For the quarter, the railroad’s operating income declined 11%, to $962 million, as revenue fell 7%, to $2.9 billion. Earnings per share slumped 1%, to $2.55. NS’s operating ratio rose 1.4 points to 64.2%.
For the year, operating income rose 1%, to a record $3.9 billion, even though revenue declined 1%, to $11.2 billion. Earnings per share grew 8%, to $10.25. NS’s operating ratio was a record 64.7%, an improvement of 0.7 points. Volume for the year was down 5%.
“In the face of a challenging volume environment, we’re pleased to share results today that demonstrate this organization’s strong momentum in streamlining our operations and making substantial progress toward our long-term commitments,” CEO Jim Squires told investors and analysts on the railroad’s earnings call this morning.
Squires said the annual operating ratio improvement was “particularly impressive against the backdrop of declining volumes.”
NS in 2019 set all-time on-time performance records for merchandise and automotive traffic and posted its best intermodal on-time performance since 2009, Chief Operating Officer Mike Wheeler says.
Last year NS launched its TOP21 operating plan based on the principles of Precision Scheduled Railroading, which has made the railroad more fluid and reliable.
“Our network is running fast and on time,” Wheeler says, citing a 17% improvement in average train speed and a record low terminal dwell that was 30% below the levels of 2018.
The railroad is operating with the lowest number of train and engine crews ever, Wheeler says, as NS moves tonnage on fewer but longer trains. Crew starts were down 15% in the fourth quarter, well below the 9% decline in revenue ton miles.
The NS locomotive fleet was 20% smaller at year end, which Wheeler says allowed the railroad to furlough 600 mechanical positions across the railroad. An additional 135 layoffs are expected this year as the railroad matches the mechanical workforce to the smaller fleet size.
NS’s merchandise volume sank 6% in the quarter due to a slowdown in the industrial economy. Intermodal volume was off 8% amid loose truck capacity. And coal volume was down 21% as low natural gas prices put pressure on coal for use in electricity generation, and reduced steel production hit domestic metallurgical coal volume. The railroad’s export coal shipments also tumbled.
Chief Marketing Officer Alan Shaw says coal will remain challenged this year, but intermodal volumes should resume growth in the second half of the year. The outlook for merchandise traffic was cloudy given ongoing uncertainty in the industrial economy.
NS expects flat revenue this year, Squires says, but anticipates an operating ratio improvement of 2.35 points as the railroad continues to see productivity gains and cost reductions. NS also stuck with its goal of a 60% operating ratio for 2021.
The fourth quarter was the 12th straight that NS has seen growth in revenue per unit for all three of its business segments, Shaw says.
Shades of early Penn Central it sounds like, cutting traffic and driving away customers to profitability. And we’re not complaining just as fans who no longer have so many trains to watch.
To compare: the Q4 operating ratio for 2018 was 62.8. The overall OR for 2018 was 65.4, so they were experiencing a downward trend at that point.This is directly after the very first round of “clean-sheeting” where small tweaks were made to the manifest and unit train network and almost no large, disruptive changes were made.
In 2019, we’re celebrating a Q4 OR of 64.2? With a yearly OR of 64.7?
Basically, you’ve told me TOP21 has done nothing but fail to make you guys more profit while positioning yourself poorly for any sort of top-line growth. Oh man, and look at those excuses as to why traffic is off…
Make no mistake, TOP21 and PSR are a sinking ship. You gotta look past the fluff to see it.
Did anyone notice in an other Trains article that UP is resuming interline service discontinued in 2018. Merchandise business is dying on the railroads. Their graving trains of coal and sand diminishing on a grand scale. To increase the business no matter the model, you have to have a sales team on the streets. One stop shopping for a customer with 100’s of car load days are over. The railroads will have to go to work, provide good service for the money or continue to shrink. Maybe they can impress WS as they lose much of the business, but I doubt it. They will probably not see 2018 traffic levels again for a while under the circumstances. For shippers, it is just easier to work with trucks vs trains. Look on the Interstate highways. Virtually tons of business that could or use to be on the rail.
I am 1 of them employees that got laid off. I should thank them because i have found a great job and i feel like I am wanted there unlike at NS and make just as much money.
The decline in Coal shipments is predictable as Coal is the highest cost fuel for making electricity. Electric utilities are closing Coal power plants as quick as they afford it. There is so much excess Natural Gas that pipeline transportation costs is most significant cost for using gas.
Maybe UP and NS can combine forces and call the Prune Slash Reduce plan UPTOP2021
PSR, you will have volume decline, RR dictates to customer how and when they wiil be worked. Customer either fits in the PSR model or find another avenue. Ones that are left will get hit with an increase in shipping rates to try and offset the lose. PSR profits come from layoffs, firings and property sales…
Hmmm..sounds good I guess if your upper management….a third grader once told me that as an ice cube slowly melts away in a glass, it still carries the same weight. It’s just not an ice cube any more!….think about it…if your not a member of NS management, the lesson here will be apparent in no time.
More lipstick put on the PSR shrink-mode pig…
Hopefully it leads to modern regulation for a national asset. It is too valuable to allow Wall Street and their complicit pocket-stuffing Class 1 executives to set policy.
And the North Alabama area served by NS is just about void of local traffic compared to ten years ago.
UP will be operating with 3000 fewer employees this year..Yet they hired hired hundreds of T&E personnel years prior. So expand your footprint in order to cut your foot off?? NS is going down the same path.. If you have RR stocks in: CSX, UP, NS dump em’ and wait until after the elections..
It seems sad that companies appear to brag about laying off employees.