Norfolk Southern's Margins Remain Pressured, but Intermodal Activity Finally Stabilizing

From the start of the rail renaissance in 2004 through 2008, Norfolk Southern posted the highest margins among U.S. Class I railroads. Its operating ratio (expenses/revenue) deteriorated to 75.4% in 2009 during the great recession, and remained stuck between 69% and 73% from 2010 to 2015. This fell short of progress made by Union Pacific and Canadian Pacific, which lack Norfolk's exposure to Appalachian coal. However, by 2017 Norfolk was back on track, improving to an adjusted 60.1% OR in 2021 as it bolstered pricing execution and adopted precision railroading principles, which have yielded more efficient use of locomotive assets and labor. Of note, in late 2019, former Canadian National CEO Claude Mongeau (2010-16) joined Norfolk's board of directors to help bolster PSR efforts.