Norfolk Southern has reported a significant 12% decline in its quarterly profit, attributing the drop to substantial costs associated with its proposed merger with Union Pacific and ongoing economic uncertainty. The freight railroad's financial results for the fourth quarter reflect the dual pressures of a challenging business environment and one-off expenses linked to strategic corporate activities.
Financial Performance Details
The company announced it earned $644 million, or $2.87 per share, during the final quarter of the year. This represents a notable decrease from the $733 million, or $3.23 per share, recorded in the same period a year earlier. However, both sets of figures were impacted by various one-time charges that distorted the underlying operational performance.
One-Time Charges and Adjusted Earnings
Norfolk Southern highlighted that merger-related expenses accounted for $58 million in costs during the quarter, while an additional $23 million was attributed to the aftermath of the 2023 East Palestine, Ohio, derailment. Excluding these exceptional items, the Atlanta-based railroad stated it would have achieved an adjusted profit of $725 million, or $3.22 per share.
This adjusted bottom-line figure actually surpassed analyst expectations, beating the $2.78 per share forecast by experts surveyed by FactSet Research. The outperformance suggests that, beneath the surface charges, the company's core operations remain resilient.
Merger Progress and Regulatory Hurdles
The proposed $85 billion merger with Union Pacific, which aims to create a transcontinental railroad network, continues to dominate Norfolk Southern's strategic focus. CEO Mark George confirmed the company is concentrating on improving operational efficiency while collaborating with Union Pacific to prepare a comprehensive merger application for consideration by the Surface Transportation Board.
Regulators have already rejected the railroads' initial submission, requesting more detailed information before proceeding with their review. The deal, if approved, would combine two of the nation's largest freight railroads, creating an entity with more than 50,000 miles of track across 43 states and connections to major ports on both coasts.
Economic and Political Challenges
George acknowledged the difficulty in predicting economic performance this year, citing President Donald Trump's trade policy shifts occurring on short notice as a particular challenge. This economic uncertainty compounds the regulatory obstacles facing the proposed merger, creating a complex operating environment for the transportation giant.
The CEO noted that despite these challenges, Norfolk Southern delivered $215 million in annual productivity savings last year and achieved its best safety performance in over a decade regarding injury and accident rates. "In 2025, we strengthened the foundation of our railroad. We kept our cost commitments, maintained reliable service, and delivered measurable safety gains," George stated.
Industry Impact and Stakeholder Reactions
The potential merger has already begun drawing reactions from various industry stakeholders. Some shippers, competitors, and unions have started positioning themselves on both sides of the debate, anticipating the lengthy regulatory review process that lies ahead. The combined railroad would significantly reshape freight transportation in the United States, particularly in the eastern and central regions where Norfolk Southern and Union Pacific respectively operate.
As one of the largest freight railroads in the country with extensive operations in the eastern United States, Norfolk Southern's financial performance and strategic decisions carry substantial weight within the transportation sector. The coming months will prove critical as the company navigates both economic headwinds and the complex regulatory landscape surrounding its proposed merger.
