NSC - Earnings call transcript Q2 2024 | Norfolk Southern Corporation

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Operator

Good afternoon, ladies and gentlemen, and welcome to Norfolk Southern Second Quarter 2024 Earnings Call. [Operator Instructions]. This call is being recorded on Thursday, July 25, 2024. I would now like to turn the conference over to Luke Nichols, Senior Director of Investor Relations. Luke, please go ahead.

Luke Nichols

Thank you, and good afternoon, everyone. Act today's meaning will provision of Private Litigation during statements certain of that Securities the within the Reform note call, make we forward-looking the Please XXXX. of safe harbor Corporation, materially to relate and future Norfolk to events These results. which may statements subject differ future are and actual performance for of Southern from uncertainties risks most risks reports for full SEC refer Please and we with uncertainties filed to our annual the important. view as of and those quarterly disclosure

norfolksouthern.com comparable in that reconciliation non-GAAP release. as basis at provided Investors including Our section, measures operating our our presentation available in Please all referenced slides or with the of prospective being our on used ratio along are an note adjusted to ratio. earnings operating today GAAP during adjusted non-GAAP references are any today's to the measures, call

Turning introduce to Alan my to Executive Norfolk Southern's now X, Officer, Slide and Chief Shaw. pleasure it's President

Alan Shaw

you, Luke, you, us. and thank everyone, for joining Thank

our OR our Chief million me XXX half Chief sequential XX%. to of was Financial our we a with adjusted XX.X%, XX% Here quarter $XXX Ed XX.X% reported the to $X.XX. $X.X our good basis operating shareholders points range Notably, first ratio adjusted income earnings billion, margin our in of making we our ratio. OR Officer; share with first quarter in delivered of improvement financial to Officer. per commitment of Mark Marketing a Elkins, income net of Chief on half the operating on second Earlier, operating second diluted today George, Officer; Operating including and results, and John of are Orr, our

our team and initiatives. the and our Thoroughbred demonstrates significant Our headwinds it's our by margin strong safety in service, productivity close by this of peers strategy despite accelerating delivered quarter to revenue progress gap core. The balanced at over to improvement the growth with ability quarter executing productivity

weakness we overcome and volume costs. through our on growing and by able X hear and increasingly you metrics, on were key opportunities Ed market progress laser-focused will from market John, operational controlling to remaining Mark, As strong to responding

is We safety the also safety the our metrics. gains operable the take and in progress culture This improving seriously to our allowed gain to that standard foundation as of significant to continue when continue gold operations excellence delivering benefits coal and in productivity of onboard share opportunities to the to the in our intermodal, customers on shareholders. create returns. This deliver strategy. will is with the and being discipline while for and agriculture. our strength service-sensitive that make teams and flywheel in deliver markets and market driving will industry. commitment spot product participating service growth compelling is and and Efficient such effect tangible a auto

in several record performance we result, a merchandise measures. As posted key

quarter our While an results inflection represent our our continues, point work encouraging performance. in second operating

customers, John of ahead. the front better urgency have delivering in Southern's now over employees of excited operational communities to results and us. We I'm power discuss to Norfolk runway that and strategy and progress. way for We're it plenty committed the our pace shareholders. I'll further turn demonstrate a our of our to with for opportunities

John Orr

our a on provide Alan. update to you, progress. pleasure Thank an It's

to safety safety X. our Turning to Slide performance enables At and NS commitment unwavering. is

field NS safety. the our During framework strengthen leveraged quarter, our we to leadership

and and reductions rate. our sensors. on mainline inspection efforts X field our best-in-class focus These have continued we We added contributed portals commissioned to additional accident to mainline accident

the reinforcing conducted the safety X our strengthening ballast from capabilities also and cross-functional summits, leadership We to boardroom. safety

Slide indices. to X. improved across performance metrics We core all Turning our our network of

the our Year-to-date, and active XXX have power have an in XXX cost reduced work and together. half. we improvements Our additional locomotives targeted fleet reductions balanced approach proved motor safety, online service best by second

to metrics our and the by reliability fleet drive both locomotives, remove for and fuel GTMs As we design and and X% performers, available down use driving over result in car the of improvements cost, worst time expense. Quarter-over-quarter, that materials out reliability processes our increased the and maintenance, overall up by Both we X%. are horsepower driving road. store we velocity terminals

strategy improvements purchase in materials Our includes cost crew fuel service management, efficiency enhancements. procurement, and productivity structural optimization,

So million in as the few that a cost let's the take initiatives takeout for pipeline closing gap a commitment. the $XXX track look of at we the are

Turning to Slide X.

velocity our train I car operating connection something extending schedules have improving captures performance. a by and improvements closely. terminal execution reducing and in plan, velocity is over-the-road X% delivered We improvement performance. in Car monitor handlings, It

X% day. during with the speed working our service their online. unnecessary eliminated XXX response customers reduction in of in velocity over inventory For Driving quarter, to a of improve, to required the example, car the current as rightsize improvements train cars to fewer velocity and includes per delivered we car train car we the cars speed handlings quarter, pipelines are overall volume. In

service train addressing reliability and dispatching train and improving are speed by We safety, practices. unscheduled stops

example, rooms and reduction of fees an scheduled mechanical analysis root For cause of unscheduled resulted in stop stops train our in XX% has war every QX.

discipline to XXX to of and X% March overtime combination in from expense in and and a improvements to network We reduction starts. The operating planning. encouraged has terminal adherence. really out extra and that X% connections increased watchdog to reductions to team, have extreme bringing our They starts discipline just challenged has KGTM XX this extra crew execution dropped for This the in yield and QX. instilled crew train by network-wide cause driven planned crew has has a train have operations train. compared accountability These plan every resulted our in I'm per June. and visibility root new

we network underway. in least and recalibrating our resources local standards sweating redesigns car even the This improvement path Yard grows, the effectiveness are further. is operational velocity. X% are and As XX% at to to

and mile We are first waste last in rework driving out and the mile operations.

approximately same to footprint. Efficiency this in XX% is of within We work of here. important really crew the starts allocate are the since to capacity additional we take unlocking space on me

next the months, will improve fuel we productivity. continue to XX Over

and We quickly, more improve locomotives, assertively ton, to fuel turn and to leverage push power train will trip vendor distribution manage increased continue accountability size. per optimizer horsepower

of We locomotive productivity are improvements X%. an additional targeting

One the is to skilled develop strength of my that build of I'm leading. to improvements sustain the next the generation bench railroaders PSR to personal objectives and

is We the outcomes with are across structuring the proud organization drive collaboratively to confidence. organization. daily and engagement encouraged am the department The in and I every the the and by people strategic and and team working entire of

increased what's service me shipments this September. increased intermodal the purchased earlier This we just is is growth of yield categories we will our initiatives motivated Our important and the next strength and wave creates deliver Within build In to savings as quarter. velocity rents simultaneously that carloads want service demand our and my by balancing XX%, out lane intermodal, and expenses This NS comp on our rents launching X%. materials, are success reservation upon flywheel for and services, and the cost. remarks platform smooth X bang in team reduces and X rationalization success. I the breeds service that all certainty. car P&L increased energized XX% automotive, of but performance by X%. to beyond And and and really strain with discussed system in creating examples by following to the close quarter of X in Slide

we consolidated reduced best service starts, service our complexity are sustained some At have ever. same of driven enjoying the the train customers and streamlined out handling Our have cost. time, plan,

tremendous driving sub-XX to unlocking OR. franchise, are urgently a We eliminating value within new adding capability, our waste and

Ed. Now it over I'll to turn

Ed Elkins

to afternoon on good everyone and John, you, Thank call. the

year. Overall results Let's go came to to notably rose commercial improved increase X% XX, prior Slide in unfavorable the intermodal X%, more driven Merchandise led second $X increase were while versus X% better from by a in billion, by I'll fell intermodal, fluid X% that review Volumes a X%, network service our mix. product in decrease. just X% impacts revenue and on results delivered customers. Revenues merchandise driven last quarter. above revenue our volumes a volume for RPU rose marks by fuel an a revenue out year-over-year. record the of Volume set versus for RPU Intermodal, again and year, increased RPU an X%, once grew XXth XX quarters, record revenue coal, X% while was less fuel flat. X% increased a increased which X%. RPU X% RPU last This declined And X%. all-time the where fuel. less less all-time new In alongside declined and

record record which an in via challenges were supply impacted fuel our take Key record and agility service to creativity the outage Francis note book, these was complex Scott a second unprecedented the Point, in marked for Baltimore extraordinary the to on port and automotive in of merchandise I'll set the less less Kohl's global Now all-time the We for closure which chemicals, RPU achieved quarterly restored propelling reflect our revenue was quarter demonstrated around do chains revenue total by and until Baltimore. I extraordinary intact quarter. less Metals, flat fuel. that operational the Baltimore. keep customers RPU of April. of a fuel our Bridge face Lamberts want an in revenue which fuel. Intermodal to performance and in record the in Virginia was all-time less here in

if exclude price X% and by fuel grew we the charges, revenues However, despite from pressure mix storage headwinds. and

of strong that are John and are service his the product these delivering. superlatives supported by team All

revenue may 'XX. mix manufacturing headwinds growth We're the lowering review projects to and to infrastructure market around borrowing higher X% and XX new for ongoing In interest based we currents, to Slide year costs, our underway. activity to merchandise, be expectations but continue. industrial benefits we expect turn Let's expect and rates full overall and see from of continued continuing on by our adverse cost for constrained outlook rest

see domestic a finally, within export network deliver value. utility prices international foresee are import headwinds and volumes while shipments expected while continuing, some a of improved and unlock volume challenged of the we weak to demand Intermodal remain fluidity channel new to rise remain reopening the markets in truck as shareholder from production. All environment through and growth volumes. growth Baltimore right. will overall space excess export Our also the capacity driver coal, and momentum And

and invest grateful will part example in The customers' in our These the for network expand Let's financial to as to cover growth reaches Norfolk premium and mine We're grade deliver revenue, key close I'm now and portfolio Southern This revenue markets want nearly service of is strategy partnership and for coal will it we're high-quality excited partnership coal years strategic years a their Mark take balanced finish project, enhance in in our also our a term. economic production. This that to This they XX. link highlight finally, infrastructure for large their motion. be to capital produce this turn in where peers lines this and grow to to with for commitment X customers also gap met new carload over demonstrates Slide projects our it to businesses. customers rail include producer short over approach new the investments long with developed win minute our a a of results. our business. I'll state our market. are the our the the be to to just our of confidence to and with million support our of when is thank tons significantly come. opportunity. Investing strategy. annually for Alabama growth support our their coal key full chosen investments And to met-coal met I top-tier in an terminal of concrete is example mainline future of and to our XXXX, going facility win-win this regions a up set global production U.S. recent to in on

Mark George

Thanks, Ed, and afternoon, good everyone.

a and on Slide right. quick GAAP the XX results start on of on results Let's the adjusted with reconciliation the left

actually line of item. that column, were you costs income the realized curtailment QX favorable our recoveries will an million incident also $XX million $XXX that within also our quarter exceeded favorable cost see the postretirement see Eastern income as separation our associated other You'll accruals, is a but true-up restructuring adjustment to as the we income booked additional accrued. In column of the insurance Ohio in

OR We also adjustment. the range. was cost column, contest. from associated highlight a under tax our by income the Adjusted with favorable proxy expenses the $X.XX a line was XX.X% incurred in aided guidance state results, line $X.XX QX below with the advisory in including

chart, next go the to through XX, the results. the compared year-over-year and variances sequential On adjusted Slide I'll

or a X%, revenue strong structure. was making of Year-over-year from lift function million team a $XX was excellent performance quarter second but Our remove on of combined revenue with X%. X%, dose up was progress service enabled performance network our RPU us and the volumes that to with down cost providing up

the most quarter. Operating million evident flat, at headwind rise was remained which gap improvement. expenses revenue the and year-over-year of That As in Yet sharp sequential growth. that's above the points inflation from because were where with business several volume million million. to gray the of cost including XXX which a cost the over and rents, costs it's is in here OpEx at lines. Shifting versus in of comp Ed as sequential by equipment mix remaining adverse, improving driven by large as or when lines will expense time, in in terrific acceleration operating with first the but business business box reflecting headwinds, I'll volume, to favorable volume high average $XX a drove ben, us efficiency $X the revenue average momentum as up despite drive as OR a allowed did a categories, merchandise in reduction RPU $XXX quarter, Slide $XX OR despite a was team and appears to Slide these only chart. on up sequential in savings more has velocity The ratio takeout, saying mix result million a down certainly X% to into purchase network fuel up decline in strong QX the $XXX notably reduction illustrated out look our focusing down shows mix growth change on dramatic below X% well service our within exceed as basis million momentum cost shift on as to green is in merchandise on at also XXX to in what was the the level, most in services RPU well of other. The RPU improvements. volume on operating increase you'll adverse XX. the narrowing all ops especially job discussed, see a each of speeding network see deliver The QX point and revenue XX, growth to basis industry. Drilling drive mitigation looking on sequential line start combining quarter. the this nice on the

ranks, QX. from sequential X% in took from the announced lower million also employee and compared of our largely You'll workforce. Property that but comp see to downsizing the also savings attrition nearly gains levels T&E in actions the bend previously we driven X second of our $XX in management in quarter totaled

on quarter results quarter smoothed normal So to you the our and amount. performance commitment. lumpy some of way theoretically is much the say Real first either Xx $XX half our in with pretty was choose in that annual rate. line evaluate in a are transactions million the you our may OR run the But a estate was

to environment made demonstrating meet on been OR had are allowing us a our what volume in structure we than commitment an So for, planning the we weaker point encouraged despite very organizational agility. inflection is at cost clearly we

quarter. the As be revenue to to step adverse various And effect a mix. here July we and headwinds in volume increase softer some expected, with second we that million the industry's that but consider. contractual tailwinds third and the previously next creates Ed are there comp on look the sequential than noted improvement, in ben X, wage and up $XX will half, took

message conditions, second is guidance about leave half momentum in the that operating our we I despite softer with will and reaffirming are our said, XX% productivity range. want and within the wage talked help to XX% ratio John that you that for neutralize macro to the impact. the However, today on operations, side actions All key

and hand cash some to I'll that will next with some excess years several cash to seen boosts a Before of properties and creates opportunities had That have We've make and to asset we is which of are the past and PSR, for of returns. capital. our streams, on we over that assets. I of the list adding often pursuing network there quarters. incremental a Alan, comment Alan? sales, Many in you flow generate several those capital shareholder liberation simplify robust have evaluate sales a larger efficiency continue

Alan Shaw

Mark. Thanks,

turn Let's XX. to Slide

lowered specific heard the guidance from to productivity year strategy. I despite you Southern testament to lower confidence our and they full year have our in thank our all shareholder quarter full intermodal we mechanical, strength results the teammates you to improved revenue front deliver and approximately significant drop guidance. As the Ed to operational gives as is commitments OR T&E, John, deliver us us, growth. from and opportunities Mark on are of identified and doing John approximately Ed, done revenue our capital for are actions the Mark which improvements. coal. demonstrated X% outlook. merchandise, revenue smart The every the heard in productivity Norfolk the focus to as And purchase a well growth our we that want day rents my and in in XX,XXX of accelerate have a services and of momentum single with from and in second outcomes reaffirming workforce, X% fuel, and on overcoming all

second our gap. of we close on key clear road initiatives for have to areas our results deliver a and multiple in confident ahead. and and several line margin team's in We months by trajectory next map the quarter. XX the quarters progress sight our over proud of encouraged gains a the I'm execute the in ability OR as in

We questions. to Operator. open call the will now

Operator

[Operator Instructions].

ahead. UBS. Wadewitz we call First go have Tom is from Tom,

Thomas Wadewitz

in ex yield the fuel of number merchandise. a the highlighted records you performance Ed, Yes. and

intermodal go potential that Or down think and to opportunity the So do pricing how Are the at yields Intermodal business. you see yield. per are in about further? drivers a ask intermodal stronger they to unit you and And bottom? I revenue we timing seeing wanted the about there

Ed Elkins

man. Thanks,

the And walk X the really that pressuring keep mix their in are unionized intermodal. Mix X or weakness you really road there. price make segment is and saw that carriers mix where in part in points through me employed. our fleets -- around counts and story premium really lower up Let price and driven the you to

piece mix we're empty a other lot of shipments. The is seeing

that me, Intermodal trying then the in in there. And part excuse ILA empty segment we're see when and all side, We're are see where highway rates. the does intermodal question the action on also offshore. seen possible carriers West Coast. anticipation year of really your On highway segment them really have out the Coast are starting really lot start and does ports back better to from capacity get a domestic the -- or of of when back putting the to push empties that's them more the a -- we on of pressure East some to International seeing when second long carriers to rates lot is repositioning think moves drop it We in the the

bottom. we're point. getting really customers few customers, first to I kind along And of biggest think that inflection for think our peak our that right from hear think of the time our from we're to seen, domestic we're for closer a what bodes customers. year and Talking they and bottom. well I as as season I the closer well for I've what they're I the today, years. a from an this do, And expecting customers X in international noted real our around both I what from read I bouncing

Thomas Wadewitz

way second per to it revenue some for it? a to stability looked that like in So unit. maybe Is think about in half XX% growth sounds reasonable maybe

Ed Elkins

Yes.

is sideways. think on I domestic side moving the RPU

Operator

from The from will Scott next Group be Wolfe question coming Research.

Scott Group

the QX, some in maybe help we the there some side, get but wage from progress. obviously, Mark, just were cost sequential $XX cost So million on increase good

couple way negative OR about just overall ex separately, in and And last maybe QX? structural helpful. any So mix? cyclical a coming from? about is a think something where phenomenon of then the help fuel us of think that's you is chart Or this is is to cost the there maybe growth more just the the Do quarters mix is trend really -- this

Mark George

you team second that? on to for Scott, question. ask part want mix. Ed first the that with I'll tag of the do But help on the to question Thanks, go

Ed Elkins

about quarter significant see those our like the Sure. into intermodal. I move of in some and I've third of and really that we're at that's can in the playing second lower seeing vehicles, you, finished going growth the and that of I do commodities seeing We're the both challenges we mix will that. in out aggregates kind forward already lower-rated tell of And been same talked story some merchandise fourth. end of spectrum. volume the

I happened revenue. a and there. what back additional record seeing the that use real car attributable actually handle focused the in... been velocity is think and a better of seeing in where lot to about change to we that equipment are amount volume we mean share from We are we've supply less where out It's sea on we're really the earning automotive market a merchandise

Alan Shaw

got volumes service XX% up We're on the in the most Ed in leveraging providing of provide X%. we Yes, something we intermodal John franchise product and years you going is lanes. powerful best rationalized in our East, intermodal.

Scott Group

lengthen basics, we really driving war day drill and trains moving low through service the drive efficiencies onboard cost the most and down the and by We of the And our that eliminating right? rooms resiliency to right a asset customers our it at can gets waste, miles sweat our we down. capacity creating our out efficiencies, more creating so locomotives really more the can, reliability per and

Mark George

volume on that the the Scott, I'd mix you side. another on, adverse touched But incremental momentum the quarter. erode of here And part question. see sure. here for Even is, That's third into we'll that mix, tailwind have in as from tailwinds productivity I the though first one transitions going probably say some of got guess. to the good we've growth benefit more We're the really

see time starts higher despite reductions So over in to continued expect volumes. going and I crew we're

look, I of very services. we're to and should in innings -- improve continue purchase think we're attacking fuel the early attacking efficiency very,

some got we've So broad-based initiatives there.

here, to really agreement X.X% So I increase in we're in takes wage July there. touched upon, you We've headwinds tailwinds as that think, see quarter. good effect that third the are going got But X. some

of million quarter, third comp And and top ben $XX comes OR it fuels modeling So is way step-up of going of we're as of headwind. headwind the that, basis be that's sequential in X well. that, basis like from on seems to points day on points and fuel the XX sequential it, probably XX, XX OR

see it our But going how out the we're position third happy shakes quarter. ultimately, we'll So really all with here. into

Alan Shaw

is Yes. to faster we're for our flywheel second that in this Look, an unlock revenue lot OR effect guidance it's network is generating of John headwinds. we're of really year team seeing a productivity, and his confident the And despite for the and because half savings. to a XX% where in XX% of opportunities

Operator

from America. Ken Bank coming from of question The be Hoexter will next

Ken Hoexter

but was recorded, you good. seemed was like super that It know on I pretty speed. that were

you suggest Just I move the following doesn't you're in exclude would guess, what XX%, If from on right? you versus in at get downside the a those what doing. XX.X% kind -- talking XX% the over target, XX%, the XX%, then of confident the the steps Alan, taking, OR. with Shouldn't happen some And talk looking question you're get in seems with I we performance, to But do XX% little Scott. it down sequential confident be it side like But much Maybe just real you need guess, to estate? ran maybe counter you're given you're really things like X-year there that savings. if what of I John's on seems steps it that bigger Scott's or cost is just bigger you step-up you have. with to said the a that you taking, you're upside

Mark George

sequentially, right OR. you the when QX in to QX, some Well, years have you Ken, look, have we again, you're historically, look that improvement where

level where of degradation. you other some You years have have

you average, sequential at this of you on unique if probably volume is degradation in this in period think somewhat it's is year, this which time. expecting exclude I of slight improvement. we're look this period year, if XXXX. But And of time, a

really continued that John So face on is of that's going out. what is all in doing gravy I And in momentum laid help to that of the the top us. headwinds

So from. where that's know don't I is coming [indiscernible]. the confidence

John Orr

from that inspire early would confidence engagement go change, field. and power major the and my delivering in the we're to the into the the days people I say, opportunities, terminals comes of team, In onboarding, of lead my the them see Ken, would I engage flywheel now field, seeing focused increased and is well the things. structure our management the We're that we to day-to-day we're how team and scale, reframe the build as intent, the really doing strategic in people on finders creating as the as more more and capability.

the the service starts X and doing people a things or X safety, the XX design safety happening is blitz finding week result of Just today, to out we just to going improve that that's and safety and other people elongate and keep based a trains we're and in flywheel, signed very the sustainability. of I'm train off power starts doing on on being And confident eliminates field, I ways build structure, seeing as is in synthesize field. capability create the we're it more service delivering. and This

Mark George

to So there question headwind on third to also just why what going some here the not repeat better, the I essence of quarter to in said just I'm is getting your Scott, the curve playing And the basis probably way of quarter wage XX there's basis see to fuel the out, we XX of points. another increase from related headwind. the second points also

got upside. not Maybe -- shakes So some fuel bad. doesn't is end we're big But are could That talking volume be being out overcoming those too. up where see about to And hurdles. that. honestly, as we

Unknown Attendee

all and to we're work to to equity sweat our think lot I going guidance, the a it's way. there's to what of be overcome hard doing going meet be

Ed Elkins

supply. possible We in we're And are is market. mean me Ohio that only with of recent converted from targeting our Agree. know higher X between challenged let the coil a challenged Indiana revenue. velocity we the line customer metals you middle of largest look, highway give and car because I and examples that's -- wins and more better macro environment but a

So we off grew the inorganically highway.

converted We lane tonnage able rail less aggregate the to because more Georgia in highway of large to equipment. state with the shipper, we're also our all handle with largest

Operator

The from from Partners. Vertical Jeff next coming will be Kauffman question Research

Jeffrey Kauffman

I with having may kind STB view and that the hearings want rail. on to of your changes get may how some just they're the that impact big-picture the or and not of the

Alan Shaw

coming up focused STB strategy. got STB reducing about enhancing on right? service, safety. And are are and we. And revenue growing is our The we're balanced hearing a has we're service, growth. we're The improving we're of delivering, so costs, part We that's

So a and story good we're to we've here, tell got aligned.

Unknown Executive

add, being a when were driving reinforcing weeks just Washington they Alan, And ago economy, and right plan with the U.S. meeting were vision. to of with were our they and few business our in really STB lockstep an as commissioners, resiliency and in service the we enabler

of when So us -- in to wants well front what the But we're commercial I the I will when leading talk doing. to regulator think challenge think sector. going that, it of continue we're the it's sector all always serves to to it

Operator

come Fargo. will question Wetherbee from next from The Wells Chris

Christian Wetherbee

be the further the in we the John, we of reductions you're making making year? think the guess, particular, of rest What about of here? in move guess, given heads to I half required are I should headcount? progress that we as thinking resources see words, the in other in through move guess sort I able do progress back through the we're that sequentially about as we as you're year. how

Scott Group

the is head customer true, count can exercise. aligning reduction the service the counts, this there I rightsizing and the this, T&E are This with efficiencies a tell Well, it's asset and you customer while not requirements. is fewer head

the to a hotels, did T&E really T&E. show our a the we sequentially, service that really I some the the on KGTM. sorry, need improving efficiencies T&A count that it a getting the to watch of frozen bring best really except skill we network, don't flexibility working fact need on So for eliminating labor cost at hiring that associated providing in to on. the in X% acute where it improvement you But my where in operating address move value. I lower and taxis, those is them that overall. we're any we're head that remarks really an and despite reason And long rightsize our We've overtime, made with there's or on things of what substantial opening with cost the to that's or give expense we're focus be. And they organization people, And -- where outliers, doing sorts clear I waste

to seeing where I So you that's of. forward more look can think

Mark George

volume, had end And I you, more bit year And on versus on be down little track a the end year. previously by are get of tell time X%, Chris, like guided the last of the to right? we would carrying to we we the that's

Operator

from The Brian next question will come Ossenbeck JPMorgan. from

Brian Ossenbeck

big get Ed to of examples, a been to quarter So impact than but weighted there of you're to about tough XQ, guess into just us other ticket point, to gave Mark, And it's target? been from come points call. counting on I fourth next more back the basis softer sort sequential are expected. XXX to implied some couple volume a the a maybe the environment It's coming quarter. XQ of Or little headwind to through certainly of that has items that

confidence that to help sequentially that's what some going in through target hit that to So of gives you come you XQ? the

Mark George

Yes.

in you where I challenge because a actually being the get one fourth think we the profile momentum continuous the year. I throughout quarter OR we're back that have think productivity be the half, float actually, that the see the lighter you making in a there'll typical of up.

bit a fourth the and would quarter little I fourth volume the to typically So you both to third less little in are sail going that in bit somewhat expect would would quarter, help more while third quarter as And imagine us a is I might similar get look through. productivity we the and going here.

Operator

The coming Chappell John from Evercore next question be of ISI. will

Jonathan Chappell

and past future. Ed,

you mentioned to made? the you've of putting you service part future. some and to then ahead you is any to improvements moving Do there that been feel volume if who the rail had second of open of from plans will, quantify, rail have cutting now to months, if that from back list the there resistant a for given would that muscle had have who the vast the memory from past, of you're way some the the given any maybe the putting to customers are final more some you contingency network bone impact metrics wins up. potential in you've these last was these any to of long First, be it switching new certainty. And customers in of negative who service several past little any, distraction, a bit

Ed Elkins

part Yes. of to remember the I'm question. trying first your

Unknown Attendee

any I [ lose ] volume.

Ed Elkins

look, this. think guys our customers know Yes. you -- I

as to across one us, on earn in because them that not in it we rooting have strategy we back the say know chain most additional And that this Our chain I would are and of in we we right coming and a year. back of share customers we really, growing lot the And we're unlock find is to had our solution, for they lost helping groups cost they us half are supply the were and first that's focused markets. where look, to customers to more which supply now. is through probably forward, that are area they particular us resistant value had were for merchandise money. confidence supportive different move there customers moving behind have the our whole of out volumes a of they X our us board. But

that's what focused those So we're we're and customers day every on. back, to working hard earn single really

Alan Shaw

service every together. on weak and The Intermodal market, John product we're product putting secure product because to and And Orr to and margin agriculture and revenue and and X% Automotive great sales are delivering additional opportunities most team and for we markets of spot X% of additional in respectively, were the right? between has this pick because of X looking service-sensitive coal that created. that his Look, markets they're grew alignment weak able in the great our John opportunity up operations, the the capacity markets, because dividend marketing

Ed Elkins

long whole thing. our supported over time with And said, this the I that customers, of who a period we've relationships built like

Alan Shaw

point. Great

Operator

question next coming be will from Barclays. Brandon The from Oglenski

Brandon Oglenski

you statement expectation. a still very expecting your And think I big your few And because back coal land think a we've the in look, recorded sale maybe more. prior export you half, we identified on on just We Mark, in decline remarks, had I point prior especially hey, talking yields quick to think clarification. of Are about, transactions. that the then, was ended

what that's think I heard. I

So should that contemplating you that million made were also you a think be OR we a maybe I that's comment in $XX.X outlook? quarter. expect about should you forward going. And think the where I

annualized million there's are gains? coming. bigger thinking be Or we should sales saying potentially So $XX you

Mark George

that [indiscernible], I'll first. part answer second

was that and So of the be sheet. in call referring large And would our to as land things gains terms trying that's that to would we I the augment balance side. out on referred of probably more to really kind non-GAAP typically

$XX balance OR to we on was of no, million on capital path guide So really of million in they a $XX conversation the It restoring to forward. way the our sheet. Typically, going part are and any not normal on are course but $XX year real $XX OR. million, the there that in there range. are XXXX it's in absorb that's the that's gains we where And within that of kind million, years years estate where a more

it it, smoothing million making about, range $XX neighborhood $XX this $XX talking general commentary be was I but could in call that a year. million, So more million,

Ed Elkins

them eroded price you'd is well. chain prices, rates disruptions and are we'll then gains during the to to, the were continue there global supply the that north to prices going And of are mostly talk really a quarter what those stay coal caused But lower as those see that And to few expecting but have see. asked drift the slight expectation we There We'll slightly $XXX. seaborne happens. away. of Okay. about lift experts are several

Operator

The Shanker Stanley. Morgan from Ravi from next question will come

Ravi Shanker

I down? customer this? there? Coast Can kind think line and are give there little already, for you was some and can of port of said you around something before settles And bit there. more you What what's where more actions us that a unpack time a East some that the it go little the detail earlier that behavior seeing

Ed Elkins

that take one. I'll Sure.

knows port on I think [indiscernible] reach September everyone agreement XX the operators. with ILA the to

what's That We starting are have BCOs talking shippers market. get as Sea. But customers, reasons. rise our intermodal the little line steamship as bit. their in hedge are happens, of on to that Coast to West to We well of activity the customers includes a lot the on going for number a of partners. our And see domestic a all bets Red freight their as to

And freight as well So observing and believe, I they're deploying to Coast east. as the this just the market. is the West me really

out the Coast. will going think there of I you're boxes the with the seaborne supply shortage not West off they steamship of elongated chains. containers, in their inland that lines come is because containers to are see What want

to be the this domestic intermodal think I thing of West way lot evolves. Coast. the a And That's there's out for demand so going

Operator

coming from be will Alper question next The Elliot Cowen. for TD

Unknown Analyst

This Seidl. is [indiscernible] on for Jason

Hoping margin purchased lever could in on of that. the services. the some for next brought initiatives will be broad-based you You up elaborate

purchased of year? of Maybe the progress should back some of cadence the will through the about the be services about think we talked half that how we OpEx items You headwinds through the year. as

Mark George

Thanks question, that's years, it's the amount cloud-based Yes, it's obviously, lot for up of from mean in subscription-based gone I handful services. the a Elliot. a largely -- technology big spend past

costs lot intermodal time, with the associated X/X -- a purchase see showing variable services activity. capital. you So more to opposed about at to up costs probably and the about as related volume in now But software is same

actually, increase grew X% sequentially, slightly. year-over-year, actually X%. the Intermodal services down around it And limited but So to was purchase we

down. spent focused going pretty be time, this is about I lot bring and a an to outside and volume the of we're other So purchased John, to a of to jump find lot do this the of in to in? that services of And certainly, opportunities past of on area the we've John months talking pieces. want you variable aggressively trying couple areas

John Orr

fuel our to looking Yes. at at we're we reduce there. trucks out, some fuel expensive same and and the able how the to time, vendor we're do visibility. process. and locomotives -- create pruning and more franchise, for example. looking fuel, our pruning exposure But at streamline same fuel take to the the pull distribution similar We DTL reliance look We've on just that, more that, really then reduce how been intermodal hard at of time distribution some We're driving accountability

put materials So got even on able locomotives that with we've and the midterm to views that some our putting locomotives and And long-term into really services down. fuel. associated cascades we're down short-term, maintaining

Mark George

one will in And to tell down be look would it expect the it on point other first see I I be ask half. you, how did Yes. is purchase going the worse than no you what balance would in because at the half. of you to year. year-over-year the back services about it

Alan Shaw

this drive response franchise revenue revenue and more as productivity, there leveraging And [ then ] merchandise a great our road truck market drive and broad-based product same to focused of rents. to got time, VergeService the at and sight then on equipment focus big services more the right? really got on intermodal fuel as that. service we've powerful workforce well. is on leveraging a and the of purchase productivity clear But We've line and map, part drive

Unknown Analyst

What think the of services about X of crew And do recrews. costs, much biggest how that you drives and..

Alan Shaw

you've [indiscernible] done on job reducing over time. that

Unknown Executive

creating recrews, the that. that our power reducing the reduce creating to cabs, real Ed service out, the and the possible our stability, resiliency able and [indiscernible] And proposition a being just we're costs taxi in over cost reduce of the not exposure sell you associated the at is recrews lowest all flies mobility. flywheel that that's because of house exposure of we're So winning that as to hotels, to, time, with

Operator

be question Stephens Daniel Imbro Inc. from next coming from The will

Daniel Imbro

the back and the absorb turning ability to back circle from this The like to business flywheel some service a It is to good you wanted sounds have that winning that earlier merchandise disruption in is year. I of volume. place.

embedded it and the the what guide, share And market guess, that back then it I back half? that's winning of on back merchandise more takes or include So to some catalyze more you do for does volume? back of pace win in volume that think win start outlook profitable some volume

Alan Shaw

and bear. capacity lot the have A also of that improved service Yes. we to is just that product it leveraging

want utilization we we And against and rail capacity As market. Frankly, to environment, in cost equipment more increase the customers our to save a the put can truck. has equipment, freight money. our relative customers' this of advantage even

Ed Elkins

get look, in Exactly. of be we've in the to really first to happened over As happen merchandise a where half hard right? let's extended worked erosion time, the now. And clear, year. of our this we It's volume didn't fairly are period right

first various all and demonstrating what that customer So them. to are runs belt a right every one conveyor the them pull the all, speed going out improving giving what at time. same exactly that's there and it fundamentally customers we're want, to they the going our it now, But of we're with there to first is is that customers. varying we're levers pull which with need,

Unknown Executive

I And reducing still getting better. impacting productivity, resources, capacity capacity why creating without customer and approach service is service. reducing think we're facing -- our that's

Operator

will come Jordan Goldman question from Alliger next The Sachs. from

Jordan Alliger

I'm standpoint, sort whole from about of about we Just curious, sort gap operational of a sea much question, this think sort just and changes. fine-tuning a is you to operational flow margin bunch of the close as tackling, of all of major talked that how of year into initiatives we them, would of lack blocking the year consider a next plan better for what and you as versus word, basic an

assess to as go along execution difficulty here. from the Just we trying of

John Orr

what different an sight happen. And there they'll a I just is day. this opportunity. it that -- wins. will utilization, of forward, solid of asset at commitment that the the on that's is big mean, pipeline it's and million of be in secret. itself things. consider lends stability bigger growing point. those all always to out through efficiency, there. move to stability as to come -- I we taking crew make drive would a -- work, it's and railroad single our series opportunities And in I've fuel whether it's But path every inflection Today And there wins, through utilization, efficient, we effective and running $XXX we're got hard overall -- of no we've points. line small that, made a Well, create an to

So it's a I would we're to say things drive hard. going those blend of and

Alan Shaw

leadership, the of to of our year. team is half us weakness his producing it's And the guidance have the discipline John what allows and it's it's market and to second improvements plan, Look, for operational are the our confidence acceleration execution. reaffirm the of overcome

Operator

Spracklin RBC will question Capital next come from Markets. The Walter from

Walter Spracklin

that? Do new and a your one as roots onshoring Mexico what market I'd Pacific CPIC focus network call that it in -- opportunity that getting business network described? via times, several and of challenge for the of that's they're you like saying big their to a a your product Union this focus turn before mentioned been into is is Or hasn't you been big there Southeast that wheelhouse a Southeast this I'm gave to trend. now new product opens opportunity? your source to be on would that Could contingent ] into up Mexico CSX's route Do having and opportunity that a more I near-shoring little an when I you obviously, being debate. But you that and as me CPKC if the gave think for on see [indiscernible] CPKC during put via access Mexico a true? CPKC, time presented the bit been or the into wrong, before. at a for to [ destination has and you the it the never -- I mean, know may correct have access and

Ed Elkins

We probably would described or come high what value I is and say. manufacturing here's think back add assuring look, is everyone that is manufacturing, automated. that Advanced is to going kinds X know of Well, onshoring to America. how which that I There's very North near occurring.

that's America, think that in U.S. to place Mexico. to come probably back North But going going is is to the I basic a manufacturing

CPKC as really talking the week well with as on every we're So opportunities. Grupo Mexico

will in be opportunities One and very to future that for I are of think segments via Speedway. the the those that will various exciting opportunities manufacturing. for is U.S. products opportunities emerge connecting Southeast of Mexico other There near Meridian the That's sure.

Walter Spracklin

and in talking the said General yesterday about supply Motors It's of it on was Mexico world Mexico and conversation. that both X right, major great the short the in you're well some wasn't that last connection where as a and in a the of spent the just conversation, to going part And office as are. the years really we chains, part I've part Ed, for be railways of lost that the of me sea. got opportunities understand opportunity we've

think I So term? a real and that's in immediate near opportunity the

Ed Elkins

would future for I standby Yes, say developments.

Operator

from Stephanie come will Moore Jefferies. call this from question last The from

Stephanie Benjamin Moore

I guide the does maintaining year, you're years OR that forward of so touch increased this improvements even wanted this aka better revenues. with this kind kind going the even to the for speak, OR on seeing ahead, to load just productivity lower of spring the year, the in

ahead? in expansion we background the OR I'd get to that if years constructive love backdrop, forward of that roll mean more your So does to a XXXX, kind and accelerating freight XXXX or the thoughts. hopefully,

Alan Shaw

Stephanie, environment. And we at of targets. And this are we doing beginning aggressive freight we OR we the out said delivering year, are long-term do. pretty we a weak a set everything despite would

to environment, a a are in tough freight to road going. enhancing first We it. revenue service. and sub-XX on map, reducing We're safety. of we'll a keep out We're the our rate, reduce a We've multiyear We're we're we're OR laid growing then in costs. improving plan year delivering we're and But and executing.

Mark George

through if faster. you generates horizon, opportunities outsized see maybe industry, and top there line getting think the opportunities And -- know end this you in think I on that outsized I it up usually

Operator

at back CEO are There the and I'd final questions comments. like further Alan to turn for Shaw, the no to call over time. this President now

Alan Shaw

the forward Southern, the look and we your for interest to Thanks in couple continuing over conversations next Norfolk of months.

Operator

today. you and call that participating concludes your this Ladies for please ask gentlemen, your We lines. you for disconnect conference and thank

Norfolk Southern (NSC) 25 Jul 242024 Q2 Earnings call transcript