ATLANTA — Norfolk Southern on Wednesday reported record third-quarter financial results despite handling lower volume.
“The Norfolk Southern team delivered strong financial results in the third quarter, achieving quarterly records for revenue, net income, and earnings per share,” CEO Alan Shaw said on the railroad’s earnings call with investors and analysts.
NS’s operations also improved during the quarter as it reached its train and engine hiring goals ahead of schedule. “We are qualifying conductors at a robust pace,” Shaw says.
Average train speed rose 20% during the quarter, and cars also spent less time in yards, thanks to improved staffing levels and the implementation of another phase of the railroad’s TOP | SPG operating plan, Chief Operating Officer Cindy Sanborn says.
Volume was down 2% overall, with merchandise off by 2% and intermodal down 5%. Coal volume was up 14%.
Factors behind the decline in intermodal volume included customers diverting loads to the highway in advance of a potential strike in September and the loss of short-haul international intermodal volume to trucks, Chief Marketing Officer Ed Elkins says.
Shaw said he was confident that the railroad’s ongoing service improvements would lead to volume growth in the coming months, despite signs of a weakening economy.
If a downturn leads to a decline in traffic, will NS be as quick to furlough train crews as it was at the onset of the pandemic?
“We have to make sure we manage through downturns in such a way that we are in a good place to handle the upturns. That’s how we’re going to grow long-term,” Sanborn says, noting NS would first rely on attrition to thin crew ranks if necessary.
NS’ third quarter operating income rose 12%, to $1.27 billion, as revenue grew 17%, to $3.3 billion. Earnings per share increased 34%, to $4.10.
The railroad’s operating ratio was 62%, a 1.8-point increase compared to a year ago as NS set aside money for larger than expected wage increases and bonuses for its unionized employees. The wage impact added 2.7 points to the operating ratio.
“Improved staffing levels” stated as reason for record income. Wonder if anyone will remember those words when a downturn in freight occurs? Betcha they just layoff like they have in the past.
Perhaps Norfolk Southern could reclaim the ‘Crescent’ from Amtrak which would continue supplying power to the train between Washington and New York. The ‘Crescent’ (possibly restored to the original name “Crescent Limited” changed during the Great Depression) would be re-equiped with Siemens’s Venture cars and Charger locomotives with the clean sleek lines of Brightline trains but in Tuscan red with yellow-gold stripes.
Incentives would be prudent to NS such as upgrading trackage.
As a shareholder, I hope some of these earnings go toward plant improvements to facilitate additional growth and facilitate better ability to increase intermodal business.