Norfolk Southern CEO optimistic about 2025 after solid fourth quarter

[January 30, 2025]  By JOSH FUNK

Norfolk Southern's solid fourth quarter — combined with the optimism the railroad is hearing from their customers and support they're getting from Washington D.C. — has the CEO feeling optimistic about 2025.

The railroad, based in Atlanta, earned $733 million, or $3.23 per share, in the fourth quarter. That's up from $527 million, or $2.32 per share, the prior year, helped by a couple of one-time items whereas the same quarter last year was weighed down by hefty derailment cleanup costs. The insurance payments Norfolk Southern is collecting during the fourth quarter related to the disastrous East Palestine, Ohio, derailment in 2023 and ensuing cleanup provided a $32 million boost, and some sales of rail lines added another $40 million to the bottom line.

Without those unusual items, the railroad would have earned $688 million, or $3.04 per share. That easily exceeded the $2.94 that the analysts surveyed by FactSet Research were predicting.

CEO Mark George said regulators from the Federal Railroad Administration, Surface Transportation Board and National Transportation Safety Board and members of Congress were all positive in recent meetings last week.

It appears that the Trump administration and the Republican-controlled Congress could ease restrictions on the industry instead of continuing to push for the changes President Joe Biden's Transportation Department had recommended after the 2023 derailment near the Ohio-Pennsylvania border.

“Everyone recognizes that we move the American economy. So we’re an integral, vital part of moving the American economy,” George said. “So they want to be supportive. So those are the messages we were receiving. It feels good and it’s different.”

All the major railroads that have reported earnings this month have said they expect the FRA to now be more likely to approve waivers from regulations the industry has been seeking for years to use automated inspection technology to replace some human inspections. Rail unions have opposed those changes and argued that the new technology should supplement — not replace — human inspections.

Democratic U.S. Rep. Chris Deluzio, who represents the area of western Pennsylvania just over the border from where the East Palestine derailment happened, said he hopes the Trump administration won't roll back regulations on railroads and undo things like the two-person crew requirement rule the Biden administration finalized last year. Instead, Deluzio said he hopes Vice President JD Vance will help put pressure on Republican leaders in Congress to pass a rail safety bill similar to the one he proposed after the derailment while he was still an Ohio senator.

“I don’t think this should be the moment to give the industry handouts when in fact, we should be putting stricter requirements on them on how they operate their trains through our communities,” Deluzio said Wednesday at a news conference in western Pennsylvania where he announced plans to reintroduce a rail safety bill similar to the one that stalled after the derailment.

Norfolk Southern locomotives are moved through the Conway Terminal in Conway, Pa., June 17, 2023. (AP Photo/Gene J. Puskar, file)

It's hard to tell how any tariffs Trump might impose will affect the shipments railroads deliver. Last week, Union Pacific' s CEO warned that imports could be hurt significantly by tariffs, but NS' George seemed less concerned because he said any drop in imports might be replaced with increases in domestic production.

“Things will play out over time, but we move the U.S. economy, we move GDP. And whether that GDP is coming across the border as an import or whether it’s now being produced domestically due to some onshoring, we’re going to be there to move it,” George said. “So I kind of think it’s going to be a net wash in terms of volume.”

Edward Jones analyst Jeff Windau said companies in all sectors are trying to get a handle on what tariffs will mean, and it's hard to know exactly how many of these trade sanctions will actually be imposed and how targeted they might be.

“It’s a very common question being asked on this earnings season so far. And really at this point, it’s very difficult to answer,” Windau said.

Norfolk Southern said the East Palestine derailment is now expected to cost nearly $2.2 billion total with about half of that related to legal costs and settlements like the $600 million class-action one. Insurance is expected to cover at least $751 million of that — leaving only a $1.4 billion impact on the railroad's finances. But only about half of that has been paid out so far.

Norfolk Southern started off the fourth quarter by recovering from Hurricanes Helene and Milton in the Southeast. That hurt some of the railroad's service metrics during the quarter, but George said he's proud of the way the railroad responded to the storms and confident that Norfolk Southern is getting more efficient.

Even with that disruption the railroad hauled 3% more freight in the fourth quarter. But its revenue slipped 2% to $3.02 billion as the lower fuel prices reduced its surcharge revenue. The mix of shipments the railroad hauled also shifted to a less-profitable mix with more deliveries of shipping containers filled with assorted goods, and coal revenue dropped 9% as that line of business continued its long-term decline. That was still slightly ahead of the $3.015 billion that Wall Street predicted.

The railroad predicts its revenue will grow 3% in 2025 and its profit margin will improve as it records another $150 million of productivity savings on top of a nearly $300 million improvement last year.

Norfolk Southern is one of the nation's largest railroads with tracks crossing 22 states in the Eastern United States.

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