NS Reports Records in 3rd Quarter Financial Report

Norfolk Southern said on Wednesday that it posted quarterly records for operating revenue, operating income, net income and diluted earnings per share during the third quarter of 2022.

Net income was up 27 percent to $958 million, or $4.10 diluted earnings per share, from $753 million, or $3.06 per diluted EPS in the third quarter of 2021.

Operating revenue was $3.3 billion, a quarterly record, which represented an increase of 17 percent.

NS said the revenue gain was driven by a 20 percent increase in revenue per unit due to higher fuel surcharges and pricing. Income from operations totaled a record $1.3 billion, up 12 percent.

Operating expenses in the quarter rose 21 percent to $2.1 billion due to higher fuel prices, increased labor costs and other elevated expenses resulting from inflation and slower network velocity, NS officials said in a news release.

Incremental labor costs of $117 million associated with the tentative major labor agreements including $88 million in expenses pertaining to prior periods.

The operating ratio of 62 percent was up 1.8 points over that of the third quarter of 2021.

However, a report on the website of Railway Age characterized the NS financial report as a mixed picture because earnings missed projections of Wall Street analysts.

“A large question will be NS’s ability to capture intermodal traffic that have been lost due to labor/network challenges,” Cowen and Company Managing Director Jason Seidl told Railway Age.

The report also showed that freight volume dropped 2 percent overall during the third quarter.

Merchandise freight was down 2 percent while intermodal volume dipped 5 percent. Coal was a bright spot increasing 14 percent.

NS Chief Marketing Officer Ed Elkins said intermodal volume declined because some shippers diverted loads to the highway in advance of a potential work stoppage in late September.

Some short-haul international intermodal traffic also went to trucks.

CEO Alan Shaw during an earnings call with investors expressed optimism that as NS improves its service it will see increases traffic.

Top NS executives said during the call that the railroad is exceeding its goals of hiring new conductors.

Average train speed rose 20 percent during the quarter, and rail cars also spent less time in classification yards.

Chief Operating Officer Cindy Sanborn was asked if NS would furlough train crews if traffic decline in coming months due to a softening economy.

“We have to make sure we manage through downturns in such a way that we are in a good place to handle the upturns,” Sanborn said. “That’s how we’re going to grow long-term.”

She said NS would first rely on attrition to reduce its operating crew head count if traffic declines.

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