AP Business Writer
OMAHA, Neb. (AP) — Norfolk Southern’s 23 percent drop in second-quarter profit follows the same story line as other railroads seeing a sharp decline in coal shipments.
Norfolk Southern posted $433 million net income, or $1.41 per share. That’s down from $562 million, or $1.79 per share, a year ago.
The Norfolk, Virginia, railroad fell just shy of the per-share earnings of $1.42 that analysts were looking for, according to a poll by FactSet.
Norfolk Southern’s revenue decreased 11 percent to $2.71 billion because coal volume fell 21 percent and total volume declined 2 percent. That revenue figure was also more meager than expected.
Union Pacific and CSX railroads both cited similar challenges when they released results earlier this month.
Citi Research analyst Christian Wetherbee said Norfolk Southern’s results were slightly better than he expected, suggesting that railroad profits may start improving after this quarter.
Edward Jones analyst Logan Purk said this quarter has clearly been “a speed bump for the railroad industry.”
“Norfolk clearly stands out as the worst of the bunch,” he said.
Norfolk Southern fared worse than its peers because it has more exposure to export coal and its fuel surcharge program has a bigger lag than other railroads, Purk said. There is a delay between when fuel prices rise and when the railroad’s surcharges start collecting higher rates.
The company predicts that third- and fourth-quarter revenue will likely trail last year because of challenges in the coal, crude oil and steel markets. But the railroad maintained an optimistic long-term view because the economy continues improving and freight traffic is growing in most areas outside of coal.
“Norfolk Southern is well positioned to continue improving service, which will reduce costs and add value to our customers,” CEO James Squires said. “Growth within the intermodal franchise, consumer spending, housing-related momentum and improved manufacturing activity all support an optimistic longer-term outlook.”
The railroad said it doesn’t expect to furlough significant numbers of workers this year because its workforce is close to an optimal level for current traffic.
Norfolk Southern’s shares gained 28 cents to sell for $83.24 in afternoon trading Monday.
Norfolk Southern Corp. operates about 20,000 miles of track in 22 states and the District of Columbia.