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Rail News: Norfolk Southern Railway

Norfolk Southern's Q2 profit falls on lower volumes

Norfolk Southern Corp.'s second-quarter 2016 net income declined to $405 million, or $1.36 diluted earnings per share, from $433 million, or $1.41 earnings per share, a year ago, the Class I announced this morning.

Railway operating revenue fell 10 percent to $2.5 billion compared with Q2 2015's revenue as a result of reduced volumes and lower fuel surcharge revenue. Overall, volume dropped 7 percent to 1.8 million units for the quarter, NS officials said in a press release.

Coal revenue plummeted 25 percent to $339 million and coal volume fell 24 percent because of high stockpiles, limited coal burn due to a mild winter and sustained lower natural gas prices.

Merchandise revenue fell 3 percent to $1.6 billion, largely due to fewer chemicals being shipped as a result of low oil prices, NS officials said.

The five merchandise commodity groups' year-over-year revenue results were chemicals, down 6 percent to $426 million; agriculture, up 1 percent to $383 million; metals/construction, down 3 percent to $334 million; automotive, down 2 percent to $248 million; and paper/forest, down 5 percent to $186 million.

Intermodal revenue declined 15 percent to $538 million, with volume down 5 percent in the quarter primarily because of the restructuring of NS' Triple Crown Services subsidiary.

Income from railway operations clocked in at $770 million, down 5 percent from Q2 2015's results. The quarterly operating ratio improved 1.4 points to 68.6 percent.

Cost cutting and lower fuel costs resulted in a 11 percent decline in operating expenses, which totaled $1.7 billion for the quarter.

"Our second-quarter results reflect our unwavering focus on cost-control, steadfast commitment to customer service, and significant improvements in network performance," said Chairman, President and Chief Executive Officer James Squires.

NS is on track to achieve productivity savings of at least $200 million for 2016, he said. The company's operating ratio of 69.4 percent for 2016's first half set a record, prompting executives to be confident that NS will achieve a full-year operating ratio below 70 percent, said Squires.

"Through the continued execution of our strategic plan, we remain confident in our ability to drive superior shareholder value through excellent customer service that positions us for future revenue growth, combined with network efficiency and asset utilization," he said.

NS' second-quarter earnings were better than anticipated by Wall Street analysts, The Wall Street Journal reported.

Contact Progressive Railroading editorial staff.

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