Freight transportation company Norfolk Southern (NYSE: NSC) met Wall Street’s revenue expectations in Q3 CY2025, with sales up 1.7% year on year to $3.10 billion. Its GAAP profit of $3.16 per share was 2.6% below analysts’ consensus estimates.
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Norfolk Southern (NSC) Q3 CY2025 Highlights:
- Revenue: $3.10 billion vs analyst estimates of $3.11 billion (1.7% year-on-year growth, in line)
- EPS (GAAP): $3.16 vs analyst expectations of $3.24 (2.6% miss)
- Adjusted EBITDA: $1.45 billion vs analyst estimates of $1.47 billion (46.6% margin, 1.8% miss)
- Operating Margin: 35.4%, down from 52.3% in the same quarter last year
- Free Cash Flow Margin: 23.2%, down from 36.1% in the same quarter last year
- Market Capitalization: $64.76 billion
Company Overview
Starting with a single route from Virginia to North Carolina, Norfolk Southern (NYSE: NSC) is a freight transportation company operating a major railroad network across the eastern United States.
Revenue Growth
A company’s long-term performance is an indicator of its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Regrettably, Norfolk Southern’s sales grew at a sluggish 4.3% compounded annual growth rate over the last five years. This was below our standard for the industrials sector and is a poor baseline for our analysis.
We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Norfolk Southern’s recent performance shows its demand has slowed as its revenue was flat over the last two years. We also note many other Rail Transportation businesses have faced declining sales because of cyclical headwinds. While Norfolk Southern’s growth wasn’t the best, it did do better than its peers. 
This quarter, Norfolk Southern grew its revenue by 1.7% year on year, and its $3.10 billion of revenue was in line with Wall Street’s estimates.
Looking ahead, sell-side analysts expect revenue to grow 3.3% over the next 12 months. While this projection indicates its newer products and services will fuel better top-line performance, it is still below average for the sector.
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Operating Margin
Norfolk Southern has been a well-oiled machine over the last five years. It demonstrated elite profitability for an industrials business, boasting an average operating margin of 34.3%. This result isn’t surprising as its high gross margin gives it a favorable starting point.
Looking at the trend in its profitability, Norfolk Southern’s operating margin decreased by 2.4 percentage points over the last five years. Many Rail Transportation companies also saw their margins fall (along with revenue, as mentioned above) because the cycle turned in the wrong direction. We hope Norfolk Southern can emerge from this a stronger company, as the silver lining of a downturn is that market share can be won and efficiencies found.
In Q3, Norfolk Southern generated an operating margin profit margin of 35.4%, down 16.9 percentage points year on year. Since Norfolk Southern’s operating margin decreased more than its gross margin, we can assume it was less efficient because expenses such as marketing, R&D, and administrative overhead increased.
Earnings Per Share
Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.
Norfolk Southern’s EPS grew at a solid 11% compounded annual growth rate over the last five years, higher than its 4.3% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
Diving into Norfolk Southern’s quality of earnings can give us a better understanding of its performance. A five-year view shows that Norfolk Southern has repurchased its stock, shrinking its share count by 12.3%. This tells us its EPS outperformed its revenue not because of increased operational efficiency but financial engineering, as buybacks boost per share earnings. 
Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.
For Norfolk Southern, its two-year annual EPS growth of 19.8% was higher than its five-year trend. We love it when earnings growth accelerates, especially when it accelerates off an already high base.
In Q3, Norfolk Southern reported EPS of $3.16, down from $4.85 in the same quarter last year. This print missed analysts’ estimates, but we care more about long-term EPS growth than short-term movements. Over the next 12 months, Wall Street expects Norfolk Southern’s full-year EPS of $13.12 to grow 1.6%.
Key Takeaways from Norfolk Southern’s Q3 Results
We struggled to find many positives in these results. Its revenue was just in line and its EPS missed. The stock remained flat at $285.41 immediately following the results.
So should you invest in Norfolk Southern right now? The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free for active Edge members.
