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NSC Beats on Q2 Earnings, to be Acquired for $85B by UNP
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Key Takeaways
NSC Q2 EPS of $3.29 beat estimates, driven by cost controls despite a slight revenue miss.
UNP will acquire NSC for $85B in a cash-and-stock deal, closing expected by early 2027.
The merger will create a transcontinental railroad spanning 50,000 route miles across 43 states.
Norfolk Southern Corporation’s (NSC - Free Report) second-quarter 2025 earnings (excluding 12 cents from non-recurring items) of $3.29 per share beat the Zacks Consensus Estimate of $3.27 and increased 7.5% year over year, owing to lower costs.
Railway operating revenues were $3.11 billion in the quarter under review, missing the Zacks Consensus Estimate of $3.13 billion. The top line increased 2.2% year over year, driven by the 3% rise in overall volumes. Total revenue per unit dipped 1% year over year. Income from railway operations rose 4% year over year to $1.17 billion. Railway operating expenses inched up 1% on a year-over-year basis to $1.9 billion, primarily due to a double-digit increase in expenses on minerals and other items.
More than the earnings numbers, it was the announcement that Norfolk Southern would be acquired by fellow railroad operator, Union Pacific Corporation (UNP - Free Report) , at an enterprise value of $85 billion, that attracted attention. Before highlighting further details of the deal, let us uncover more facts related to NSC’s earnings report.
Q2 Segmental Performance of NSC
Merchandise revenues increased 4% year over year to $2 billion. Actual segmental revenues were a tad higher than our estimate of $1.94 billion. Revenue per unit decreased 1% year over year.
Intermodal’s revenues were flat year over year at $743 million. Actual segmental revenues were lower than our projection of $783.2 million. While segmental volumes increased 1%, revenue per unit inched down 1% year over year.
Coal revenues were $395 million, down 1% year over year. Actual segmental revenues missed our projection of $409.8 million. Coal volumes increased 12% year over year. Revenue per unit declined 11% in the reported quarter.
Norfolk Southern Price, Consensus and EPS Surprise
Norfolk Southern, currently carrying a Zacks Rank#4 (Sell), exited the June quarter with cash and cash equivalents of $1.3 billion compared with $1.64 billion at the end of 2024. NSC had a long-term debt of $16.5 billion at the second-quarter end compared with $16.6 billion at 2024-end.
For 2025, NSC now expects year-over-year revenue growth in the 2-3% band (previous expectation was for 3% growth). Adjusted operating ratio improvement is now expected to be in the band of 100-150 basis points year over year compared with the 150-basis-point growth anticipated earlier. With the cost-control initiatives yielding strong results, NSC now expects productivity savings in 2025 to exceed $175 million (previous expectation was above $150 million).
A Look at Another Railroad Company’s Q2 Results
CSX Corporation (CSX - Free Report) reported mixed second-quarter 2025 results wherein earnings beat the Zacks Consensus Estimate, but revenues missed the same. Quarterly earnings per share of 44 cents beat the Zacks Consensus Estimate of 42 cents but decreased 10.2% on a year-over-year basis on the back of lower revenues.
Total revenues of $3.57 million marginally missed the Zacks Consensus Estimate of $3.58 million and declined 3.4% year over year. The downside was owing to lower export coal prices, reduced fuel surcharge and a decline in merchandise volume. These were partially offset by higher merchandise pricing, an increase in other revenues and growth in intermodal volume.
The UNP-NSC Merger Details
In a bid to create America’s first transcontinental railroad, UNP inked a deal to buy NSC in a stock and cash transaction. The deal, approved by the board of directors of both companies, is expected to close by early 2027.
Under the terms of the agreement, Norfolk Southern shareholders will receive a Union Pacific share and $88.82 in cash for each share of the former. The offer price of $320 per share represents a total enterprise value for Norfolk Southern of $85 billion based on Union Pacific’s unaffected closing stock price on July 16, 2025.
Union Pacific will issue approximately 225 million shares to Norfolk Southern shareholders, representing 27% ownership in the combined company. Norfolk Southern shareholders will be able to participate in the upside of the combined company’s growth opportunities and synergies. The agreement is structured without a voting trust and includes a $2.5 billion reverse termination fee. The transaction is expected to be accretive to Union Pacific’s adjusted EPS in the second full year after closing and rising to high single-digit accretion thereafter.
In the event of the merger materializing, the combined entity will seamlessly connect more than 50,000 route miles across 43 states from the East Coast to the West Coast, linking approximately 100 ports and nearly every corner of North America. The merged entity will be headquartered in Omaha, NE, but will continue to maintain operations in Atlanta, where Norfolk is currently based. The combined company will be led by UNP’s current CEO, Jim Vena.
The deal would be closely scrutinized by antitrust regulators before materializing. The pro-business stance of the current administration may help the deal go through. Investors would closely wait for further updates on this burning issue.
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NSC Beats on Q2 Earnings, to be Acquired for $85B by UNP
Key Takeaways
Norfolk Southern Corporation’s (NSC - Free Report) second-quarter 2025 earnings (excluding 12 cents from non-recurring items) of $3.29 per share beat the Zacks Consensus Estimate of $3.27 and increased 7.5% year over year, owing to lower costs.
Railway operating revenues were $3.11 billion in the quarter under review, missing the Zacks Consensus Estimate of $3.13 billion. The top line increased 2.2% year over year, driven by the 3% rise in overall volumes. Total revenue per unit dipped 1% year over year. Income from railway operations rose 4% year over year to $1.17 billion. Railway operating expenses inched up 1% on a year-over-year basis to $1.9 billion, primarily due to a double-digit increase in expenses on minerals and other items.
More than the earnings numbers, it was the announcement that Norfolk Southern would be acquired by fellow railroad operator, Union Pacific Corporation (UNP - Free Report) , at an enterprise value of $85 billion, that attracted attention. Before highlighting further details of the deal, let us uncover more facts related to NSC’s earnings report.
Q2 Segmental Performance of NSC
Merchandise revenues increased 4% year over year to $2 billion. Actual segmental revenues were a tad higher than our estimate of $1.94 billion. Revenue per unit decreased 1% year over year.
Intermodal’s revenues were flat year over year at $743 million. Actual segmental revenues were lower than our projection of $783.2 million. While segmental volumes increased 1%, revenue per unit inched down 1% year over year.
Coal revenues were $395 million, down 1% year over year. Actual segmental revenues missed our projection of $409.8 million. Coal volumes increased 12% year over year. Revenue per unit declined 11% in the reported quarter.
Norfolk Southern Price, Consensus and EPS Surprise
Norfolk Southern price-consensus-eps-surprise-chart | Norfolk Southern Quote
Liquidity of NSC
Norfolk Southern, currently carrying a Zacks Rank#4 (Sell), exited the June quarter with cash and cash equivalents of $1.3 billion compared with $1.64 billion at the end of 2024. NSC had a long-term debt of $16.5 billion at the second-quarter end compared with $16.6 billion at 2024-end.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
NSC’s 2025 Guidance Tweaked
For 2025, NSC now expects year-over-year revenue growth in the 2-3% band (previous expectation was for 3% growth). Adjusted operating ratio improvement is now expected to be in the band of 100-150 basis points year over year compared with the 150-basis-point growth anticipated earlier. With the cost-control initiatives yielding strong results, NSC now expects productivity savings in 2025 to exceed $175 million (previous expectation was above $150 million).
A Look at Another Railroad Company’s Q2 Results
CSX Corporation (CSX - Free Report) reported mixed second-quarter 2025 results wherein earnings beat the Zacks Consensus Estimate, but revenues missed the same. Quarterly earnings per share of 44 cents beat the Zacks Consensus Estimate of 42 cents but decreased 10.2% on a year-over-year basis on the back of lower revenues.
Total revenues of $3.57 million marginally missed the Zacks Consensus Estimate of $3.58 million and declined 3.4% year over year. The downside was owing to lower export coal prices, reduced fuel surcharge and a decline in merchandise volume. These were partially offset by higher merchandise pricing, an increase in other revenues and growth in intermodal volume.
The UNP-NSC Merger Details
In a bid to create America’s first transcontinental railroad, UNP inked a deal to buy NSC in a stock and cash transaction. The deal, approved by the board of directors of both companies, is expected to close by early 2027.
Under the terms of the agreement, Norfolk Southern shareholders will receive a Union Pacific share and $88.82 in cash for each share of the former. The offer price of $320 per share represents a total enterprise value for Norfolk Southern of $85 billion based on Union Pacific’s unaffected closing stock price on July 16, 2025.
Union Pacific will issue approximately 225 million shares to Norfolk Southern shareholders, representing 27% ownership in the combined company. Norfolk Southern shareholders will be able to participate in the upside of the combined company’s growth opportunities and synergies. The agreement is structured without a voting trust and includes a $2.5 billion reverse termination fee. The transaction is expected to be accretive to Union Pacific’s adjusted EPS in the second full year after closing and rising to high single-digit accretion thereafter.
In the event of the merger materializing, the combined entity will seamlessly connect more than 50,000 route miles across 43 states from the East Coast to the West Coast, linking approximately 100 ports and nearly every corner of North America. The merged entity will be headquartered in Omaha, NE, but will continue to maintain operations in Atlanta, where Norfolk is currently based. The combined company will be led by UNP’s current CEO, Jim Vena.
The deal would be closely scrutinized by antitrust regulators before materializing. The pro-business stance of the current administration may help the deal go through. Investors would closely wait for further updates on this burning issue.