U.S. Railroads Takeaways from a Call with IBT / Teamster Rail Coalition

Research evidence excerpt

U.S. Railroads Takeaways from a Call with IBT / Teamster Rail Coalition

Valuation Method and Risk Statement

Long term secular pressures on US utility coal consumption is a risk for the railroads. The

railroads also have cyclical risk as a slower pace of economic growth would likely translate to

weaker automotive, chemicals, metals and forest products volumes. In the US and Canada we

do not expect significant changes in rail regulation but incremental changes could slow the

pace of pricing gains for the railroads.

We value NSC and UNP on a multiple of 2026E EPS.

Norfolk Southern has already absorbed the impact of declining tonnage in the domestic utility

coal market. However, further declines in utility coal remain a source of risk in the medium

term. NSC has cyclical leverage to the automotive, chemicals, metals, and forest products

markets and as a result, a significant downturn in the economy is a source of risk. NSC has

proposed an initiative to improve productivity and reduce costs over the next several years and

difficulties in executing their plan may be another source of downside risk for NSC. While we

do not expect major changes in regulation or legislation, incremental changes could still

reduce NSC’s ability to raise prices.

Union Pacific has exposure to cyclical risk through its businesses of transporting chemicals,

autos, metals, and forest products. Union Pacific also has risk of lower US utility coal

consumption in the medium term due to low natural gas prices and regulatory factors. While

we do not expect significant changes in U.S. rail legislation or regulation, incremental

adjustments to rail regulation could have a negative effect on the pace of pricing gains that

UNP can realize.

U.S. Railroads 2 July 2026 ab 2