Norfolk Southern reports record financial results despite traffic decline

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NORFOLK, Va. — Norfolk Southern today reported record quarterly financial results as more efficient operations, cost control, and price increases were enough to offset broad volume declines.

Despite signs of slowing economic growth, NS maintained its volume and financial outlooks for the year. The railroad is banking on landing more intermodal, automotive, crude oil, sand, and aggregates traffic in the second half of the year, as well as reaping productivity gains from its new operating plan based on the principles of Precision Scheduled Railroading.

“Our railroad is performing very well. The transition to our new PSR-based operating plan, TOP21, went flawlessly, and we are already seeing the financial benefits, with more to come,” CEO Jim Squires told investors and analysts on the railroad’s earnings call.

For the second quarter, NS operating income rose 4%, to $1.06 billion, as revenue grew 1%, to $2.9 billion. Earnings per share rose 8%, to $2.70, which came in 9 cents below Wall Street expectations, according to an I/B/E/S analyst survey. The operating income, revenue, and earnings per share figures all set quarterly records.

NS also posted an all-time low operating ratio of 63.6%, a 1-point improvement over last year’s second quarter.

Volume was down 4%, with all three NS business segments showing declines: Coal shipments slumped 6%, intermodal by 4%, and merchandise was down 3%. Merchandise revenue was up 2% to a record level, however, while coal revenue was flat. Intermodal revenue declined 2%.

The volume declines were due to a number of factors, Chief Marketing Officer Alan Shaw says. Midwest flooding affected automotive traffic. Steel volumes were down due to the impact of tariffs. Domestic intermodal volume was down 10% due to increased truck capacity. And coal was hurt by weaker exports as well as lower domestic metallurgical coal shipments.

NS key operating metrics showed significant improvement compared to a year ago, with average train speed up 19% and terminal dwell down 37% to record levels.

“Our train performance, terminal dwell, shipment consistency, and car level velocity for the second quarter were the best on record for any quarter,” Chief Operating Officer Mike Wheeler says.

The railroad expects to meet or exceed service and operations targets for the year, including on-time performance, locomotive and crew productivity, train weight, and the number of cars online, Wheeler says. But for the second straight quarter the railroad reiterated its goals without providing specific quarterly metrics for each measure.

Total employment at NS declined 6% compared to the second quarter last year.

NEWSWIRETrains News Wire

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