Credit Suisse 5 th Annual Industrials Conference November 29, 2017 - - PowerPoint PPT Presentation

1 / Norfolk Southern Corporation

Credit Suisse 5th Annual Industrials Conference

November 29, 2017

Cindy C. Earhart

Executive Vice President and Chief Financial Officer

2 / Norfolk Southern Corporation

Forward-Looking Statements

Certain statements in this presentation are forward-looking statements within the meaning of the safe harbor provision of the Private Securities Litigation Reform Act of 1995, as amended. In some cases, forward-looking statements may be identified by the use of words like “believe,” “expect,” “anticipate,” “estimate,” “plan,” “consider,” “project,” and similar references to the future. Forward-looking statements are made as of the date they were first issued and reflect the good-faith evaluation of Norfolk Southern Corporation’s (NYSE: NSC) (“Norfolk Southern” or the “Company”) management of information currently

• available. These forward-looking statements are subject to a number of risks and uncertainties, many of

which are beyond the Company’s control. These and other important factors, including those discussed under “Risk Factors” in the Company’s Form 10-K for the year ended December 31, 2016, as well as the Company’s other public filings with the SEC, may cause our actual results, performance or achievement to differ materially from those expressed or implied by these forward-looking statements. Forward-looking statements are not, and should not be relied upon as, a guarantee of future performance or results, nor will they necessarily prove to be accurate indications of the times at or by which any such performance or results will be achieved. As a result, actual outcomes and results may differ materially from those expressed in forward-looking statements. We undertake no obligation to update or revise forward-looking statements, whether as a result of new information, the occurrence of certain events or otherwise, unless otherwise required by applicable securities law.

3 / Norfolk Southern Corporation

65% 70% 75%

1st Qtr 2nd Qtr 3rd Qtr 4th Qtr

2015 2016 2017

First Nine Months 2017 Highlights

3

First Nine Months 2017 vs PY

Railway operating revenues

7%

Railway operating expenses 4% Railway operating ratio 130 bp Income from railway

• perations

11%

EPS

17%

$5,085 $120 $97 $21 $3 $5,310 $10

Fuel Purchased Svcs & Rents

2016

Materials & Other

2017

Comp. & Benefits

Operating Ratio Improvement Expense Components ($ in millions)

Net increase of $225 / 4%

Deprec.

RE RECORD CORD RE RESUL ULTS RE RECORD CORD RE RESUL ULTS

4 / Norfolk Southern Corporation

Extensive Market Reach Supports Growth

Norfolk Southern’s network, alignment with shipping partners and market approach generates long-term growth:

• Serves more than 50% of the US population,

manufacturing activity, and energy consumption

• 65% of all freight shipped greater than 500 miles

begins or ends in our region

• Superior Eastern intermodal network
• Alignment with steamship lines adding capacity

in the East

• Largest metals franchise
• Most expansive network of automotive plants
• Industry-leading short line access
• First-in-class industrial development

Diversified customer and market base

~19,500 Route Miles

• f Track

22 States Served by Network 40+ Ports 250+ Short Lines

5 / Norfolk Southern Corporation

Current Economic Environment

Source: Truckstop.com, The Conference Board, Federal Reserve Bank of St. Louis, BEA

(8.0%) (4.0%) 0.0% 4.0% 8.0% 12.0% Percent Change

Gross Private Domestic Investment [Nonresidential] (percent change from preceding period in Real GDP)

85.0 90.0 95.0 100.0 105.0 110.0 115.0 120.0 125.0 130.0 07/16 08/16 09/16 10/16 11/16 12/16 01/17 02/17 03/17 04/17 05/17 06/17 07/17 08/17 09/17 10/17 Index Value (1985=100)

Consumer Confidence

102.0 102.5 103.0 103.5 104.0 104.5 105.0 105.5 106.0 106.5 Index Value (2012 = 100)

Industrial Production Index

2.0 7.0 12.0 17.0 22.0 27.0 32.0 37.0 42.0 47.0 52.0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Truckstop.com Market Demand Index (MDI)

(available loads vs. available trucks)

2014 2015 2016 2017

6 / Norfolk Southern Corporation

Norfolk Southern Volume Trend

Fourth quarter AAR carloads through week 47 (November 25, 2017)

7% 42,737 5% 7,646 6% 6,656 5% 1,979 1% 885 (2%) (1,369) (4%) (4,075) Intermodal Coal MetCon Paper Chemicals Automotive Ag

1,143.4 1,197.9

2016 2017

+4.8%

Total units (000’s) 4.8% increase in AAR units 4QTD 2017 vs. 2016

7 / Norfolk Southern Corporation

Fourth Quarter Outlook

Revenue Outlook Operating Expense Outlook

3Q17 Actual

• vs. 3Q16

4Q17 Outlook

• vs. 4Q16

Compensation and benefits: Headcount ~ 1,100 ~ 800 Wage and H&W rates $29M ~ $29M Incentive compensation $47M ~ $47M Fuel $17M Price and consumption driven

Growth in Industrial Production Increased construction activity Declines due to pipeline activity Tightening truck capacity Alignment with shipping partners High seaborne pricing Mild weather and low natural gas prices

8 / Norfolk Southern Corporation

Strategic Plan Enhancing Shareholder Value

• NS progressing on financial and operational targets
• Operating ratio declined y-o-y for seven consecutive quarters
• Productivity savings of ~ $150 million for 2017
• On track for $1 billion in share repurchases
• Dedicated team focus on delivering long-term shareholder value
• $650M of annual productivity savings by 2020
• Market approach facilitating top line growth
• Operating ratio below 65% by 2020 or sooner
• EPS double digit compound annual growth rate by 2020
• Returning capital to shareholders

8

9 / Norfolk Southern Corporation

Thank You

www.norfolksouthern.com