Norfolk Southern (NSC) Morgan Stanley‘s 12th Annual Laguna Conference 2024 summary

Leadership transition and organizational focus

• New CEO and COO emphasize swift, decisive leadership changes to move past recent crises and distractions.

• Leadership aims to restore pride and momentum, focusing on operational excellence and accountability.

• Recent months have seen significant organizational realignment and a renewed focus on safety and customer service.

• Employees are energized by the leadership change and are moving forward with renewed purpose.

• Leadership highlights the importance of a quality-oriented culture and intolerance for poor performance.

Operational improvements and customer impact

• Process changes and operational discipline have led to immediate cost savings and improved service metrics.

• Investments are focused on high-ROIC projects, with tailored capital allocation rather than broad capacity expansion.

• War rooms and root cause analysis are being used to address operational issues and drive permanent improvements.

• Customers are responding positively, with increased spot business and improved on-time performance.

• Service-sensitive markets like automotive and intermodal are seeing growth, even in a soft truck environment.

Financial performance and cost initiatives

• Approximately half of a $250 million cost opportunity has already been realized, with the remainder on track for the year.

• An additional $150 million in cost savings is targeted for next year.

• Productivity initiatives are expected to deliver $550 million in savings, moving the operating ratio into the low 60s.

• Achieving a sub-60 operating ratio will require modest revenue growth and a secular market recovery.

• Focus remains on balancing profitability, revenue growth, and free cash flow to support share repurchases and EPS growth.