NS announces preliminary Q1 results, agrees to $600M East Palestine settlement

Norfolk Southern Corp. today announced preliminary first-quarter 2024 financial results, as well as a $600 million agreement to settle a class action lawsuit related to the 2023 train derailment in East Palestine, Ohio.

The company reported adjusted railway operating revenue of $3 billion, adjusted railway operating expenses of $2.1 billion, adjusted income from railway operations of $904 million, adjusted diluted earnings per share of $2.49, and an operating ratio (OR) of 69.9%.

Based on generally accepted accounting principles (GAAP), NS reported railway operating revenue of $3 billion, railway operating expenses of $2.8 billion, railway operations income of $213 million, diluted earnings per share of 23 cents, and an OR of 92.9%.

"In the first quarter, we delivered an adjusted operating ratio in line with our guidance, which called for a seasonal increase of 100-200 basis points sequentially from the fourth quarter," said NS President and Chief Executive Officer Alan Shaw in a press release.

That achievement resulted despite macroeconomic challenges and the ongoing impact of the company’s revenue mix being weighted toward lower-rated traffic, including international intermodal, which continues to significantly drive volume growth, Shaw said.

"We are encouraged that non-GAAP margin improved each month throughout the quarter. Looking ahead, we have strong momentum in our effort to achieve a full year 100-150 basis points improvement, including 400+ basis points of year-over-year improvement in the second half of the year," he added.

The Q1 results include the impact of a $600 million agreement in principle to resolve a consolidated class action lawsuit relating to the East Palestine derailment. Additionally, preliminary GAAP results include charges associated with the company's involuntary and voluntary separation programs that will eliminate management positions, as well as costs associated with the recruitment of a new chief operating officer, expenses associated with shareholder matters, and a deferred tax adjustment.

Collectively, those items increased the company's railway operating expenses by $691 million, increased its OR by 2,300 basis points, and reduced earnings per share by $2.26.

The Class I is becoming a more productive and efficient railroad, Shaw said.

"There is still work to be done to achieve industry-competitive margins and our target of a sub-60% adjusted operating ratio in three to four years and we are taking all the right steps to deliver on our promise," Shaw continued. "Our recently appointed Chief Operating Officer John Orr is executing precision scheduled railroading principles and accelerating our operational improvements, which are already yielding positive results. We are moving with urgency, and we are confident in our ability to achieve our near- and long-term operating and financial targets."

NS will announce its full Q1 2024 results on April 24.

If approved by the court, the $600 million East Palestine settlement agreement will resolve all class action claims within a 20-mile radius from the derailment and, for those residents who choose to participate, personal injury claims within a 10-mile radius from the derailment.