Norfolk Southern posts record $3.52bn revenue on 3% volume growth

Norfolk Southern grew third-quarter revenue 14% to a record $3.52 billion, with fuel surcharges accounting for 8 of those 14 percentage points, while operating income rose 5% to $1.15 billion. Earnings per share climbed 7% to $3.37, and total volume across the network advanced 3%, with merchandise, intermodal and coal carloads each up 3% on the year.

CEO Mark George told analysts the quarter reflected disciplined execution. "Our third quarter was strong with steady execution, making notable improvements to our network while delivering solid results," George said on the earnings call. "We have an outstanding team of thoroughbreds who remain focused on the fundamentals: operating a safe, reliable railroad, serving our customers, growing the business, and improving productivity across the network."

The railroad's operating ratio stood at 67.4%, worsened by 2.8 points from a year ago, largely because of higher fuel costs. Adjusted for ongoing expenses tied to the February 2023 derailment and hazardous materials release in East Palestine, Ohio, and costs related to the proposed merger with Union Pacific, the operating ratio was 65.4%.

What is driving the demand shift toward rail?

George pointed to a tightening truck market as a tailwind for rail competitiveness. "Demand for rail service is growing with encouraging trends in areas such as domestic intermodal and chemicals," he said. "The current macro environment is tightening the truck market, and that helps rail be more competitive. And what you saw in the quarter is us capturing the increased customer demand."

Chief Commercial Officer Ed Elkins said the carrier is broadly optimistic for the remainder of 2026. High fuel prices linked to the Middle East conflict are lifting energy-related traffic, though NS is watching whether prolonged pump-price increases eventually soften consumer demand.

The commercial outlook by segment:

• A tight truck market and high fuel costs favor highway-to-rail conversions in forest products, consumer products and domestic intermodal, Elkins said.
• International intermodal remains weighed down by trade uncertainty.
• Manufacturing has expanded for nine straight months, industrial development runs ahead of last year, and vehicle production looks modestly positive.
• Coal is expected to grow, led by exports and supported by utilities rebuilding depleted stockpiles.

How did the service metrics perform?

Key operational measures remained below year-ago levels but improved sequentially after spot crew shortages caused second-quarter congestion. Terminal dwell improved 3% and train speed rose 5% versus the second quarter, while on-time train originations jumped 18%.

The intermodal service composite came in at 84%, down from 92% a year ago. Merchandise trip plan compliance was 74%, compared with 80% in the prior-year quarter, though it recovered 6 points sequentially; the intermodal metric slipped 1 point from the second quarter.

"We entered the quarter with a clear plan to recover network fluidity by improving originations, reducing dwell, increasing velocity, and getting the railroad back on schedule," Chief Operating Officer Brian Barr said. "We delivered sequential improvement across those foundational measures."

The gains came despite August weather disruptions on the railroad's high-speed corridor, where crews removed hundreds of downed trees, repaired multiple washouts and activated strategic reroutes during widespread power outages. "While the historic wind and rain interrupted some of our July momentum, it did not derail our progress," Barr said.

Where is the network being restructured?

Norfolk Southern redesigned car connections at terminals to eliminate handlings, a change that removed 95 crew starts per week and took 200 cars per day off the network even as the railroad absorbed 3% carload growth, Barr said. It also consolidated smaller trains between Birmingham, Ala., and Macon, Ga., saving 14 crew starts per week and reducing locomotive requirements, and shifted 50 daily switch cars from Enola, Pa., to Allentown Yard — freeing Enola crews for road service, cutting cost per car and opening yard capacity at Enola.

On the safety front, personal injury and train accident rates continued improving through the first nine months of the year, with the train accident rate at a record low for the railroad.

NS has also rolled out new online customer tools that accelerate responses to rate requests and improve shipment visibility. "Our goal is simple: Make Norfolk Southern the easiest railroad to do business with so that we win more freight in competitive markets," Elkins said.

With the truck market tightening, fuel elevated and coal stockpiles still being rebuilt, NS enters the rest of 2026 positioned to convert more highway freight to rail — provided service metrics keep closing the gap to last year's levels.