Norfolk Southern (NSC) and Union Pacific (UNP) logged stronger-than-expected second-quarter results amid robust freight demand and higher fuel surcharges, sending the shares of the merger-bound rail operators higher Thursday.
Norfolk's adjusted earnings rose to $3.52 a share in the June quarter from $3.29 a year earlier, topping the FactSet-polled consensus of $3.32. Revenue jumped 11% to $3.47 billion, ahead of Wall Street's $3.38 billion views.
The company's shares were up 5% in afternoon trade and have rallied 21% so far this year.
"Fuel surcharge was a major factor in the second quarter, helping to blunt some of the fuel expense pressures," Norfolk Chief Commercial Officer Claude Elkins said on an earnings conference call, according to a FactSet transcript. "If you look past these headline numbers, you'll see that even without fuel, we achieved record revenue in the quarter."
Second-quarter operating expenses surged 15% year over year, more than two-thirds of which was driven by the "substantial rise" in fuel costs, Chief Financial Officer Jason Zampi said on the call.
Separately, Union Pacific's second-quarter adjusted EPS rose to $3.41 from $3.03 a year earlier, topping the consensus of $3.24. Operating revenue grew 12% to $6.86 billion, exceeding the Street's $6.71 billion views.
The company raised its full-year EPS growth outlook to high-single digit from mid-single digit.
Union Pacific shares were rose 4.4% intraday, bringing its year-to-date gains to 32%.
"Solid core pricing combined with business mix to drive 175 basis points of freight revenue improvement," Chief Financial Officer Jennifer Hamann told analysts on a call, according to a FactSet transcript. Operating expenses increased 13%, with fuel expenses surging 63% amid a 60% jump in average fuel prices and 2% higher gross ton-miles, according to Hamann.
"Even against ongoing margin pressure from fuel, fuel prices have remained volatile, and our recent purchases have been over $4 a gallon," Hamann said. "Overall, a strong first half of 2026, coupled with an improved outlook, highlight our ability to grow volumes, deliver for customers, and manage costs."
Last year, Union Pacific agreed to acquire Norfolk in a cash-and-stock deal valuing the smaller railroad operator at about $85 billion. The companies continue to make progress on the deal, Norfolk Chief Executive Mark George said Thursday.
Price: $348.22, Change: $+17.28, Percent Change: +5.22%
