Industry News

Norfolk Southern 3Q Earnings Plunge

October 28, 2009 | 04:15 p.m. CDT

Norfolk Southern Corp. said Oct. 27 that its third-quarter earnings plunged 41 percent as shipments sank for everything from coal for power plants to retail goods, reports The Associated Press.

NS earned $303 million, or 81 cents per share, compared with $520 million, or $1.37 per share in the third quarter of 2008. Revenue dropped 29 percent to $2.06 billion from $2.89 billion a year earlier. Shipping volume dropped 20 percent from a year ago, but improved 8 percent from the second quarter. NS reported a third quarter operating ratio of 72.8 percent.

Revenue in the railroad's biggest segment – general merchandise – which includes shipments of everything from cars to food products, fell 24 percent to $1.1 billion. Revenue from coal shipments used in steel production and electricity generation fell 35 percent.

NS said it offset some weak demand by cutting costs, which included eliminating more jobs. Fuel costs also helped. They were less than half what they were a year ago. At the same time, the company said it was hampered by much lower fuel surcharges than a year ago. Railroads charge their customers the added fees based on oil prices, which dropped from record highs in July, 2008.

The railroad offered cautious optimism that the country is at the beginning of economic recovery. But CEO Wick Moorman said there was "sediment in the crystal ball," echoing other forecasters who are still unsure how long it will take the nation to climb out of the recession.

Moorman remains optimistic about the railroad's future coal shipments. He said shipments should grow stronger as demand for steel rises next year, mostly because of a Chinese stimulus plan spurring new building projects. He thinks shipping improvements in retail goods and products related to home building, such as lumber, are farther down the tracks.