to create capacity those blocks are allowing us to even remove train sets from the network, putting resources both crew and power back into the network and help us provide service to the customer, reducing their time in route.

Brian Barr: Those blocks are allowing us to even remove train sets from the network, putting resources, both crew and power, back into the network and help us provide service to the customer, reducing their time in route. We're seeing very positive effects here with the speed, with the origination, some of the internal measurements, it's all really in an effort to help process cars for the customer and be more reliable.

Speaker #4: So we're seeing very positive effects here. With the speed, with the origination, some of the internal measurements, but it's all really in an effort to help process cars for the customer and be more reliable.

Speaker #1: And I think what you're seeing here is really a team that's getting into the details and getting out there in the field and being very, very tactical.

Mark George: I think what you're seeing here is really a team that's getting into the details and getting out there in the field and being very tactical. Trying to really accelerate the network and free up some resources. A lot of the moves that Brian's talking about lessens the dependence on human resources. That's another way to free up T&E to actually be able to respond to some of the volume that we've had. That growth, coupled with these actions, we've actually seen an improvement in our train speed now here in the past few weeks. We're feeling very encouraged about where we are operationally. Thanks, Bascome. Appreciate it. Next question, please.

Speaker #1: Trying to really accelerate the network and free up some resources. So, a lot of the moves that Brian's talking about lessen the dependence on human resources.

Speaker #1: So, you know, that's another way to free up T&E to actually be able to respond to some of the volume that we've had. And, you know, so that growth, coupled with these actions, we've actually seen an improvement in our train speed now here in the past few weeks.

Speaker #1: So we're feeling very encouraged about where we are operationally. So thanks, Vasco. Appreciate it. Next question, please.

Speaker #3: From Richard Hernandez at Deutsche Bank. Please go ahead.

Operator: From Richa Talwar at Deutsche Bank. Please go ahead.

Speaker #1: Hey, Richard, thank you.

Mark George: Hey, Richa. Thank you.

Speaker #2: Yeah, thank you for the time. Hello. So, yeah, I just wanted to see if you could talk about the competitive dynamic a little bit more.

Richa Talwar: Hey, guys. Thank you for the time. Hello. Yeah, I just wanted to see if you could talk about the competitive dynamic a little bit more. Your competitor, primary competitor in the East, has introduced some new product improvements, be it their new partnerships and Howard Street Tunnel, beginning to sell that. Just curious if that's affecting the competitive environment at all and how that overall environment is basically evolving. I know you kind of touched on it. You're seeing opportunities to grow in other areas. Yeah, just addressing those specific points. Thanks.

Richa Harnain: Hey, guys. Thank you for the time. Hello. Yeah, I just wanted to see if you could talk about the competitive dynamic a little bit more. Your competitor, primary competitor in the East, has introduced some new product improvements, be it their new partnerships and Howard Street Tunnel, beginning to sell that. Just curious if that's affecting the competitive environment at all and how that overall environment is basically evolving. I know you kind of touched on it. You're seeing opportunities to grow in other areas. Yeah, just addressing those specific points. Thanks.

Speaker #2: You know, your competitor—a primary competitor in the East—has introduced some new product improvements, be it, you know, their new partnerships and how it's retunneled, beginning to sell that.

Speaker #2: Just curious if that's affecting the competitive environment at all, and how that overall environment is basically evolving. I know you kind of touched on it.

Speaker #2: You're seeing opportunities to grow in other areas. But, yeah, just addressing those specific points—thanks.

Speaker #1: Yeah, I think both competitors in the East are doing good things for their customers. Ultimately, we're both working to try to take freight off the highway, and we're having success.

Mark George: Yeah, I think both competitors in the East are doing good things for their customers. Ultimately, we're both driving to try to take freight off the highway, and we're having success, and this is a really strong market backdrop to do that. We applaud them for their successes, and we're really proud of ours. Ed, you want to add anything?

Speaker #1: And this is a really strong market backdrop to do that. So we applaud them for their successes, and we're really proud of ours. Ed, you want to add anything?

Speaker #4: No, I agree. I'm really proud of ours, too. Thanks a lot, Richard. Appreciate it.

Ed Elkins: No, I agree. I'm really proud of ours, too.

Mark George: All right. Thanks a lot, Richa. Appreciate it. Next question, please.

Speaker #1: Next question, please.

Speaker #3: Brandon Oglinsky at Barclays. Please go ahead.

Operator: Brandon Oglenski at Barclays. Please go ahead.

Speaker #5: Hey, good morning. This is Eric Morgan on for Brandon. Thanks for taking the question. I wanted to just come back to pricing and intermodal.

Eric Morgan: Hey, good morning. This is Eric Morgan on for Brandon. Thanks for taking the question. I wanted to just come back to pricing and intermodal. Can you just maybe speak at a high level, to the extent to which you normally participate in the truckload cycle? Not sure if you have, like, a rule of thumb where truckload contract rates are up X, you might see your yields move Y a certain number of months or quarters later. Relatedly, just, it sounds like you're incrementally constructive on domestic relative to international and intermodal. Can you just speak to how that might translate to mix in that line from here? Thanks.

Speaker #5: Can you maybe speak at a high level to the extent to which you normally participate in the truckload cycle? I'm not sure if you have, like, a rule of thumb—where truckload contract rates are up X.

Speaker #5: You might see your yields move, you know, a certain number of months or quarters later. And relatedly, just, you know, it sounds like you're incrementally constructive on domestic relative to international.

Speaker #5: Intermodal—can you just speak to how that might translate to mix in that line from here? Thanks.

Speaker #4: I think you got it right in terms of—we are very constructive on the domestic side, maybe a bit less so on a sequential basis for the international side.

Ed Elkins: I think you got it right in terms of, we are very constructive on the domestic side, maybe a bit less so on a sequential basis for the international side. Look, we have spent years working on reframing our contracts and our relationships with customers so that we can be responsive to that market dynamic of rising or falling truck prices to, number one, stay competitive, and number two, deliver as much value as we can to shareholders with the service that we're offering. We've taken that from a lag that's probably defined in many months or sometimes maybe a year, down to a couple quarters, couple three quarters. I'm really rounding off there.

Speaker #4: Look, we have spent years working on reframing our contracts and our relationships with customers so that we can be responsive to that market dynamic of rising or falling truck prices.

Speaker #4: To, number one, stay competitive, and number two, deliver as much value as we can to shareholders with the service that we're offering. We've taken that from a lag that's probably defined in many months or, you know, sometimes maybe a year, down to a couple of quarters — a couple, three quarters.

Speaker #4: And I'm really rounding off there. But it's a shorter cycle than it was previously. And we are very encouraged by what we're seeing both in the headlines on the highway, but also what we're seeing in our own day-to-day pricing opportunities.

Ed Elkins: It's a shorter cycle than it was previously. We are very encouraged by what we're seeing, both in the headlines on the highway, also what we're seeing in our own day-to-day pricing opportunities. Thank you.

Speaker #4: Thank you.

Speaker #1: Thanks, Eric.

Mark George: Thanks, Eric. Operator?

Speaker #3: Questions from Ari Rosa at Citigroup. Please go ahead.

Operator: Question from Ari Rosa at Citigroup. Please go ahead.

Speaker #1: Hey, Ari.

Mark George: Hey, Ari.

Speaker #6: Yeah, hi. Good morning. So this is one of the more upbeat calls I've heard from you guys in a while. I guess understandably, given the macro backdrop.

Ari Rosa: Yeah. Hi. Good morning. This is one of the more upbeat calls I've heard from you guys in a while, I guess, understandably, given the macro backdrop. Talk about the downside risk. Like, how do you think about what kind of the sustainability of this macro environment? Do higher fuel prices pose any risk or any concern to some of the industrial customers? Broadening that out, for a long time, we've talked about the ability for NS to get back into that kind of low 60s OR. If we see this macro environment sustain itself, do you think that's something that's feasible as we think about kind of the trajectory over the next two to three years?

Speaker #6: But talk about the downside risk. Like, how do you think about the sustainability of this macro environment? Do higher fuel prices pose any risk or concern to some of the industrial customers?

Speaker #6: And then, broadening that out, for a long time we've talked about the ability for NS to get back into that kind of low-60s OR.

Speaker #6: If we see this macro environment sustain itself, do you think that's something that's feasible as we think about the trajectory over the next two to three years?

Mark George: I think from a macro perspective, we all feel good now. We're cautiously optimistic. The cautious part is, do higher fuel prices, sustained higher fuel prices, eventually hurt the consumer, which can diminish demand and start working against us in the future? That is the risk. I think we all felt like a short-term bump in fuel is something that the economy can handle, and it has handled thus far. How long this persists and the long-term impact of it is the question mark. I think that's probably the big risk. Let's face it, we've had basically four years that we've navigated through a freight recession. We've been waiting for this to break. This is the longest freight recession in history.

Speaker #1: I think from a macro perspective, we all feel good now, but there is, you know, we're cautiously optimistic. And the cautious part is, do higher fuel prices sustain higher fuel prices eventually hurt the consumer?

Speaker #1: Which can diminish demand and start working against us in the future. So, that is the risk. I think we all felt like a short-term bump in fuel is something that the economy can handle, and it has handled thus far.

Speaker #1: How long this persists, and the long-term impact of it, is the question mark. And I think that's probably the big risk. Let's face it, we've had basically four years that we've navigated through a freight recession.

Speaker #1: And we've been waiting for this to break. This is the longest freight recession in history, so we've been ready to come out of this.

Mark George: We've been ready to come out of this. I remember quite well when we were at 18, 24 months, the recovery was imminent, and it never actually came. It does feel like this confluence of higher fuel prices and also some of the enforcement on commercial driver licenses and drug and alcohol testing, all of these things maybe have had an impact finally on the trucking side of things, where we're coming out of this in a much more rail-competitive environment. We have to keep our eyes on what happens long term if fuel stays high for long. Maybe if we stay under $100 a barrel, we can handle it, if it goes to 110, 120 for any prolonged period of time, maybe it becomes more problematic. I don't know where those thresholds are, that's where we feel we have probably the bigger risk.

Speaker #1: I remember quite well when we were at 18, 24 months; you know, the recovery was imminent, and it never actually came. So it does feel like this confluence of higher fuel prices, and also some of the enforcement on commercial driver licenses and drug and alcohol testing—all of these things maybe have had an impact, finally, on the trucking side of things, where we're coming out of this in a much more rail-competitive environment.

Speaker #1: But we have to keep our eyes on what happens long term if fuel stays high for a while. You know, maybe if we stay under $100 a barrel, we can handle it.

Speaker #1: But if it goes to 110 or 120 for any prolonged period of time, maybe it becomes more problematic. I don't know where those thresholds are.

Speaker #1: But that's where we feel we have probably the bigger risk. Did I miss anything, Ed?

Mark George: Did I miss anything, Ed?

Speaker #4: No, you nailed it. I think, you know, we see a good demand environment improving the demand environment and a supply side that has been constrained on the highway for all those reasons that you talked about.

Ed Elkins: No, you nailed it. I think we see a good demand environment, improving demand environment, and a supply side that has been constrained on the highway for all those reasons that you talked about. I think you're absolutely right to be cautious about fuel price and how long it sustains itself at those higher prices.

Speaker #4: And I think you're absolutely right to be cautious about fuel prices and how long they've sustained themselves at those higher levels.

Speaker #1: Yeah, so hopefully that gives you the answer you're looking for, Ari. And look, that same four years we've been dealing with a freight recession, which has basically blunted our top line completely from a volume perspective.

Mark George: Yeah. Hopefully that gives you the answer you're looking for, Ari, and look, that same four years we've been dealing with a freight recession, which has basically blunted our top line completely from a volume perspective. We've also had to absorb very high inflation, right? That's a real hard combination that's had an impact on the overall P&L and profitability. Can we now enjoy a couple few years of real strong top line where we keep in check the cost line? That is going to be the path toward really improving margins over the long term.

Speaker #1: We've also had to absorb very high inflation, right? And that's a really hard combination that's had an impact on the overall P&L and profitability.

Speaker #1: So, can we now enjoy a couple of years of really strong top-line growth while we keep the cost line in check? That is going to be the path toward really improving margins over the long term.

Speaker #1: You know, I don't think the inflation goes away, quite honestly, because, you know, we're locked in with these union agreements that are fairly generous.

Mark George: I don't think the inflation goes away, quite honestly, because we're locked in with these union agreements that are fairly generous, but we have to control all the other aspects in our P&L on the cost side while we try to manage the volume growth that we expect if things turn like we think they will. Better RPU, hopefully not offset by mix like we've also had to deal with in the past several years. There is a path there. There is a path there if everything goes right and we manage well. Thank you, Ari. Look, I think at the end of the day, we're going to wrap the call up here, and I want to thank everybody for listening in. Again, we're executing in a very dynamic environment thanks to the discipline of the team.

Speaker #1: But we have to control all the other aspects in our P&L on the cost side, while we try to manage the volume growth that we expect.

Speaker #1: If things turn out like we think they will, and with better RPU—hopefully not offset by mix, like we've also had to deal with in the past several years.

Speaker #1: So, there is a path there. There is a path there if everything goes right and we manage well. Thank you, Ari. So, look, I think at the end of the day, we're going to wrap the call up here.

Speaker #1: And I want to thank everybody for listening in. Again, we're executing in a very dynamic environment thanks to the discipline of the team. I'm really excited about the work that Brian and his team are doing to already improve our network so we can handle more and more volume.

Mark George: I'm really excited about the work that Brian and his team are doing to already improve our network so we can handle more and more volume. That service is improving, and we've got momentum, so I feel good about that. We haven't taken our eye off the ball at all with regard to productivity. Productivity, service, and safety, they all must move together. Safety, we're really proud of our results. We are doing well, and looking ahead, we're cautiously optimistic, as we just said. Thanks again to our Railroaders, and thanks again to our customers and all of our other partners out there. We'll see you on the road. Take care.

Speaker #1: That service is improving, and we've got momentum, so I feel good about that. We haven't taken our eye off the ball at all with regard to productivity.

Speaker #1: Productivity, service, and safety—they all must move together. Regarding safety, we're really proud of our results and we are doing well. Looking ahead, we're cautiously optimistic, as we just said.

Speaker #1: So, thanks again to our railroaders, and thanks again to our customers, and all of our other partners out there. We'll see you on the road.

Speaker #1: Take care.

Speaker #3: Thank you. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. And at this time, we do ask that you please disconnect your line.

Operator: Thank you. Ladies and gentlemen, this does indeed conclude the conference call for today. Once again, thank you for attending. At this time, we do ask that you please disconnect your line.

Q2 2026 Norfolk Southern Corp Earnings Call

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