ATLANTA — Norfolk Southern on Wednesday reported record fourth-quarter and full-year operating income as well as a record low operating ratio.
CEO Jim Squires said the railroad hit or exceeded the three-year financial targets set in 2019 when NS adopted a Precision Scheduled Railroading operating model. “Through a multiyear effort, we delivered on our commitments, overcoming significant headwinds associated first with a freight recession and then a global pandemic over the course of our plan,” Squires told investors and analysts on the railroad’s earnings call.
Earnings per share was up, the operating ratio down, and $10 billion was returned to investors through a combination of share buybacks and dividends over the past three years, Squires noted.
For 2021, operating income surged 48%, to $4.4 billion, as revenue increased 11%, to $11.1 billion. Earnings per share increased 31%, to $12.11. The operating ratio, compared to the adjusted figure for 2020, improved 4.3 points to 60.1%.
Volume was up 5% in 2021, led by double-digit increases in coal, metals and construction, and chemicals traffic. All of NS’s business segments grew during the year as volume bounced back from 2020 pandemic-related lows.
For the fourth quarter, operating income rose 15%, to $1.1 billion, as revenue grew 11%, to $2.8 billion. Earnings per share increased 18%, to $3.12. The operating ratio was 60.4%, down from 61.8% a year ago.
Fourth-quarter volume declined 4% due to lower levels of intermodal, automotive, and agriculture, forest, and consumer products. Intermodal volume was affected by terminal and port congestion, chassis shortages, and warehouse throughput, while auto production remained muted due to the ongoing global computer chip shortage.
NS has a favorable outlook for 2022 merchandise and intermodal volume, as rising industrial production will boost carload traffic and continued consumer spending and restocking of low retail inventories will lead to intermodal growth, Chief Marketing Officer Ed Elkins says. Auto production also is expected to ramp up this year.
NS has a guarded view of coal traffic, which is expected to return to its long-term decline this year due to unfavorable price trends for export metallurgical coal and lower domestic utility demand, Elkins says.
NS’s financial outlook for the year includes operating ratio improvement of between a half point and full point, and revenue growth of 7% to 9% driven by merchandise and intermodal. The railroad will spend $1.8 billion to $1.9 billion on capital expenses this year.
This is wonderful news. Go Team. Now they can easily afford generous pay increases & to pay 100% of their employee’s health care costs. What a great way to say thank you to all who made this possible & attract new hires.
Because the Fed has decided to stop doing their “market intervention” via the S&P 500. When they unwind, everyone unwinds. Now that Wall Street is happy, they can raise interest rates, now the banks can increase profits, traders can hedge against the loss of value in the currency and their stock portfolios.
Meanwhile, commodity prices rise because it takes more diluted dollars to buy the same number of widgets. Values of those 401k, 403b, Roth and Trad IRA’s start losing value because your average Joe doesn’t use Robin Hood to hedge against GameStop or pork bellies.
Jim Squires can retire in peace with his bonus and the next 2 generations of the Squires family can live debt free and look back because not only did their grandfather survive the pandemic, he navigated perhaps the weirdest time in railroad history the US.
Why should I as a shareholder be happy when my share price keeps dropping in January — in spite of today’s results?
Customer complaints, late trains, hiring issues….still made record profits….well, at least the share holders are happy….
And in the bizarro world of Class 1 railroads, we all know that’s the ONLY stakeholders that really matter. 😏
The first CEO to get a ZERO operating ratio wins the prize!