At a Morgan Stanley investor conference in California, Norfolk Southern executives outlined the challenges and opportunities the railroad faces in the third quarter of 2026. Chief Financial Officer Jason Zampi explained that fuel prices, which were expected to peak in May, have continued to rise and now represent about a 250‑basis‑point drag on the company’s operating ratio compared with forecasts made two months earlier.

Seasonal performance and freight share growth

Zampi noted that, after accounting for the fuel‑related headwind, the company expects third‑quarter performance to be slightly below normal seasonal trends. Nevertheless, Norfolk Southern sees a positive outlook in its freight business. Executives highlighted incremental market‑share gains as the railroad continues to attract shipments that previously moved by truck.

Future intermodal opportunities

The railroad’s next major growth opportunity, according to the executives, will come during next year’s intermodal contract bidding season. By offering competitive rates and reliable service, Norfolk Southern aims to shift additional freight from highways to rail, supporting both efficiency and environmental goals.

Tariff uncertainty largely resolved

Zampi said most customers have moved past the recent tariff uncertainty, describing the tariffs as a largely one‑time event that no longer exerts a significant ongoing influence on markets such as automotive. This stability, he added, allows shippers to plan more confidently.

Geopolitical factors affecting fuel

The CFO pointed to the conflict in the Middle East as a larger concern, noting its impact on global fuel prices and shipping routes. While the railroad cannot control these external forces, Norfolk Southern is monitoring the situation closely to mitigate any further cost pressures.

Merger with Union Pacific progressing

Regarding the proposed merger with Union Pacific, executives reported that the regulatory review is proceeding broadly in line with expectations. The current timetable, they said, provides greater visibility into the process, allowing both companies to plan for a potential integration.

Outlook

Despite the fuel cost challenge, Norfolk Southern remains confident in its ability to grow freight volumes and improve operational efficiency. The company will continue to focus on expanding its intermodal offerings, leveraging its network to provide a reliable alternative to trucking, and navigating geopolitical risks that affect energy markets.

Original reporting: Appleton, WI News Feed (HLL/CB) — read the source article.