NS attributes higher profit to volume growth, strategic plan

Norfolk Southern Corp. reported fourth-quarter 2017 adjusted net income of $486 million, or $1.69 per diluted earnings per share (EPS), compared with $416 million, or $1.42 per diluted share, in the same period a year ago.

For full-year 2017, NS posted $1.9 billion in adjusted net income versus $1.7 billion in 2016. Adjusted diluted EPS were $6.61, an 18 percent increase over last year's record diluted EPS of $5.62, NS officials said in a press release.

Including the impact of the Tax Cuts and Jobs Act of 2017, NS logged net income of $3.97 billion in Q4 2017, with diluted EPS of $13.79. For the year, net income including the impact of tax reform was $5.4 billion and diluted EPS were $18.61.

In Q4 2017, operating revenue rose 7 percent to $2.7 billion compared with the previous year's quarter, as overall volumes increased 5 percent reflecting growth in intermodal, coal and merchandise.

Operating expenses during the quarter decreased 4 percent to $1.7 billion compared with the previous year's quarter. The impact of tax reform decreased operating expenses by $151 million, which more than offset increases that resulted from volume growth and higher fuel prices and incentive compensation.

Adjusted income from railway operations in Q4 rose 13 percent year-over-year to $863 million. NS posted an operating ratio for the quarter of 67.7 percent, a 170 basis point improvement over the operating ratio in Q4 2016.

For full-year 2017, NS reported railway operating revenue climbed 7 percent to $10.6 billion compared with 2016's results. NS attributed the increase to 5 percent growth in the major commodity categories of coal and intermodal.

Railway operating expenses increased 2 percent to $7 billion compared with 2016's expenses. The increase was attributed to higher diesel fuel prices, increased incentive compensation, higher inflationary costs and volume growth. Those higher costs were offset in part by efficiency savings and the benefit of tax reform.

NS' operating ratio for 2017 was 67.4 percent, a 150 basis point improvement over 2016's operating ratio.

"Norfolk Southern is open for growth, and we are optimistic as we head into 2018 that the current economic environment will provide an opportunity for continuing growth," said Chairman, President and Chief Operating Officer James Squires.

He also cited the company's strategic plan as a reason for the improved bottom line.

"We remain steadfast in our commitment to deliver on the goals in our strategic plan, of which positioning ourselves for growth is a key element," Squires said. "We are laser-focused on execution of our strategy and are confident that we can achieve our targets by 2020 or sooner."

Also in 2017, NS invested more than $1.7 billion in capital to maintain its infrastructure and support economic growth, company officials said. The recently completed Portageville Bridge is one example. Funded through a public-private partnership, the new bridge will support economic growth and jobs across New York's Southern Tier region.

Looking ahead in 2018, NS plans to invest $1.8 billion in capex to maintain the safety of its rail network, enhance service, improve efficiency and support growth, company officials said.