Norfolk Southern Corporation
Industrials · Ground Transportation
5k route miles, regulated near-monopoly economics, ~50% intermodal / ~50% carload mix. Operating ratio (OR) is the KPI - every 100bps of OR ≈ $120M EBIT on ~$12B revenue base. 1B+ in derailment + remediation charges, accelerated safety capex, and consent decree with EPA.
Mark George (ex-CFO) took CEO Sep 2024 after Alan Shaw ousted; Ancora activist campaign settled with 3 board seats early 2024.
(1) OR re-rating optionality - NSC at ~67-68% adj OR vs $CSX ~63%, $UNP ~60%; closing half the gap = mid-teens EBIT upside. (2) PSR-lite execution under George; headcount + locomotive productivity catching up. (3) Intermodal volume leverage to nearshoring + East Coast port share gains ($MAERSK-B, Savannah, Norfolk).
(4) Pricing power - rail core pricing tracking 3-4% above inflation. (5) Real estate + fiber easement monetization optionality.
(1) East Palestine tail - class actions, NTSB findings, FRA rulemaking still open; reserves may prove light. (2) Coal secular decline (~15% of mix, structurally shrinking). (3) Truck competition on short-haul intermodal as diesel + ELD-driver economics shift.
(4) Regulatory overhang - STB reciprocal switching rule + two-person crew mandate pressure OR. (5) Activist-board friction risk if OR gap to peers persists into 2026.
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