Good morning, ladies and gentlemen, and welcome to Norfolk Southern Corporation First Quarter 2025 Earnings Conference Call. At this time, note that all participant lines are in the listen-only mode. Following the presentation, we will conduct a question-and-answer session. Also note that this call is being recorded on Wednesday, April 23, 2025. At this time, I would like to turn the conference over to Luke Nichols. Please go ahead, sir.

Good morning, everyone. Please note that during today's call, we will make certain forward-looking statements within the meaning of the safe harbor provision of the Private Securities Litigation Reform Act of 1995. These statements relate to future events or future performance of Norfolk Southern Corporation, which are subject to risks and uncertainties and may differ materially from actual results. Please refer to our annual and quarterly reports filed with the SEC for a full disclosure of those risks and uncertainties we view as the most important. Our presentation slides are available at norfolksouthern.com in the Investors section, along with our reconciliation of any non-GAAP measures used today to the comparable GAAP measures, including adjusted or non-GAAP operating ratio. Please note that all references to our prospective operating ratio during today's call are being provided on an adjusted basis. Now turning to Slide 3. It's my pleasure to introduce Norfolk Southern's President and Chief Executive Officer, Mark George.

Good morning, and thank you, everyone, for joining. Representing Norfolk Southern with me today are John Orr, our Chief Operating Officer; Ed Elkins, our Chief Commercial Officer; and Jason Zampi, our Chief Financial Officer. We're looking forward to updating you on our Q1 2025 results. There's a lot to be pleased with this quarter as we delivered results in line with what we signaled, while dealing with a challenging winter, including 18 storms that were far more consequential to our network than Helene was last fall. John will share details on that impact and how we quickly restored fluidity to our network to serve our customers with minimal disruption. Our network resiliency was evident again, thanks to great planning and execution by our team, and we did it safely, with lower injury and accident rates, as our team continues to embrace safety as a core value. Despite all this disruption and absorbing $35 million of storm restoration costs that Jason will detail, we delivered 8% EPS growth on an adjusted basis, driven in part by $55 million of labor productivity savings. I'd like to thank every member of the thoroughbred team for their hard work and dedication during the quarter. Teamwork and a focus on safety and service excellence are what's propelling our progress. We're also proud of our commercial agility, staying close to our customers as we, and they, dealt with weather-related impacts to operations, East Coast port rebalancing, and volume fluctuations in anticipation of tariffs. Our behaviors and performance are increasing our customers' confidence in our service product, and that's driving meaningful share gains. We're doing a better job anticipating market and customer needs, taking on the right long-term growth opportunities in the most strategic lanes. We are prepared to handle volume growth. Overall, Norfolk Southern is doing what we set out to do. We remain focused on what we can control: safety, network performance, customer service, and costs. I'll hand it off to the team now to provide more detail on the results, starting with John.

Thanks, Mark, and good morning. Starting on Slide 5. As you said, the weather tested the resolve of the operating team in what was both a challenging and rewarding quarter. We faced significant weather across most of our network. Mark mentioned 18 storms. Let me tell you about one of them. Depicted in Slide 5 is our Heartland Corridor. A flash flood caused the Tug River to rise almost instantaneously to its highest flood levels since 1977. This impacted a 100-mile stretch of our mainline that moves over 50 trains a day. Depicted on the top left is a fill failure. The restoration of this one location required 8,700 tons of rock, the equivalent of about 700 truckloads of material. The repair to this remote yet critical location was accomplished in just 52 hours. Meanwhile, 87 miles down the same river system, the floodwaters and debris surged against this overpass. That's the image you see depicted in the lower left. Debris and high water jeopardized the bridge's structural integrity. We fought for two days against the surging water before being able to remove the debris and restore the bridge deck. There were 35 additional outages caused by the Tug River flood that were simultaneously repaired over a 4-day period. During the quarter, we incurred $35 million in extraordinary expenses to respond to storms, which adversely affected our operating ratio. While we can't control the weather, we can control our preparation and our response, and I am extremely proud of the entire team. Turning to Slide 6. Our FRA injury ratio was down 13% year-over-year and 15% sequentially. This is the lowest quarterly ratio in over a decade. Train accident frequency reduced by 43% year-over-year. Our pursuit of safety excellence and culture is showing tangible results. Turning to Slide 7. We delivered year-over-year network and productivity improvements across the board. Terminal dwell, AAR train speed, car velocity, and locomotive productivity improved meaningfully year-over-year. Turning to our service metrics. While we improved merchandise trip plan compliance, our time-sensitive intermodal composite was the most impacted by the storms. Exiting February, intermodal service stabilized and in recent weeks, we are at target. These numbers alone don't tell the whole story of our performance. The first half of the quarter was the story of the operations center and the engineering department planning and executing responses to the many disruptions. The second half was the story of commercial, mechanical, and transportation teamwork. For example, commercial and operations created an inspirational March Madness initiative to catch up Lamberts Point's quarterly export coal volume. They collaborated with our supply chain and terminal partners to optimize coal sequencing and dumping at the pier. Together, we've delivered both our forecasted and backlog volume efficiently. Safety and service excellence are evident in these results. Turning to Slide 8. The team is proving the art of the possible. Our PSR 2.0 transformation is unlocking network value and delivering on our financial commitments. Our Zero-Based operating plan rolled out in the quarter. Phase 1 simplified train plans, tightened connection standards, and strengthened our competitive resource and cost structures. For example, we netted a reduction of over 100 weekly crew starts. This generated yields in train and T&E productivity, reduced final mile dwell for over 600 customers, and reduced overall transit. Meanwhile, Enterprise Resources streamlined our materials management and distribution network. They are reducing material handlings, controlling expenses, and all the while increasing productivity. They are relentlessly pursuing every opportunity to eliminate waste and drive efficiencies across all spend categories. This includes further improving energy management solutions and implementing advanced fuel initiatives. For example, our HPT improved by 13% year-over-year. This resulted in a fuel efficiency record for the fourth consecutive quarter. We are aligning more closely to our suppliers while optimizing internal and transactional processes, positioning Norfolk Southern to fully leverage our scale and drive greater value for the long term. Our PSR 2.0 transformation simultaneously delivered safety, service, and resilience. We powered through the adversity in the quarter, and we are carrying that great momentum into Q2. Over to you, Ed.

Well, thanks, John, and good morning, everyone. Now let's move to Slide 10, and you'll see that the overall volume for the first quarter rose 1% year-over-year despite the winter weather conditions that we and our customers experienced during that period. While total revenue was flat, continued fuel surcharge headwinds masked an otherwise solid revenue performance as total revenue, less fuel was up 2% and RPU less fuel was up 1% year-over-year despite sharply lower export coal pricing. Specifically, within merchandise, volume fell from a year ago as gains in our Chemicals and Ag businesses were offset by weakness in our Metals and our Construction segment. The period saw a 4% increase in Merchandise RPU less fuel delivering another consecutive quarterly record in that metric. In intermodal, we achieved a 3% year-over-year volume increase with gains in both domestic and international, while premium continues to face market pressure. Overall, intermodal RPU less fuel was up slightly for the second consecutive quarter due to stabilization in truck pricing. Now let's turn to coal, where lower export coal prices drove RPU less fuel lower by 3%. Partially offsetting these shortfalls were volume gains in our utility business, thanks to strong electricity demand and support from higher natural gas prices. Okay. Let's move to Slide 11 for our market outlook. It's clear that we're in a dynamic economic environment. For our merchandise markets, we expect strength in autos to continue in the near term, although announced tariffs could be a headwind to volumes for the remainder of the year. Manufacturing activity has been building in many markets, and we will stay close to our customers as trade policies unfold. Strength in our chemicals markets such as waste and plastics along with our intense focus on recapturing market share, give us confidence that we are well positioned to mitigate some of the uncertain market conditions that we see. Staying very close to our customers is the key here. When we look at our intermodal markets, we expect continued normalization of our East Coast share and are watching shipping patterns very carefully as trade policy evolves. If tariffs drive prices for international goods higher, import demand may soften, and we're staying close to that. Truck capacity remained steady throughout the quarter, which maintained a flat trend for our price outlook. Coal prices continue to be pressured as the industry is expected to see tempered production amid significant uncertainty around export trade. In the near term, we expect the current trends in the utility markets to continue. On Slide 12. Industrial development activity continues to increase with strong interest from firms seeking to expand domestic production as well as international companies seeking to locate new manufacturing facilities in the United States. Sectors such as steel manufacturing, metals, fabrication, food production, and construction materials saw an increase in project activity through the latter half of the first quarter with momentum continuing to build through April. However, we're also noting cases where decision timelines appear to be extending as customers evaluate the macroeconomic environment. Considering all the uncertainty, I'm encouraged by our ability to maintain our quality service as volumes increased as we closed out the quarter, and I'm encouraged by our trajectory moving forward. As our customers navigate this uncertainty, we are by their side offering a service product that can help reduce their costs in their supply chains. We sincerely appreciate the partnership that we've built with our customers and are striving to grow trust and to earn more of their business every single day. And with that, I'm going to turn it over to Jason to review our financial results.

Thanks, Ed. Slide 14 reconciles our GAAP results to the adjusted numbers that I will speak to you today. Insurance recoveries continued to exceed the incremental cost of the Eastern Ohio incident, which resulted in a net benefit of $185 million in the quarter. Total insurance recoveries to date are nearing $1 billion with less than $100 million of coverage remaining. Adjusting for the net recovery related to the incident, operating ratio for the quarter was 67.9%, which includes 120 basis points from storm restoration costs. From a bottom-line perspective, EPS was $2.69. Moving to Slide 15, you'll find the comparison of our adjusted results versus last year and last quarter. As we previewed during the quarter, the impacts of typical seasonality coupled with the higher-than-expected winter storm restoration costs drove a sequential increase in the operating ratio of 300 basis points. From a year-over-year perspective, despite the elevated storm costs and flat revenues, our productivity initiatives have continued to take hold, and we generated 200 basis points of operating ratio improvement, with operating expenses down 3% on higher volumes. Let's take a closer look at the $68 million year-over-year expense decline. The $35 million of incremental storm restoration costs are embedded in multiple line items, including purchased services and materials. We are focused on what we can control, and our operational momentum and execution on productivity initiatives delivered cost savings across the board. Labor productivity was strong in the quarter. That, coupled with the timing of land sales helped offset an incentive comp adjustment related to 2024, increased pay rates, and higher claims costs. We continue to gain traction on our fuel efficiency, and importantly, our purchase services and rents were down $30 million in the face of 3% higher intermodal volumes. All of these actions support our cost takeout goals. Summarizing our adjusted financial results on Slide 17. The strong operational momentum that has been the foundation for continued productivity savings led to 8% improvements in both net income and EPS over last year. These results, together with ongoing balance sheet repair, led to the resumption of share repurchases, and we bought back nearly $250 million of shares in the quarter. The 200-basis point improvement in the operating ratio and this team's ability to deliver productivity savings in any environment gives us a lot of confidence as we move through these uncertain times. I'll turn it over to Mark to wrap up.

All right. As you have heard, we successfully navigated the first quarter to recover from the significant weather impacts to our network. At the same time, we delivered better service on higher volume all while continuing to drive greater productivity. Now as it relates to our guidance on Slide 19, one thing that we can control is our costs and we remain highly confident in our ability to extract at least $150 million, as evidenced by our strong momentum that continued in Q1. At this time, there's no clear information on how tariffs may impact our end markets and revenues. So we are reiterating our full year 3% revenue growth guidance and 150 basis points of operating ratio improvement while acknowledging that there is uncertainty on the horizon. To drill a little deeper on that point, we will be keeping a close eye on the end markets, staying in close communication with our customers. There may be cases where we see changes in freight, origin and destination, as well as changes between customers, some who may be on our network or on others. We may benefit in some instances or suffer in other cases, but our growing track record of service excellence and agility positions us to continue to capitalize on all opportunities. As the effects become clearer in the months and quarters ahead, we will calibrate and communicate with you accordingly. But right now, our guidance remains intact. So with that, let's open the call for questions. Operator?

First, we will hear from Ken Hoexter at Bank of America. Please go ahead, Ken.

Hey, great. Let's start with the operating ratio, considering the strong performance in cost savings. I'd like to get your perspective on potential upside or the pace of reaching targets. My question is about the 120 basis points of cost, which would have brought you to a 66.7% without typical seasonal effects. Could you or Jason discuss the 250 basis points, which seems to be your long-term trend? Should I consider that starting at 66.7% means the second quarter could be in the 64s? Is that a reasonable way to think about your potential?

Jason, why don't you talk a little bit about the cadence?

Thank you, Ken. We are very focused on our full year guidance. As Mark mentioned, we aim to achieve $150 million in productivity and cost reduction savings, along with a 150 basis points improvement in margin on a 3% revenue growth. We have faced some challenges this quarter due to the unusually harsh winter weather, as well as a 50 basis points impact from fuel prices. Despite the uncertainty in the macro environment, we are seeing strong momentum from our service product. This quarter, we have made significant progress towards our productivity goals. I believe the figures indicate that to meet our targets, we need to maintain an operating ratio below 64% for the remainder of the year. However, this performance will not be uniform across quarters. I expect the second quarter to perform better than the typical seasonal pattern, coming off the 67.9% we reported for the first quarter. Beyond that, I prefer not to provide too much detail on a quarterly basis due to the prevailing uncertainties.

Next question will be from Chris Wetherbee at Wells Fargo. Please go ahead.

Hey, thanks. Good morning. Maybe I wanted to ask about yields. So merchandise stepped up. I know we have a record there. Intermodal was up year-over-year for the second quarter in a row. Can you talk a little bit about what you're seeing in the pricing environment? Obviously, service has improved quite a bit. I'm just kind of curious how much you think this is sort of a Norfolk-specific dynamic where you're seeing some opportunity to catch up on price and what the market has kind of given you?

Thanks for the question. This is Ed. We've been successful taking price in the merchandise side of the business, really on the back of improving service. For us, that's been the headline for the last three quarters. Our customers are trusting us more and more and really offering us more opportunity, both on the price side as well as on the volume side to expand our portfolio with them. On the intermodal side, we're taking what the market will give us basically, and that's really a sideways price right now that it's very flat, and we'll see where it goes with all the uncertainty going forward here. But we're still taking price predicated off the value of the service that we're providing, and we feel good about our trajectory there.

Obviously, the seaborne met coal pricing is the biggest challenge that eats away at a lot of that other good core pricing performance.

Clearly, in the coal side, seaborne prices have been a drag and looks like they're going to be a drag for a few more quarters.

Next question will be from Scott Group at Wolfe Research. Please go ahead.

Thank you, good morning. I’d like to follow up on the merchandise yield increase of 4% excluding fuel. Is this primarily due to the product mix, or is it a result of accelerating core prices? Also, I understand the current uncertainties, but I’d like your insight on how you would respond if volumes begin to decline. If, for example, volumes were to drop by 5%, would you be able and willing to make further cost reductions, such as decreasing headcount?

Why don't you answer the yield question.

It's been a while since I’ve thought about this. On the merchandise front, we’ve successfully gained share in a couple of important markets, particularly in chemicals, and this is coming from various sources. This is beneficial for the portfolio. At the same time, we are exceeding our plan for same-store pricing, which makes me optimistic. Additionally, our customers are indicating that they perceive increased value in the products we provide. They are also looking for cost-saving measures, and we are in an excellent position to offer that. Regarding your second question, I’ll begin answering and then pass it on to Mark. Please go ahead.

Yes. No, that's a hypothetical if you get a 5% decline. It's pretty catastrophic scenario. We are not fully volume variable as an enterprise, as you know. You'd have to go and do some draconian things if you wanted to be volume variable. I think we learned a harsh lesson when we tried doing that in 2020 with the onset of COVID and then were unable to respond quickly. So the reality is we're going to keep our eye on the external outlook. Meanwhile, we're doing really great stuff looking at being more productive and efficient. You see the way we've been handling the volume last year while actually managing and absorbing nutrition in our direct headcount. We're continuing to do that. That's part of the math this year as well. I'm not going to respond to a 5% decline scenario, but just know that we've got a lot of productivity runway left. John and the team are doing great stuff inside the organization, including in IT and technology where we're trying to drive and find productivity savings. So we're keeping our eye on the volume trends right now. We hear a lot of the same stuff in the marketplace about the potential for recession. We felt really bad last week. We felt pretty good yesterday. Today, we feel a little more encouraged. That just shows 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 or cause us to do anything. That said, we're scenario planning and just stay tuned.

Next question will be from Brian Ossenbeck at JPMorgan. Please go ahead.

Hey, good morning. Thanks for taking the question. First, to quickly follow up on the land sale. It sounds like maybe there's some timing. So I just wanted to see if that was going forward or it was still on the full year expectation, just came a little bit earlier? And then maybe, John, you can just talk about the network performance looks like it's bouncing back pretty well in terms of resiliency. So I wanted to see how you're getting about that, if you think that's sort of the new normal under the 2.0 program. And what sort of market opportunities that brings you because clearly, your peers are having some different issues that they're not able to recover from as fast as what it seems like you are.

This is Jason. I'll start off on the land sale question. We continue to think about land sales in that $30 million to $40 million range for the year. But as you've seen in the last couple of quarters, those can be lumpy, and that's kind of what you saw here. But we still think we're going to be in that range for the full year.

Yes. And I would say I'm never satisfied with how the operating environment is at any given time. So that's a curse my team has to endure. But I can tell you, I'm very, very pleased that the strength and resilience that we demonstrated coming out of the storms. We recovered quickly between the storms and prepared ourselves for the next round. The efficiencies in the network were really driven by the investments we've made in our capital over the years, pulling back and managing our resources so that we had the resilience where we can inject locomotives and cars where the market responded faster than other places so that we could serve our customers and be there for them. And then as we're doing today, pulling them back out. So we deploy locomotives. Now we've got 40 back in storage service dwell ready for the next round of surge either in a challenge or in an opportunity. Creating efficient transportation networks and really driving volume and resources to meet our GTMs is what we're all about. One of the things that I think is really important is that we're in the midst of transformation, and we're introducing rigorous standards across the organization relative to our new Zero-Based plan. We're structurally engineering out cost and improving our customer service offerings, as I said earlier, we've accelerated over 600 customer last-mile capabilities. We're putting in our yard operating plans and mechanisms to create more visibility for our customer and more visibility for our service offerings at the last-mile or first-mile. I think that helps Ed because that visibility is in collaboration with the commercial team.

Yes. Look, over the past five years, we've lost share to a lot of different competitors, and our teams are working every single day to unwind those alternatives as quickly as possible and bring that freight back to Norfolk Southern, and that's really, like I said earlier, on the back of good service that our customers can count on. And it's working.

Consistent service, you get share gains, and it's playing out right now in real-time. So we're happy about that.

Next will be Jonathan Chappell at Evercore ISI. Please go ahead.

Thank you. Good morning. Ed, you pointed out the $55 million of productivity improvements. If we look at Jason's slides, it's all under the comp and benefit line item. As we think about getting to the $150 million and more importantly, the plus component of that $150 million, does that all still fall in comp and ben as we go through this year? Or are there other opportunities in purchased services, rent, materials, etc., where you think it's more of a second half opportunity to reap the productivity benefits?

Yes. So this is Jason. I'll start off here. We've committed to that $550 million of productivity and cost reductions over this 3-year time horizon. Last year, we got more than we had promised that right around $290 million. When you look this quarter, and we've highlighted the two most significant areas. So one is labor productivity that you just called out, and the other is fuel efficiency. So those are the big pieces this quarter. On the labor productivity side, I think last year, we were probably more harvesting that from a T&E perspective. Now it's really more broad-based across all of our different crafts. You'll also see productivity really throughout the income statement here. As you mentioned, purchase services, that's a great example, equipment rents. You see the improvements we have there just due to a more fluid network. It’s really across the board here. We just called out kind of two of the bigger ones here on the slide for you.

Yes. And you're right, Jason. We can talk about high numbers, and we can talk about what's next strategies, where we continue to develop the skills and capabilities of people, where we're really harvesting ROIC on our capital investments and focusing on the diversity of our vendor relationships and really strengthening and narrowing down our purchasing capabilities. A lot of those things are building momentum. And then we layer on top of our Zero-Based plan in Phase 1, Phase 2, Phase 3. That's a continued elevation of our service offering, our commitment to rigorous standards across the organization, and really pushing the boundaries of the transportation ecosystem. But then you go down a little deeper and you think about what we are controlling? From our disciplined approach on service and looking at things that impede that service, we get into war rooms. Our war room, the very first war room that we started was on the reliability of our over-the-road trains. From there, our fleet management, our freight car costs, all of those things are coming down and flowing out. Kudos to Brian Barr and Ryan Clark, who are leading our mechanical department; our freight car maintenance in the quarter was down significantly. You have to go back to Q1 '23 to find anything close to that. When you do that and you think about all of the investments that we've made in field operations technology and more sampling we're doing, we are driving down that cost means we're getting to the issues before they come across the road. Same with loss and damage, our safety camp investments. 43% down in our FRA accident ratios and 60% down in non-FRA accidents. Below-the-line activities where customer goods and shipments are less disrupted. The goods that they're trusting with are leaving and departing and arriving in the same state we receive them. That's reducing our overtime or purchase and services, our resources there, all of the things that cost when you disrupt the natural flow of transit. As we get into how we have more reliability and availability of people, our taxi usage is down $15 million in the quarter. You have to go back over three years to find that. Our speed is translating into more direct and indirect value. All these value streams give us a lot of confidence. Jason and his insights into the finance and the linkages to our activities between the two of us are really driving attention and attentiveness to that $150 million commitment. I would say it's natural. We get a bit more in the first quarter, but we're going to keep these initiatives driving value all through the year.

Next question will be from Jason Seidl of TD Cowen. Please go ahead.

Thanks, operator. Mark and team, congrats on the good earnings in a challenging environment. I wanted to focus a little bit sort of on your agility going forward to manage costs because Mark, I think you did a great job of pointing out the uncertainty in the marketplaces and sort of what you might be faced with challenging going forward. I was hoping maybe you could talk to us a little bit about some of the levers you guys could pull and how nimble you think you can be to sort of manage those markets?

Thanks, Jason. I appreciate the question. We're doing really great stuff. John, just really listed a handful of things that we're focused on. We're getting down into details now when he's talking about taxis and meals and overtime and re-crews. Meanwhile, on the other side of the ledger, we've got IT that's doing tremendous work trying to find cost reduction and efficiency opportunities. On the administrative functions, you recall we did a RIF, reduction in force, last year that took out 10% of our administrative staff at headquarters. So we've been looking at everything and we continue to look, we're not done. We all are contributing to trying to find opportunities to streamline the company and be more nimble, more efficient. We know we're in uncertain times right now. We don't really know how it's going to manifest yet on the top line, as I mentioned before. We haven't seen the evidence yet, but we are scenario planning, and we're getting into details, as you heard John give you some of those examples. Thank you. John, do you want to add to that?

Yes. We focus on the key initiatives, including T&E mechanical and equipment, purchased services, fuel, and G&A. We are targeting core cost reductions and ensuring our resources are ready to adapt to market changes, whether it’s a spot market or an emerging opportunity that increases volume. Additionally, we have improved our onboarding process for new hires, reducing the time required for training, such as for conductors, to prepare them for their roles at NS. Our responsiveness has been enhanced and streamlined. We have transformed into a significantly different railway compared to a few years ago, and the agility we've developed across various streams gives us strong confidence in our readiness to meet the evolving landscape.

Yes. Those are great examples. And even last week you're right, we tightened controls around the use of consultants. So again, we're getting into every detail here, where I want to see everything that our team is doing with regard to engaging new consultants. We're getting into some details here, and we're getting ready to hunker down.

That sounds good. How should we think about headcount overall as we sort of head into these uncertain times? I mean are you guys sort of keeping it flat and maybe thinking about furloughs after you see any impact?

Look, I think what we've done, and I mentioned this before, is we've been managing really well our 83 hiring locations and crew locations, with attrition and controlled hiring practices because we do have a window into attrition in the future just based on the age of our crews that are out there. We know we're going to have some attrition. So we're backfilling with hires in the training pool, but we're being very controlled, very measured for the 83 specific locations, keeping an eye on volume and where that volume is going to show up on the network. It's a delicate balance that we've got to do. What you've seen is that we've actually attributed down while we've taken on more volume last year. That was very strategic, and that's another form of productivity; volume absorption is another angle of productivity, and we don't give the same credit to it, but it's a very important part of the recipe here. I think in terms of this year, I'd be surprised if you see much growth in headcount, if any at all. Certainly, if top-line pressures manifest in the back half, I would imagine we’d have to trip down more quickly. Jason?

Just like Mark said, we're really matching all of our resources to the volume trends, and obviously, headcount is part of that. You saw the great productivity that we're generating here. At this time, we still expect headcount flat with kind of where we exited the fourth quarter, but we're keeping an eye on it and will adjust accordingly.

Our next question will be from Brandon Oglenski at Barclays. Please go ahead.

Hey, thanks for taking the question. So John, I was wondering if you could talk about the intermodal service composite scores that you give and merchandise plan compliance. I know that you definitely had weather impacts in the quarter, but where do you want to see those long term? If you can follow up too like what are you seeing domestic intermodal? Are you seeing highway conversions because I think we're hearing that from some of the IMCs, especially in the East?

Yes. From the merchandise and intermodal trip lane compliance and composites. Those are internal measures that demonstrate our commitment to our customer plan. As we evolve the plan, we're tightening down our standards even more. I want to see, obviously, the trip-line compliance at a high level, so in the 80s and 90s, respectively. But also bear in mind that as we tighten down our standards, we're pushing the boundaries within our terminals and forcing waste out of even the clock that measures trip-line compliance. I expect some variability in there as we learn and develop skills and create the environment for better on-time delivery and better standards across the entirety of the over-the-road experience for a customer. Ultimately, what matters to me is that our customer is getting their goods on us and we've got the resources to supply them cars and locomotives in full to move it when they expect it that we do it safely and effectively, and we deliver it to the final terminal so that they can get to their marketplaces and win. That's how Ed and I measure ourselves, and we have to put a pin somewhere, and that's what we put on our merchandise trip-lane compliance measure.

And it's a perfect segue to we're getting some highway conversions, right?

Yes. We're a fair part of the way through the spring bid season, and we've had very encouraging results so far. Customers clearly want to save money. If they have a service product that they can trust from us, then we are a great resource for them to derisk their supply chains from a cost perspective. We see that happening, and I fully expect it to continue.

Next question will be from Stephanie Moore at Jefferies. Please go ahead.

Hi, good morning. Thank you. Maybe a question for you, Ed here. Based on the conversations you're having with customers, how has your pipeline of opportunities changed at all as of late, given the uncertainty in the market, particularly the industrial economy? Have you seen maybe any project pauses or delays? And then maybe in the same vein, any indication of a pull forward of shipments in Q1 due to tariffs?

Sure. I think I referenced it when I was talking about industrial development. We've seen the top of the pipeline expand pretty substantially with a lot of companies, both domestic and international evaluating where they could expand or create new manufacturing nodes, and we're really focused on that. Broadly, our teams are very, very focused on how we can solve problems for our customers, whether it's from the current uncertainty or whether it's just ongoing business opportunities. We have a great team out there. We're enhancing our capability when it comes to how we address our customers commercially, and I think that's paying dividends. When I think about Q1, there are a lot of put and takes out there. Number one, we had a lot of auto holds and some disruption in the first part of the quarter. We had all that terrible weather that John referenced, which really impacted our customers as well as us. Miners couldn't get to the mine, and shipments couldn't get to the rail head, etc. Do we see some pull forward? There might have been some in there or was it make-up from the early part of the quarter. A lot of things going on there, but we're encouraged by the trends right now. We're keeping a real weather eye on what's happening. I know I've said it over and over again, but I want to reinforce it, staying very close to our customers is the most important thing that we can do commercially right now. It helps us and helps our customers both figure out how to solve these problems.

I think another point on the whole pull-forward question. You talked to the customers, we're not necessarily hearing that's what was going on. The data doesn't scream out at you, like Ed is saying, so there probably is some in there, but it's not meaningful to call out.

Next question will be from Tom Wadewitz at UBS. Please go ahead.

Good morning. Ed, I have a couple of points regarding the outlook. You've mentioned gaining market share as the railroad operations improve despite some weather challenges in the first quarter. I know you were focused on the trucking aspect, but have you observed any new contracts emerging, particularly in the chemicals sector or other areas where you could potentially increase your market share compared to other railroads? Is that something you’ve experienced, or do you see potential in that? Another market-related question is about the tariff outlook, which seems quite unpredictable. Are there specific segments you are particularly concentrating on? For instance, if the 25% tariffs continue, is the focus primarily on the automotive and metals sectors? I would appreciate any insights on what you're prioritizing regarding tariffs and whether you see the impacts as positive or negative, as it's difficult to assess for the Eastern Railroad, which might experience both advantages and disadvantages from tariffs.

No problem. Thank you, Tom, for the question. On the topic of share gain, I'm encouraged by our progress. Specifically, our progress in our merchandise markets where we've been able to take some share back. That's coming from a variety of sources, including alternative sourcing of the product as well as other modes, other competitors. The thing that we're really focused on when I talk about share gain is making sure that customers who want to use Norfolk Southern, but in the past haven't been able to because of our service can come back confidently because I know that the service John is providing is one they can trust every single day. That is the most important lever that I have when it comes to gaining share wherever it's coming from. On tariffs, you're right. As an Eastern railroad, there's a variety of puts and takes out there. I think it's plausible that we could see both tailwinds and headwinds in various markets, maybe auto is one of those going forward where perhaps there'll be more domestic production. At the same time, you can't predict, and so we're just keeping a close eye on it.

It’s likely that these market shifts will take some time to unfold. The challenge for us is determining the impact of tariffs on our revenue, which is difficult to assess. The greater concern is a potential economic slowdown or recession, which could affect our revenue due to a general decline in GDP. While tariffs are harder to predict, particularly in the short term, it's important to note that we primarily operate as a domestic business, with 75% of our operations based in the U.S. The remaining 25% includes Europe, which represents a small percentage.

That's right.

When you look at Mexico, Canada, and China, each, those are about low single digits of our revenue each, okay. The rest of the world is kind of mid-single digits balanced. How tariffs play out is going to be hard to say, but I don't think it's going to be as meaningful as the risk we have on the broader economy.

Next question will be from Walter Spracklin at RBC Capital Markets. Please go ahead.

Yes, thanks very much. Good morning, everyone. Yes. So John, this question is for you. I know you've been working very hard on the resiliency and recoverability of the railroad when you have some of the winter effects like this, and you articulated those very well this quarter. My question is really on a kind of run rate basis, and we get the weekly data. We're always focused on with Norfolk Southern is on those productivity gains. Is there a metric you can kind of indicate where you're happy? Of those that come out weekly, and I'm kind of leaning toward velocity, but is there a certain car miles per day or something that we get weekly that says, okay, things are running pretty well right now? This is the level we're pretty happy with so that when we monitor that and we see at that level, we know, okay, things are running according to John's plan, and we can feel comfortable by that. Any indication there would be helpful.

Yes. Walter, first, congrats on the overtime win last night. Maybe there is hope that the leafs can get out of the first round.

This is the year. This is the year.

Well, let's hope. There's a lot of people in Canada that are looking for that silver lining. Listen, I think, as I've always said, and as you know well, being an experienced railroad analyst, that there's no one measure that's going to drive a good indication of what's going on in the business. And that's why we really focus on network asset and customer health indices. As I once described, it's an 8-burner stove, and we're always balancing out what we're doing on that stove to make sure that the products we're putting in drive safety and service excellence and does it at the best cost structure. That's what we'll continue to do. But what I think as we watch those six numbers, Walter, has been the balance of what we're doing about it. Were we sitting on those numbers and just letting them be the status quo? Are we challenging ourselves to do something more constructive? That's why it's important, the Zero-Based plan. It's taking our current customer service indices and challenging us to do better. We're challenging ourselves to cut whatever fat is left in the service schedules, terminal performance, over-the-road, crew change-off locations, and meat pass planning, and really balance that out. One of the things I thought was very constructive in the fourth quarter, and we're continuing this quarter is the compression of our fastest lines like our intermodal offerings and historically our slowest trains in the unit trains and closing the speed differential. We are moving the entire capacity at a faster rate and more productive rate. That’s manifesting into cost takeout, less overheads, less crews required, and all of those things. We’re doing that. At the same time, we're not standing still on the performances that support those things, like our resource management and the work that Mina is doing to draw down the complexity, simplify our distribution of materials, simplify our consumption knowledge, and give us better visibility. The work we're doing on our yard operating plan and daily operating plan to give customers more visibility through our Heartbeat initiative, so they can see what our local yard is planning and can bank on that and save money. Those are what we're doing that will help enhance what those big six numbers are driving. So I think there's going to be variability within that fuel, loss and damage, crew starts, over time. All are in those big six numbers. That's really what's going to drive the performance.

Next question will be from Richa Harnain at Deutsche Bank. Please go ahead.

Hey everyone. Nice to meet you on this call. I wanted to hone in, Mark, on your point around seeing meaningful share gains. I know a theme from your prepared remarks was that this came from being very close to your current customers? In response to your prior question, you suggested you are winning new business as well. I'm just curious how sticky that is? I ask in the context of one of your closest peers recently reporting and lamenting leaving business on the table given their network issues, but showing confidence that that should turn around in some time. So that's the first one. Just a quick clarification around the full year guidance. Mark, again, I appreciated the point around scenario planning around a very uncertain backdrop. But if we do have flat revenue or down revenue, can you still grow operating profit with all of these cost takeout initiatives you have? You've done better for the past two consecutive quarters with down revenue and up operating profit, but I wanted to hear more on this from you.

I'm going to have Ed talk a little bit about the share gain dynamic and the stickiness, which we think is there. As for growing operating profit, absolutely. That's our goal. We're going to be trimming where we can to try to help neutralize and offset some of the challenges that might present in the back half for these last 9 months if they materialize. But again, we're scenario planning, we're trying to remain nimble because we have to respond to the growth that we do anticipate happening. So we can't get too far ahead of the curve here. It's a question of agility and being able to pivot quickly. But Ed, why don't you talk a little bit about the share gain.

Sure. Many people in this room and on this call have heard me talk about this before, but over the past few years because of service challenges, some of our customers had to make alternative arrangements and go to other modes or other competitors to satisfy their needs. In most cases, we believe those alternatives were more expensive and probably less efficient overall. As I said earlier, we're working hard at unwinding those alternatives quickly and bring that freight back to Norfolk Southern because that's how we build our customer relationships, helping them save money and being more efficient. When we do that and deliver the service John has talked about, we will be sticky, and we are sticky because they can trust us. We are a highly efficient mode for them to deliver demand for their customers and satisfy their needs; we're confident in that.

I want to go back and talk again about the guidance we gave and the scenarios we have. First, we remain fully committed to the $150 million of cost takeout. We've got really good momentum here. You saw the first quarter results. We are going to hit that number or beat it. When you look at the revenue outlook on the positive side, our volume trends have been consistent with the way we planned them to be in the first quarter, especially since the recovery from the winter storms. We were running at 142,000, 144,000 some weeks, 146,000 carloads per week. We're feeling pretty good about that. John has done a great job on service, and Ed has been opportunistically leveraging that to bring volume onto the railroad. Remember, we've got a very diversified portfolio of business. Should there be challenges, we've got a hedge in our diversification, and pricing has been pretty steady and pretty good as you heard Ed lay out. That said, export coal pricing has been a challenge, we have to keep our eye on hopefully that can recover somewhat in the back half and provide some relief. But we're keeping an eye on that as well as fuel prices, which have been under pressure, which can cause a headwind to us on fuel surcharge revenue. Now on the negative side, we see the same macro headlines you see, the risk of lower GDP, heightened recession concerns. We're not immune to those same pressures, but we're staying in contact with our customers. There's been no clear sign from our customers that they're concerned. We're not seeing it in the numbers yet. So we'll see how things play out. We've got to be realistic. There are tangible pressures I talked about, and then there's this risk. When we're reiterating our guidance here, we don't have our heads in the sand. We understand that the situation is fluid. That's why we're in a scenario in case things turn south on us, and we'll see what we can do to offset and mitigate some of those pressures. Meanwhile, the things we can control, we've taken out the cost; John is running an outstanding network now. The resiliency in the first quarter following the resiliency we had in the fourth quarter after Helene is showing that something is different here; great. Our network is responding. Ed and the commercial agility has been fantastic. We are seeing it manifest. Even in a down market, we should be able to get some volume from share gains. That's the overall look at the way we're managing the year as we go. Control the controllables and try to help mitigate some of the things we can't control.

That is all the time we have for questions today. I will turn the call back over to Mr. George.

Okay. Thank you, everyone. We appreciate your participation and for those of you who are just listening in, and we look forward to touching base throughout the quarter. Take care and be safe.

Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. At this time, we do ask that you please disconnect your lines.