NS posts 'excellent' third-quarter results

Led by growth in chemicals, metals/construction, intermodal and automotive businesses, combined with ongoing productivity improvements, Norfolk Southern Corp. posted strong third-quarter results, with net income soaring 20 percent to $482 million.

Diluted earnings per share jumped 23 percent to $1.53 and railway operating revenue rose 5 percent to $2.8 billion compared with third-quarter 2012 results.

However, coal continued its downward trend, driven by reduced demand for electricity, competition from natural gas, a soft domestic metallurgical market and excess global supply. Coal revenue fell 9 percent to $641 million primarily because of lower average revenue per unit and a 2 percent decline in volumes.

“Even in the face of continuing weakness in the coal markets, our focus on service efficiency and velocity allowed us to provide superior performance for our customers and excellent results for our shareholders,” said NS Chairman and Chief Executive Officer Wick Moorman during an earnings conference this morning.

On the up side, intermodal revenue reached an all time high, driven up 7 percent to $605 million by a 5 percent rise in volume and a 2 percent increase in revenue per unit. Much of the volume increase resulted from the opening of new lanes in the Crescent Corridor and continued highway-to-rail conversion opportunities.

Also on the positive side, general merchandise revenue climbed 11 percent to $1.6 billion, primarily as a result of a 6 percent growth in shipments. Growth in volume was driven by chemicals, up 14 percent due to crude-by-rail business gains; metals/construction, up 9 percent, due in part to higher aggregate and frac sand volumes; automobiles, up 9 percent due to new business from existing customers and higher production; and a 4 percent increase in paper. Agriculture volumes dropped 3 percent as a result of the 2012 drought's impact on corn and soybeans, as well as weaker ethanol volumes.

Continued productivity improvements helped keep costs in check — railway operating expenses rose 1 percent to $2 billion — as well as improve the operating ratio, which dropped 3 percentage points to 69.9, NS executives said.

“Our 2013 results combined with our reduced operating ratio are a clear indication that we are on the right path,” said Moorman.