Norfolk Southern owns and operates roughly 19,100 miles of railroad track across 22 states, mostly in the Southeast, East, and Midwest. Every time a customer ships freight on that network, Norfolk Southern collects a fee. Merchandise like steel, chemicals, and automotive parts made up 63% of total railway operating revenues in 2025. Intermodal containers and trailers added another 25%. Coal rounded out the final 12%. The company also moves freight to and from Atlantic and Gulf Coast ports, connecting domestic shippers to overseas markets. The diagram below traces where the money goes.

Five years of financial data tell a story that is recovering but not yet smooth. Revenue climbed from $11.1 billion in 2021 to $12.7 billion in 2022, then slipped back and has held roughly flat near $12.2 billion through 2025. The big disruption in the middle was the East Palestine, Ohio train derailment in February 2023, which caused the railway operating ratio to spike to 76.5% that year, meaning 76 cents of every revenue dollar was consumed by expenses. The company has since pulled that ratio back down to 64.2% in 2025, which is meaningful progress.

Free cash flow tells a similar story. It peaked at $2.8 billion in 2021, dropped sharply to $0.9 billion in 2023 during the derailment fallout, and has since partially recovered to $2.2 billion in 2025. Meanwhile, net debt rose every year from 2021 through 2023, reaching $15.6 billion, before easing slightly to $14.9 billion by end of 2025. The railroad is generating real cash again, but it carries a heavy debt load that limits flexibility.

Operating cash flow has recovered more convincingly than free cash flow, reaching $4.4 billion in 2025, the highest level in the five-year window. The gap between operating cash flow and free cash flow reflects the company's heavy capital spending requirements. Norfolk Southern spent $2.2 billion on property additions in 2025 alone, and its net railroad properties sit at approximately $36 billion on a historical cost basis. Running a railroad means constantly replacing track, locomotives, and freight cars just to stay in place.

The risks facing this business fall into a few distinct categories. The first and most immediate is whether the Union Pacific merger wins regulatory approval. The Surface Transportation Board has broad authority over railroad combinations, and a deal of this size, creating the first railroad spanning the entire United States across 50,000 miles and 43 states, will face intense scrutiny over competition concerns. If the deal falls apart under the wrong circumstances, the $2.5 billion termination fee becomes a very real liability.

The second risk category is ongoing liability from the East Palestine derailment. The company still faces lawsuits, criminal investigations, and potential new government regulations on how it handles hazardous materials. Although insurance and other recoveries in 2025 exceeded incremental expenses by $254 million, the filing notes clearly that future costs cannot be predicted with certainty and could be material in any particular year. Liability insurance recoveries are now complete, meaning any new costs would need to be covered through other sources.

The third risk is structural and permanent. Norfolk Southern must transport hazardous materials, including chemicals and petroleum products, as a core part of its business. A single catastrophic accident could exceed the company's insurance coverage. New laws restricting hazardous cargo routes through cities could force expensive rerouting. And the company consumed 366 million gallons of diesel fuel in 2025, making it meaningfully exposed to fuel price swings. Cybersecurity is an additional documented threat, since trains and operations depend on complex computer systems that hostile actors could attempt to disrupt.

Coal is also a slow structural headwind. Coal revenues fell from $1.7 billion in 2023 to $1.5 billion in 2025, and the long-term direction of utility coal demand depends on natural gas prices and electricity generation trends outside Norfolk Southern's control. The company's coal franchise serves 18 coal-fired power plants directly, but that customer base is unlikely to grow.