News & Reviews News Wire Operational improvements propel Norfolk Southern’s second-quarter results

Operational improvements propel Norfolk Southern’s second-quarter results

By Bill Stephens | July 25, 2024

The railroad regained market share in the service-sensitive intermodal and automotive traffic segments

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Predominantly red and black Norfolk Southern locomotive on turntable
Norfolk Southern’s newly painted locomotive saluting its railroaders is displayed on the turntable at the Railroaders Memorial Museum in Altoona, Pa., on Saturday, June 8. Norfolk Southern

ATLANTA – Operational improvements helped Norfolk Southern win back service-sensitive intermodal and automotive traffic while driving down costs and boosting the railroad’s profitability in the second quarter.

“While our work continues, our second-quarter results represent an encouraging inflection point in our operating performance,” CEO Alan Shaw said on the railroad’s earnings call on Thursday afternoon.

The railroad’s quarterly results show a return to normalcy compared to last year’s second quarter, which was heavily impacted by the financial toll of the hazardous materials derailment in East Palestine, Ohio.

For the second quarter of this year, operating income was up 96%, to $1.1 billion, as revenue grew 2%, to $3 billion. Earnings per share rose 108%, to $3.25. The operating ratio was 62.8%, a 22-point improvement from a year ago. Adjusted for the impact of one-time items, the operating ratio was 65.1%.

Overall volume was up 5%, which led the industry for the second quarter. Intermodal volume grew 8%, merchandise was up 2%, and coal volume declined 2%.

Improved service helped NS regain market share in intermodal and automotive traffic, Shaw says.

But the railroad lowered its full-year revenue forecast today due to a negative outlook for domestic intermodal traffic, agricultural commodities, and coal. NS now expects revenue growth of around 1% this year, down from the prior forecast of 3%.

NS stuck with its full-year operating ratio target of 66%, however, due to confidence it can achieve cost reductions as its operations improve.

Norfolk Southern’s key operational and service metrics all improved compared to a year ago as well as sequentially.

The railroad’s intermodal service index improved to 91% compared to 84% a year ago, while merchandise trip plan compliance hit 80%, up from 62% in the second quarter last year.

Increased train velocity and lower terminal dwell times improved fluidity, allowing NS to return 320 locomotives to storage during the quarter, Chief Operating Officer John Orr says. Another benefit to the higher velocity: Moving 7,000 freight cars offline.

Norfolk Southern’s mainline accident rate has improved 46% this year compared to the full-year 2023, while its overall train accident rate improved 10%. The personal injury rate, however, increased 10%.

Norfolk Southern’s quarterly presentation slides are available online.

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