Norfolk Southern Q2 Earnings Beat on Record Revenue and Volume Growth

NSC’s Revenue Mix Shows Broad-Based Strength

Merchandise revenues increased 8% year over year to $2.13 billion. Units rose 2%, while revenue per unit advanced 6%, supported by higher fuel surcharge revenue and favorable rate and mix.

Chemicals revenues climbed 18%, agriculture, forest and consumer products increased 4% and metals and construction rose 5%. Automotive revenues advanced 3%, with units remaining essentially flat.

Norfolk Southern's Intermodal Leads Growth

Intermodal revenues jumped 22% to $908 million, with units up 5% and revenue per unit rising 16%. Domestic intermodal units grew 11%, more than offsetting a 3% decline in international units.

Coal revenues climbed 7% to $424 million as units increased 3% and revenue per unit improved 4%. Export coal tonnage surged 25%, while utility and domestic metallurgical tonnage declined 8% and 15%, respectively.

NSC's Costs Weigh on Efficiency

Adjusted railway operating expenses rose 15% to $2.27 billion. Fuel expense surged 85%, or $186 million, mainly because of higher prices. Compensation and benefits increased 8%, while purchased services and rents climbed 6%.

The adjusted operating ratio, which measures operating expenses as a percentage of revenues, deteriorated 210 basis points to 65.5%. Higher fuel expense and the related surcharge revenues created a 110-basis-point year-over-year headwind. Excluding fuel, revenues grew 5%, while revenue per unit increased 1%.

Norfolk Southern's Network Metrics Face Pressure

Service and network measures weakened during the quarter. Train speed declined to 19.9 miles per hour from 21.6 a year ago, while terminal dwell increased to 24.0 hours from 22.7 hours. Car miles per day fell to 138 from 142.

Customer-facing metrics also softened. Merchandise plan compliance dropped to 68% from 78%, and the intermodal service composite declined to 85% from 89%. Management said that network velocity was regaining momentum in the third quarter and reiterated that NSC remains on track for at least $650 million of three-year cost reductions.

NSC's Safety Progress Remains Intact

Safety performance provided a counterweight to the service pressure. The first-half FRA accident rate improved to 1.61 from 2.37 in the prior-year period, while the FRA mainline accident rate declined to 0.49 from 0.56.

The first-half personal injury index improved to 1.03 from 1.08. Management emphasized continued investment in safety and linked the progress to longer-term culture change across the railroad.

Norfolk Southern's Cash Flow Funds Priorities

Net cash provided by operating activities totaled $1.40 billion in the first six months of 2026, down from $2.03 billion a year earlier. Property additions were $821 million, while dividends totaled $606 million. Norfolk Southern did not repurchase shares during the period.

NSC ended June with $1.07 billion in cash and cash equivalents. Total debt declined to $16.62 billion from $17.09 billion at year-end 2025, while the debt-to-total-capitalization ratio improved to 50.6% from 52.4%.

NSC Raises Its Expense Outlook

Management now expects adjusted operating expenses of $8.8 billion to $8.9 billion for 2026. The revised view includes a projected $400 million to $500 million incremental fuel impact versus the original guidance, along with higher volumes.

Capital spending is expected to be $1.9 billion, about $300 million or 14% below the 2025 level. The program is expected to support network reliability and capability as the company prioritizes safety, consistent service and disciplined execution.

Currently, NSC carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Q2 Performances of Other Transportation Companies

Delta Air Lines (DAL) reported second-quarter 2026 earnings (excluding 88 cents from non-recurring items) of $1.56 per share, beating the Zacks Consensus Estimate of $1.51. Earnings declined in double digits (% wise) from a year ago as sharply higher fuel costs pressured profitability.

Revenues rose on a year-over-year basis to $17.67 billion but missed the consensus estimate of $17.76 billion. Broad demand strength lifted adjusted total revenue per available seat mile, or TRASM, 12.4%, while premium and diversified revenue streams continued to expand.

United Airlines Holdings, Inc. (UAL) reported second-quarter 2026 adjusted earnings of $1.99 per share, down 48.6% year over year but above the Zacks Consensus Estimate of $1.92 by 3.7%.

Operating revenues rose 16% to $17.67 billion and were essentially in line with the $17.68-billion consensus mark. A 12.1% increase in total revenue per available seat mile, or TRASM, and broad-based gains across premium, loyalty and cargo revenues supported the top line despite sharply higher fuel costs.

J.B. Hunt Transport Services, Inc. (JBHT) reported second-quarter 2026 earnings of $1.91 per share, up 45.8% from $1.31 a year ago. The figure beat the Zacks Consensus Estimate of $1.71 by 11.7%.

Operating revenues climbed 19.4% year over year to $3.50 billion and surpassed the consensus mark of $3.19 billion by 9.5%. Higher volumes and pricing across several businesses supported growth, led by a 10% increase in Intermodal loads.

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