Norfolk Southern Sole US Railroad to Report Higher Third-Quarter Earnings
Norfolk Southern Corp. became the only U.S. railroad to report higher third quarter earnings, improving net income 2% to $460 million, or $1.55 per share, as cost reductions of 10% outpaced a decline in revenue.
Revenue slipped 7% to $2.5 billion, with a matching decline of 7% in the intermodal business. Most of the intermodal decline was the reduction in Triple Crown Services activity that was scaled back last year. Earnings in last year’s third quarter were $452 million, or $1.49 per share.
The results were helped by higher costs in last year’s third quarter from restructuring as well as gains from property sales, including $23 million, or 8 cents, for reductions in Triple Crown Services. Operating income, excluding interest and taxes, was $820 million in the quarter, little changed from year to year.
“Our continued focus on efficiency and asset utilization, balanced with our commitment to customer service, drove an operating ratio of 67.5 … even in the face of economic headwinds,” CEO James Squires said.
The largest revenue decline was coal at 18%. Revenue from other commodities such as automotive and chemicals fell 4%.
Norfolk Southern shipments declined 4%, and revenue per shipment fell 3%.
In Canada, Canadian National Railway’s net income slipped 3% to C$972 million ($742 million), or C$1.25.
Canadian National generated revenue of C$3.01 billion, a 6% decline, hurt by lower coal, crude oil and frac sand business. Profit before interest and taxes was off 5% to C$1.4 billion. Total shipments handled fell 4% to 1.33 million.
CEO Luc Jobin described the results as “outstanding” despite a “still sluggish North American and global economy.”
Its operating ratio was 53.3.
International intermodal was hurt by the bankruptcy of Hanjin Shipping, whose vessels called at Prince Rupert, British Columbia, where CN offers intermodal service. Hanjin’s failure led CN to write off $20 million in bad debt.
Domestic intermodal in Canada was weaker, Chief Marketing Officer Jean-Jacques Ruest said on a conference call.
Total intermodal revenue was off 4% and shipments were down 5%.
Canadian National was helped by stronger lumber shipments to the U.S., but forest products shipments slipped 2%. Chemicals and metals business volume also dropped.
Grain shipments rose 5%, and a delayed harvest led to a reported sharp increase in October. Automotive shipments rose 8%.
