Panelists at our recent Railroad Roundtable projected weak demand for 2026. Tightening truckload capacity is encouraging but not impacting rates enough yet to gain confidence in rail pricing cycle. The Union Pacific/Norfolk
“Norfolk Southern delivered another quarter of strong results on safety, service, and productivity through a dynamic freight market,” said Mark George, President and CEO of the Class I railroad, which on Oct.
Pricing continues to decelerate in the third quarter, running well below the survey’s average. Business growth expectations worsen, akin to COVID lows. Economic confidence skews negative. Shippers would move LSD volume onto rails if transcon service offered. Rail earnings likely driven by M&A discussion despite incrementally weakening business conditions.
Union Pacific’s (UP) much-anticipated bid for Norfolk Southern (NS) was announced July 29. Both now embark on a lengthy review process, but we see the potential approval pathway justified due to U.S.
Unconfirmed reports over the weekend noted a Class I merger is close. These reports were preceded by actions by the STB that show the agency is preparing to handle a review in a more expedited fashion with a merger resource page already up, and a notice that the Board is embarking on taking steps to expedite regulatory processes. We continue to believe a deal is highly likely between Union Pacific and Norfolk Southern.
We upgrade shares of Norfolk Southern and CSX to Buy as the likelihood of rail consolidation moves up considerably. A Union Pacific bid for NSC likely results in a BNSF bid for
Class I merger talk comes back to center stage as the Wall Street Journal reports Union Pacific is in early discussions with Norfolk Southern. We hosted a call with Littlejohn & Co.
TD Cowen recently hosted a call with industry executives from the rail equipment market. From that, we heard order books are seeing no notable growth, attributable to tariff uncertainty, and used car
Pricing expectations stalled in second-quarter 2025 and remain below our rail shipper survey’s long-term average. Business growth fell modestly sequentially to levels not seen since COVID. Economic confidence improved marginally, though well below the survey average. 47% of shippers would support a transcontinental merger. We are cautious for the rail group into earnings, though we favor Union Pacific (UP).
Without volume and market share growth, the Class I’s may be at risk—or be forced to look at merging. Investors continue to await the next leg of Class I railroad earnings growth.
