Norfolk Southern Corp

Equity Research 23 July 2026 | 4:55PM EDT

Norfolk Southern Corp. (NSC): 2Q26 EPS Beat; Raising Estimates; Potential Rail Merger Remains In Focus

Bottom Line: NSC reported 2Q26 adjusted operating EPS of $3.52 compared to the Jordan Alliger | GSe/FactSet consensus forecast of $3.32. Total revenue of about $3.5B was +3% vs Goldman Sachs & Co. LLC GSe and consensus, while NSC’s adjusted OR of 65.5% was ~100 bps ahead of our Andrzej Tomczyk, CFA 66.5% forecast (80 bps ahead consensus) – which led to overall adjusted EBIT of | $1.2M at +6% above our forecast (+5% vs consensus). Reported OR was 67.6%, but Goldman Sachs & Co. LLC

that included Eastern Ohio incident insurance related costs and merger costs. Paul Stoddard | We continue to believe the potential UNP/NSC merger is likely to dominate the Goldman Sachs & Co. LLC conversation versus fundamental improvement in the near-to-medium term (See UNP and NSC Announce Agreement on Transcontinental Rail Merger, our initial Rail M&A Note, the follow-on note UNP Files Merger Application with STB for Transcontinental Rail Merger with NSC; Upgraded Synergies, and more recently UNP Re-Files Merger Application with STB for Transcontinental Rail Merger with NSC; High Level Perspectives and Run-Through).

We note that NSC’s potential future partner UNP also separately announced today that it reached an agreement with CN to expand customer opportunities in connection with the pending merger; this establishes a framework for CN to secure competitive access, Midwest expansion, and terminal ownership interests in connection with the proposed Union Pacific-Norfolk Southern merger. Under this agreement, which is contingent on regulatory approval, CN would gain certain trackage rights and terminal stakes while not opposing the merger and collaborating through the Surface Transportation Board process.

During its last earnings (1Q26), NSC did not provide 2026 guidance for overall revenue or EPS, but noted adjusted operating expenses were expected to be in the range of $8.2B-$8.4B, expectations for ~4% inflation, and more normalized land sales weighed against expected productivity; NSC updated expectations this quarter to now assume higher expenses of $8.8-$8.9B, primarily reflecting higher fuel cost expectations. NSC expects productivity savings in 2026 to be ~$150M (unchanged from 1Q) as cost-control and targeted initiatives continue to yield results (company achieved $500M productivity savings over the last two years; 2026 target brings 3-year cost takeout plan to $650M).

Results: Higher total revenues (+11% YoY vs +9% GSe) came with adjusted OR of 65.5%, or ~100 bps ahead of our forecast of 66.5%, leading to overall adjusted EBIT +6% above our forecast (+6% EBIT beat on +2% higher revenue). Last quarter, NSC had highlighted its expectation for margins to perform inline with normal sequential

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Goldman Sachs Norfolk Southern Corp. (NSC)

seasonality of ~200bps improvement QoQ into 2Q (despite the known fuel headwinds); management noted the better performance of ~320bps of margin improvement QoQ reflected the company capitalizing on better volume trends in the quarter while managing controllable costs.

The lower-than-forecast expense trajectory within Purchased Services and Materials/Other (combined ~180bps lower than forecast) were the primary drivers for better margins versus our forecast. Overall revenue per unit at +7% YoY in 2Q26 (vs GSe at +4% YoY) accelerated compared to +2% YoY in 1Q26; this was composed of merchandise RPU +6% YoY (vs flat in 1Q), intermodal RPU +16% YoY (vs +3% in 1Q), and coal RPU +4% YoY (vs -10% in 1Q). When excluding fuel, merchandise RPU growth was +3%…