TD Cowen NEARS Conference Takeaways

Why It Matters

The merger and technology initiatives could improve rail asset utilization and position rail to capture freight displaced by rising fuel costs and trucking capacity constraints, reshaping the intermodal landscape.

Key Takeaways

• Union Pacific commits to long‑term short‑line partnerships and dedicated team
• Norfolk Southern highlights merger’s potential to cut empty railcar miles
• AI and automation grants aim to modernize rail infrastructure and customer tools
• Fuel price volatility could shift freight from trucks to rail
• RailPulse visibility adoption lags; cost reductions needed for broader uptake

Pulse Analysis

The upcoming Norfolk Southern‑Union Pacific merger promises to address a longstanding inefficiency in rail logistics: near‑100% empty return trips for railcars. By creating a national intermodal network that routes equipment to high‑demand hubs such as Chicago, North Jersey, Florida, and Mexico, the combined carrier can dramatically improve asset utilization and lower waste. This structural advantage over trucking, where empty miles typically range from 5% to 15%, could translate into cost savings and a stronger value proposition for shippers seeking reliable, low‑carbon transport.

Technology is another focal point. The Federal Railroad Administration is channeling grants toward automation, advanced inspection, and data‑driven oversight, while Class I railroads invest in in‑house software and AI to refine customer support, ETA accuracy, and operational efficiency. Despite these advances, adoption of RailPulse, Norfolk Southern’s equipment‑visibility platform, remains limited due to cost concerns. Reducing subscription and hardware expenses could accelerate uptake, delivering end‑to‑end visibility that rivals competing modes and enhances service reliability.

Market dynamics further underscore rail’s growth potential. Diesel prices hovering around $6‑$7 per gallon and a tightening truckload market—exacerbated by FMCSA regulatory actions—create a price incentive for shippers to shift freight to rail. Volatile lumber flows and constrained trucking capacity have already prompted some conversion, while housing demand rebounds could intensify pressure on freight corridors. Together, the merger’s operational synergies, technology upgrades, and favorable fuel economics position rail to capture a larger share of the freight mix in the coming years.