Norfolk Southern has reported a strong performance for the fourth quarter, which, alongside encouraging feedback from customers and support from Washington D.C., has led to optimistic sentiments towards 2025 from the company’s leadership.
The Atlanta-based railroad earned a profit of $733 million, or $3.23 per share, in the last quarter, marking an increase from $527 million, or $2.32 per share, in the same period a year prior. This substantial rise was assisted by several one-time gains, whereas the previous year’s quarter was significantly impacted by costly derailment cleanup expenses. The fourth-quarter results were positively influenced by insurance reimbursements linked to the 2023 East Palestine derailment and the related cleanup, providing an additional $32 million. Furthermore, the sale of certain rail lines contributed another $40 million to the profits.
If these one-off elements are excluded, the railroad’s earnings would have been $688 million, or $3.04 per share, surpassing the predictions of $2.94 per share made by analysts surveyed by FactSet Research.
CEO Mark George expressed that recent meetings with regulators from the Federal Railroad Administration, Surface Transportation Board, and National Transportation Safety Board, as well as members of Congress, have conveyed a positive outlook. There appears to be a shift in favor of deregulation from the Trump administration and the Republican-majority Congress, which could lead to reduced restrictions for the industry, contrasting the regulatory changes recommended by President Biden’s Transportation Department following the Ohio derailment in 2023.
“It’s clear that we play a crucial role in the U.S. economy. This essential function is recognized, and we feel a strong support from regulatory bodies,” George commented, highlighting the encouraging feedback received during discussions.
Major railroads that have disclosed earnings in the current month have also indicated expectations of a more favorable stance from the FRA regarding waivers for regulations that have long been sought, specifically those allowing for automated inspection technologies as a replacement for some manual inspections. Rail unions, however, have opposed such modifications, advocating for these innovations to complement rather than replace human inspections.
In contrast, Democratic U.S. Representative Chris Deluzio, who represents the western Pennsylvania area near East Palestine, shared concerns about potential rollbacks of railroad regulations. He emphasized the necessity for stricter operational requirements rather than handouts for the industry. Deluzio is advocating for increased congressional pressure to enact a rail safety bill similar to one he proposed previously as a senator.
Uncertainty remains regarding the impact of any tariffs potentially imposed by Trump on railroad shipments. Recently, the CEO of Union Pacific cautioned that imports could suffer significantly due to prospective tariffs. However, George of Norfolk Southern expressed less concern, suggesting that any decline in imports could potentially be offset by an uptick in domestic production.
“Over time, economic dynamics will unfold. We are integral to the U.S. economy, whether that’s through handling imports or transporting goods produced domestically,” George remarked, indicating a belief that the overall volume might remain steady despite changes in trade policies.
Edward Jones analyst Jeff Windau noted that businesses across different sectors are currently analyzing the potential implications of the tariffs, though the future remains uncertain as it is difficult to predict how many of these trade sanctions will be enacted and in what manner.
The financial repercussions of the East Palestine derailment are projected to reach nearly $2.2 billion, with legal costs and settlements, including a $600 million class-action suit, making up about half that total. Insurance is anticipated to cover around $751 million, leaving a net impact of roughly $1.4 billion on Norfolk Southern’s finances, albeit with only half of that amount having been disbursed thus far.
The fourth quarter also faced challenges from Hurricanes Helene and Milton, which affected some performance metrics for the railroad. Nevertheless, George expressed pride in the company’s response to the storm disruptions and underscored a renewed focus on enhancing efficiency.
Despite these obstacles, Norfolk Southern managed to transport 3% more freight in the fourth quarter. However, total revenues experienced a 2% decline to $3.02 billion, attributed to lower fuel prices leading to reduced surcharge earnings. The mix of transported goods shifted towards less profitable shipments, compounded by a 9% drop in coal revenue, continuing its longstanding decline. Still, the reported revenue slightly exceeded Wall Street’s forecast of $3.015 billion.
Looking ahead, the railroad anticipates a 3% revenue increase in 2025, alongside an enhancement in profit margins, with expectations of achieving an additional $150 million in productivity savings in addition to nearly $300 million from the previous year.
As one of America’s leading railroads, Norfolk Southern operates extensive networks through 22 states across the Eastern U.S.
