ATLANTA — Norfolk Southern is back.
That was the message CEO Mark George and the railroad’s executive team delivered on the fourth-quarter earnings call today (Jan. 29, 2025), where they emphasized how operational improvements helped NS meet or exceed the financial targets it set amid last year’s nasty proxy battle with activist investor Ancora Holdings.
“Our network is running fast, our terminals are efficient. Service metrics are as strong as they have ever been. Our customers are noticing and rewarding us with more business and we continue to exercise strong cost discipline,” George told investors and analysts on the railroad’s earnings call. “When you put it all together, we delivered a Q4 that was in line with the guidance we gave, wrapping up a year where we delivered or exceeded on all the commitments we made.”
The operational improvements included boosting average train speed by 10%, reducing terminal dwell by 15%, cutting the unplanned recrew rate by 20%, and storing 500 locomotives even as traffic increased 5% for the year.
Running a faster, more fluid railroad produced $300 million in cost savings, which was $50 million above the target set in the spring. Even though annual revenue declined by 2% due to slumping coal rates and volume, NS was able to top its operating ratio goals.
“It’s not just the financial results that are worth celebrating,” George said. “Our safety metrics improved dramatically throughout the year.”
Norfolk Southern’s overall Federal Railroad Administration train accident rate improved 27% for the year, while its mainline accident rate declined by 44%. The personal injury rate rose, however, by 5% for the year.
Chief Operating Officer John Orr says the NS Precision Scheduled Railroading 2.0 operating model delivered both efficiency and service improvements.
“We finished the year very strong, culminating with a successful intermodal perfect peak season, year over year, handling 7% more parcel volume per day with zero controllable failures,” Orr says.
Overall, the railroad’s intermodal service composite was up 7 points for the quarter, to 86%, while merchandise trip plan compliance was up 6 points, to 80%, compared to a year ago.
“We now have reliable service that’s consistent, resilient, and is built to grow in the market,” Chief Marketing Officer Ed Elkins says.
Fourth-quarter volume was up 3% overall thanks to a 5% increase in intermodal traffic. Merchandise volume was flat, while coal was down 1%.
The railroad’s volume outlook for this year is clouded by uncertainty over potential tariffs. “The potential for new tariffs will introduce some near term uncertainty into many markets that we serve,” Elkins says. “Despite these uncertainties, we are confident that we’re well positioned to recapture market share.”
Nonetheless, Elkins expects to see intermodal and merchandise traffic growth this year as the railroad regains business lost due to service problems that followed the East Palestine, Ohio, hazardous materials derailment in 2023. “We expect growth in most of our markets,” he says. “Coal is really the only place where we see a lot of overt weakness.”
Orr says he expects to see continued operational and service improvements this year. NS will refresh its operating plan this quarter by reducing car handlings and tightening standards for terminals and car connections. The railroad also will focus on fuel efficiency and mechanical improvements.
A “need for speed” war room aims to reduce bottlenecks that can slow service and hurt fuel economy. “They are now turning their attention to challenging every permanent and temporary slow order to actively reduce stops and drive additional fuel efficiencies over the road,” Orr says.
In light of three of Ancora’s candidates being elected to the NS board in May, George was asked about the board’s dynamics and priorities.
“Our board has been really remarkably unified. They came from different avenues. We’ve got a lot of new board members. The majority of them are within the past 18 months, yet they’ve all congealed in a beautiful way in the boardroom,” George says. “And I’m really pleased to see the engagement from all quarters and the mutual respect that’s being shown given everybody’s unique background.”
George says the board remains united behind the management team and the railroad’s Better Way strategy, which aims to boost volume and profitability by ensuring that service remains consistent and resilient through economic peaks and valleys.
The NS financial outlook for 2025 includes 3% revenue growth, generating $150 million in productivity savings, and improving the operating ratio by 1.5 points. The capital plan includes $2.2 billion in spending. NS will resume share buybacks this quarter after pausing them in the wake of the East Palestine wreck.
Adjusted for the impact of one-time events — including line sales and line items related to the $2.2 billion East Palestine derailment — the railroad’s full-year operating ratio improved 1.6 points to 65.8%. For the second half of the year, adjusted O.R. was 64.1%, which was a 4.8-point improvement that was in line with the railroad’s expectations.
On an adjusted basis for the fourth quarter, operating income increased 11%, to $1 billion, as revenue declined 2%, to $3 billion. Earnings per share grew 7%, to $3.04. The operating ratio improved 3.9 points to 64.9%.
George may want to rethink is comment about the new board members. Congealed has a negative connotation — of sticking and slowing down — of grinding to a halt.