Second quarter operating revenue at Norfolk Southern plunged a whopping 29 percent to $2.1 billion.
In announcing its quarterly financial results, the carrier said the steep dive was driven by a 26 percent decline in total freight volume compared with the second quarter of 2019.
It was the largest second quarter 2020 drop among Class 1 railroads.
NS posted net income of $392 million, down 46 percent, and diluted earnings per share of $1.53, down 43 percent compared with the same period a year ago.
Railroad officials cited the COVID-19 pandemic’s impact on freight volume as a major factor in the dismal quarter performance.
Operating expenses during the quarter were $1.5 billion, down 21 percent from a year ago due to lower fuel, compensation, benefits and purchased services expenses.
In a statement, NS CEO James Squires said the railroad will continue to further trim its infrastructure, including reducing the number of hump yards that it operates and operating longer trains.
Income from railway operations was $610 million, down 43 percent. The railroad’s operating ratio for the quarter was 70.7 percent compared to 63.6 percent a year ago.
During an earnings call on Wednesday morning, Squires declined to predict how the railroad might fare from a financial perspective for the remainder of the year because it remains to be seen how durable the economic recovery will be.
However, he and other NS executives expressed guarded optimism, saying the carrier has seen a strong rebound in intermodal and automotive traffic.
One commodity NS does not expect to bounce back is coal, which sank by 57 percent during the second quarter.
NS Chief Marketing Officer Alan Shaw said coal will continue to be depressed due to competition from low-cost natural gas and weakness in export metallurgical coal markets.
During the second quarter, merchandise traffic dipped 29 percent while intermodal traffic was down 16 percent.
Shaw said the growth of consumer demand and tightening truck capacity could bode well for intermodal volume growth.
The resumption of auto manufacturing and rising manufacturing output have boosted merchandise volume.
“The consumer segments are doing really well,” Shaw said noting that intermodal and automotive volume in July have outpaced those of June.
Average train weight was up 6 percent due to NS moving more tonnage on fewer and longer trains.
Train starts were down 28 percent and Chief Operating Officer Michael Wheeler said many of the train suspensions are likely to be permanent even as traffic volume recovers.
Wheeler said train starts are down 20 percent thus far in July as NS has amalgamated various types of traffic into its merchandise trains.
Wheeler said NS still is able to add volume to existing trains without having to add train starts.
The second quarter saw the closing of hump operations in Linwood, North Carolina, and Bellevue, Ohio, and NS expects to close additional terminals.
Closing Linwood and Bellevue is expected to save the railroad $20 million to $30 million a year.