NS Revenue, Profits Fell in 3rd Quarter

As expected Norfolk Southern reported this week that its revenue and profits sank during the third quarter due to traffic declines that the railroad tied to the COVID-19 pandemic.

Operating income fell 6 percent to $939 million while revenue dropped 12 percent to $2.5 billion.

Adjusted  earnings per share rose 1 percent to $2.51.

During the period NS posted an adjusted operating ratio of 62.5 percent.

During the quarter NS reduced expenses by 15 percent while its traffic volume fell by 7 percent.

Intermodal volume grew 1 percent during the quarter, but merchandise traffic and coal combined fell 11 percent.

Domestic intermodal was up 9 percent while international intermodal volume fell 11 percent.

Coal volume alone fell by 32 percent, which represented most of the volume declines said NS Chief Marketing Officer Alan Shaw.

NS CEO James Squires said the railroad plans to pick up the pace of precision scheduled railroading changes, including closing hump operations in Macon, Georgia, and revising its southern service plans.

“As we continue rolling out PSR, our team sees additional opportunity for efficiency and growth that will close the [operating ratio] gap with the rest of the industry,” Squires said during an investor’s conference call.

The carrier said it is aiming to reach an operating ratio of 60 percent in 2021.

Chief Operating Officer Cindy Sanborn said the change NS is making to its operating plans are more than tweaking.

She said there will be longer trains that will move faster. Train length was up 12 percent this quarter compared to 6,600 feet a year ago.

Increases in intermodal and merchandise traffic have been added to existing trains.

Crew starts in August and September did not increase even though traffic volume rose.

The NS workforce in the third quarter was 18 percent below what it was a year ago.

Shaw predicted a rebound in consumer-related traffic, including intermodal and automotive, but expects anything connected to energy to recover more slowly.

He said there is no hope for coal traffic to improve so long as natural gas prices remain low and utility stockpiles stay 45 percent higher than they were at this time last year.

Sanborn said NS still has the ability to increase train length because only 9 percent of merchandise trains at at the maximum of the horsepower of their locomotive consists.

Just 10 percent of NS intermodal trains are longer than 10,000 feet.

NS in September closed its hump at Enola Yard near Harrisburg, Pennsylvania.

The closing of the hump in Macon next week will mark the sixth hump that NS has idled since 2019.

 “A lot of these hump conversions that you’ve seen  . . . actually improves car speed,” Sanborn said. “And at a system level what we want to do is avoid touches all together if at all possible. If we can speed the cars up, that’s good for us in terms of asset intensity and it’s also good for our customers. It provides them a more timely service product.”

As part of its redesign of southern operations, NS also plans to close several local yards around Atlanta.

As other railroads practicing PSR have done, NS is pre-blocking more traffic at origin and focusing on block-swapping en route.

NS will still have jump yards in Elkhart, Indiana; Conway (Pittsburgh), Pennsylvania; Birmingham, Alabama; and Chattanooga, Tennessee.

Tags: , , , , , , , , ,

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.


%d bloggers like this: