NS reports strong Q1 results, with profit up 25 percent

Norfolk Southern Corp. posted strong first-quarter 2016 results yesterday, with profit soaring 25 percent to $387 million and diluted earnings per share up 29 percent to $1.29 year-over-year.

The results demonstrate "significant progress" in the company's five-year strategic plan, said NS Chairman, President and Chief Executive Officer James Squires.

"Our focus on strengthening Norfolk Southern is yielding results, and the company is now on track to achieve productivity savings of about $200 million and an operating ratio below 70 in 2016," said Squires in a press release.

Under the previously announced plan, the Class I expects to achieve annual productivity savings of more than $650 million by 2020 and an operating ratio below 65 percent by 2020.

For the quarter, NS reported railway operating revenue declined 6 percent to $2.4 billion compared with first-quarter 2015; operating expenses declined 13 percent to $1.7 billion; traffic volumes fell 2 percent; and income from railway operations rose 25 percent.

NS' operating ratio was 70.1 percent, an improvement of 8 percent over Q1 2015 and an NS first-quarter record.

The 2 percent decline in volume was the result of lower coal traffic, NS officials said. Coal revenue plunged 23 percent to $349 million compared with the same quarter last year. A mild winter, low natural gas prices and a weak global export market combined to decrease coal volume by 23 percent.

Average revenue per unit decreased 3 percent as the impact of higher rates were more than offset by a $114 million, or 70 percent, decline in fuel surcharge revenue.  

Merchandise revenue increased 2 percent to $1.5 billion compared with the same period a year ago. Led by an 18 percent increase in automotive traffic, volume grew in all business groups except chemicals, which was affected by fewer crude-oil shipments due to low oil prices.

First quarter year-over-year revenue results for NS' five merchandise commodity groups were: chemicals, down 3 percent to $419 million; agriculture, up 3 percent to $386 million; metals/construction, down 3 percent to $300 million; automotive, up 16 percent to $254 million; and paper/forest, up 3 percent to $190 million.

Intermodal revenue slipped 12 percent to $522 million. Volume was even during the quarter as growth in international volumes were offset by lower domestic volumes due to NS' restructuring its Triple Crown Services subsidy.

NS' first-quarter report comes less than two weeks after Canadian Pacific dropped its months-long effort to merge with the company.