Norfolk Southern railroad delivered 27% higher 3Q profit
OMAHA, Neb. (AP) — Norfolk Southern hauled in 27% more third-quarter profit as the railroad increased shipping rates and reduced the number of delayed deliveries that shippers have been complaining about this year.
The Atlanta-based railroad said it earned $958 million, or $4.10 per share, up from $753 million, or $3.06 per share, a year ago. Those results included a charge of $117 million, or 28 cents per share, related to the raises the railroad offered to its employees. Earnings per share also got a 58 cent boost from a Pennsylvania tax law change.
But even with those one-time changes, Norfolk Southern’s results beat the $3.75 per share that analysts surveyed by FactSet were expecting.
The railroad said its average train speed improved to 19.1 mph (30.58 kilometers) during the third quarter, and the number of hours railcars spent waiting in terminals decreased to 25.9 hours. Both those measures are significantly better than the rest of the year as the railroad continued to hire more employees, although they still lag behind a year ago.
“We are confident our broad and continuing service improvement will drive growth opportunities in the months ahead,” CEO Alan Shaw said.
Norfolk Southern said it the number of train crews it employs is at the highest level since last summer with 7,335 workers, and there are another 950 new conductors still in training.
The railroad’s revenue jumped 17% to $3.34 billion even though the number of shipments it hauled slipped 2%. That also beat Wall Street expectations. FactSet said analysts were expecting Norfolk Southern to report $3.19 billion revenue.
Edward Jones analyst Jeff Windau said Norfolk Southern is clearly improving its service, which is encouraging, but its high expenses remain a concern because their operations haven’t been as efficient as the other major freight railroads. Norfolk Southern said its expenses jumped 21% to $2.07 billion with the price of fuel elevated and compensation costs higher.
The railroad bumped up its annual revenue growth forecast to 13%, up from 12% three months ago. Citi Research analyst Christian Wetherbee said in a research note that the increased forecast shows Norfolk Southern still has strong power to increase prices.
Shares of Norfolk Southern jumped more than 4% to sell for $225.14 Wednesday.
The railroad’s Chief Marketing Officer Ed Elkins said Norfolk Southern likely lost $20-to-$25 million in revenue during the quarter because it put a hold a some shipments ahead of the mid-September strike deadline in the contract talks with its unions because it didn’t want to strand shipments of hazardous materials or other sensitive cargo.
Norfolk Southern is one of the nation’s largest railroads, and it operates about 19,500 miles (31,382 kilometers) of track in 22 Eastern states and the District of Columbia.
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