Norfolk Southern, the Atlanta-based railroad company, didn’t see dramatic effects from tariffs in its first quarter results reported this week. It’s actually benefiting in some ways from companies pushing to save money in their supply chain.
But its CEO Mark George told investors Wednesday morning that “there’s no way to predict where we go.”
“Right now we’re in a really uncertain spot, but we haven’t seen negative trends yet that really alarm us,” he said.
The company reported $750 million in net income in Q1.
While quarterly revenue was down slightly from the same time last year, the company blamed that on lower fuel surcharge income and said it actually saw 1% growth in shipping volumes over 2024.
It also saw continued help with some of the billions in costs from its East Palestine derailment two years ago — in the form of nearly $1 billion in insurance recoveries.
Unlike other industries including aviation, where companies have been forced to backtrack on their projected annual numbers amid the trade environment, Norfolk Southern is sticking with its financial predictions for the year, George said.
The company’s business is 75% domestic, he pointed out, which insulates it from immediate tariff impact. Its business from Canada, Mexico and China are each “low-single digits” of revenue, he said.
Plus, Ed Elkins, the company’s chief commercial officer, explained the railroad — which generally offers cheaper albeit slower shipping than its main competitor, trucking — is also benefiting from customer desire to cut costs in the uncertain environment.
Customers “clearly want to save money,” he said, and “we are a great resource for them to de-risk their supply chains from a cost perspective. We see that happening, and I fully expect it to continue.”
But the bigger risk to Norfolk Southern, George said, is the broader threat of a possible recession.
“We see the same macro headlines you all see: the risk of lower GDP, heightened recession concerns,” George said.
“We are not immune to those same pressures, but we are staying in contact with our customers. There’s just been no clear sign from our customers that they’re concerned, and we’re not seeing it in the numbers yet.”
On Tuesday an International Monetary Fund official said its estimated risk of a U.S. recession has nearly doubled since last fall to about 40%.
In order to prepare, George said the railroad is “scenario planning.”
Just last week the company tightened up consultant usage, and he said he’d be “surprised” if headcount grew much this year as executives seek to manage costs.
Railroads like Norfolk Southern play a key role in supporting the location of new manufacturing in the U.S., and executives said they are still seeing “strong interest.”
Domestic firms are still looking to expand manufacturing and international firms are still looking to locate manufacturing in the U.S., but some “decision timelines appear to be extending as customers evaluate the macroeconomic environment,” Elkins said.
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