CSX vs Norfolk Southern Q3 2026: Same Fuel Bill, Opposite Cost Stories

CSX and Norfolk Southern are the two big freight railroads of the eastern United States. Their networks overlap from the Midwest to the Atlantic ports, they haul the same kinds of freight (chemicals, grain, steel, cars, coal and shipping containers), and in many markets a shipper's choice is one or the other. Both reported Q3 2026 results on October 22 with almost the same top line: revenue up 12.0% at CSX and 13.6% at Norfolk Southern. Below that line the two quarters went in opposite directions. CSX's operating income rose 44% and Norfolk Southern's rose 4.7%. Most of the difference comes from costs other than fuel, not from demand.

At a glance

• Operating ratio: 60.9% at CSX, 67.4% at Norfolk Southern. The operating ratio is operating expenses as a share of revenue, the railroad industry's main efficiency yardstick; lower is better. CSX spent about 61 cents to earn each dollar of revenue, Norfolk Southern about 67. A year ago the order was reversed on each company's adjusted basis (CSX 65.1%, NSC 63.3%).
• Total operating costs: −$53M at CSX, +$371M at Norfolk Southern. Fuel hit both about equally (+$170M and +$183M). What differs is everything else: CSX's other costs fell, Norfolk Southern's grew faster than its revenue.
• Adjusted EPS growth: about +30% at CSX, +9.7% at Norfolk Southern. Both headline EPS figures carry one-offs, but in opposite directions: CSX's reported +54% is flattered by a write-down in last year's quarter, and Norfolk Southern's reported +6.6% is held down by merger and derailment costs this year.

Side by side

Operating margin is the mirror image of the operating ratio (the share of revenue left after running the business, before interest and tax): 100% minus the ratio. The EPS levels ($0.57 vs $3.37) can't be compared with each other because the two companies have very different share counts (about 1,853 million at CSX, 225 million at Norfolk Southern); compare the growth rates instead. The two "adjusted" operating ratios also aren't built the same way: CSX's year-ago 65.1% removes only a $164 million goodwill write-down, while Norfolk Southern's non-GAAP figures remove merger costs, East Palestine derailment costs and (in 2025) restructuring charges. The CSX figures come from its filed 10-Q; Norfolk Southern's come from its earnings release, because its 10-Q had not been filed when we published.

Same demand, same fuel bill

The top halves of the two income statements look alike. Both railroads grew revenue by double digits in all three main businesses, and both say a tighter truck market sent freight to rail: CSX's 10-Q credits domestic intermodal "wins with key customers, new service offerings and a tightening truck environment," and Norfolk Southern's CEO said "a tighter trucking market highlighted rail's competitive advantages." Intermodal (shipping containers and truck trailers carried on trains) was the fastest grower at both, up 20% at CSX and 21.1% at Norfolk Southern.

Much of that revenue growth is diesel, not demand. A fuel surcharge is the extra amount a railroad bills customers on top of its base rate when fuel prices rise. Norfolk Southern's release says surcharges supplied about 8 of its 13.6 points of growth, which leaves roughly 5-6% growth on 3% more volume. CSX's 10-Q doesn't split out its surcharge, but it says revenue grew "primarily due to increased fuel surcharge revenue," and CSX's locomotive fuel prices rose 67%. CSX did carry more freight: volume rose 4.7% against Norfolk Southern's 3%.

The fuel bill itself was close: CSX's rose $170 million and Norfolk Southern's $183 million. Because surcharge money comes in and goes straight back out as fuel expense, it pushes revenue up without adding much profit, and it makes the operating ratio look worse. That hit both companies. It doesn't explain the gap between them.

Where they split: everything other than fuel

CSX cut costs while moving more freight. Leaving out fuel and last year's write-down, CSX's costs fell about $59 million (−3%) on 4.7% more volume. The biggest saving was purchased services (outside contractors and other operating costs), down $73 million, including $42 million of "efficiency savings, net of inflation" and $27 million less spent on last year's network disruptions and rerouting. Labor and fringe rose only $19 million (+2%) even though incentive pay rose $53 million, because headcount fell to about 21,900 people.

Norfolk Southern's non-fuel costs rose faster than its non-fuel revenue. Its four core cost lines (compensation, purchased services and rents, depreciation, materials and other) rose 7.6% to $1,886 million, against roughly 5-6% revenue growth excluding surcharges. Labor wasn't the problem: compensation rose just 2% on 3% more volume, an improvement on Q2. The problem was a single line, "materials and other," which rose $77 million (+52%) to $224 million. The earnings release gives no reason for that increase; the 10-Q should.

One-offs push the reported figures in opposite directions. CSX's year-ago quarter included a $164 million non-cash write-down of its Quality Carriers trucking business, worth $0.07 a share after tax. Leaving it out, CSX's EPS growth falls from 54% to about 30%, still strong. Norfolk Southern's current quarter carries $70 million of costs its adjusted figures remove: $42 million of Union Pacific merger expenses and $28 million of East Palestine derailment costs. Its year-ago quarter also had $40 million of such items. On the adjusted figures the gap is about 30% vs 9.7% EPS growth, and about 25% vs 7.2% operating income growth. That is narrower than the headline 54% vs 6.6%, but still wide.

Buybacks and taxes explain little of either result. CSX's share count fell 0.75%, worth less than a point of EPS growth, and its tax rate rose (24.0% from 22.7%), a slight drag. Norfolk Southern bought back no stock this year because the merger agreement bars it without Union Pacific's consent, and its tax rate was 23.1% in both years. At both companies the EPS change came almost entirely from operating profit.

Takeaway: This quarter's gap between the two railroads came from costs, not from demand or fuel. Both grew revenue 12-14% and both absorbed fuel bills $170-183 million higher, but CSX's other costs fell about 3% while Norfolk Southern's core costs rose 7.6%, led by a 52% jump in "materials and other." On each company's adjusted figures, a year ago Norfolk Southern was the more efficient railroad (63.3% operating ratio vs CSX's 65.1%). Now CSX leads, 60.9% to 65.4%.

What the scorecard doesn't capture

CSX's efficiency has come with worse service. By CSX's own figures, 73% of carloads arrived on plan versus 83% a year earlier, and 83% of containers versus 93%. Terminal dwell (how long a car sits in a yard) rose 12% to 10.6 hours. The company's chief operating officer retired on October 12, nine days before results, and no successor was named. Our CSX report flagged that unreliable service eventually costs a railroad volume (shippers go back to trucks) and money (more railcars, crews and rerouting). The first sign is there: equipment rents rose $6 million, which the filing ties to "longer merchandise cycle times." Norfolk Southern's earnings release gives no comparable service statistics, so we can't say whether its service is better or worse. What we can say is that CSX's cost lead was won while its own service measures got worse.

Cash backs up both sets of earnings, CSX's by more. Nine-month operating cash flow was 1.47 times net income at CSX and 1.33 times at Norfolk Southern. Norfolk Southern's is down 17.5% from a year earlier, mostly because of East Palestine payments including the final $285 million of the Ohio class-action settlement. Its receivables have also grown 24% since December. CSX's receivables used $196 million of cash over nine months versus $30 million a year earlier, which its filing calls "commensurate with higher revenues."

Norfolk Southern's numbers come with a pending sale. Union Pacific agreed on July 28, 2025 to acquire Norfolk Southern for stock and cash. The deal needs Surface Transportation Board approval (the federal regulator for railroad mergers), and either side could owe a $2.5 billion termination fee in specified circumstances. Until the deal closes or is abandoned, Norfolk Southern will keep carrying merger costs ($145 million so far in 2026) and won't buy back shares. That keeps its reported and adjusted results apart and makes its quarters less comparable with CSX's. CSX isn't part of that deal: its Q3 10-Q no longer mentions advisory costs for "potential industry consolidation," which it had in Q2, and names no transaction.

What to watch next

Norfolk Southern's 10-Q, which we estimate for around November 2, should explain the 52% jump in "materials and other": a one-off (claims or maintenance timing) would mean most of the operating-ratio gap with CSX is temporary, while a running cost would mean it isn't. For CSX, watch whether on-plan delivery recovers in Q4 under new operating leadership, especially for intermodal, its fastest-growing business and the one most exposed to shippers switching back to trucks. For both, if diesel prices fall, surcharge revenue will shrink and reported revenue growth will slow even if volume and pricing hold, so volume and the operating ratio will be better guides than headline revenue. For Norfolk Southern shareholders, the Surface Transportation Board's decision on the Union Pacific deal matters more than any single quarter.

Sources: figures are from our published analyses, CSX Q3 2026 (from CSX's Form 10-Q) and Norfolk Southern Q3 2026 (from Norfolk Southern's October 22, 2026 earnings release), at https://financialreportinsights.com/companies/csx/2026/q3 and https://financialreportinsights.com/companies/nsc/2026/q3.