Despite low volume growth, Norfolk Southern reports strong Q1 2012 results

The Norfolk, Virginia-based carrier reported first quarter net income of $410 million—or $1.23 per share—which was up 26 percent compared to the first quarter of 2011 and ahead of Wall Street expectations of $1.12 per share.

By ·

Class I railroad first quarter earnings have been strong since earnings season recently kicked off, and results from Norfolk Southern were no exception.

The Norfolk, Virginia-based carrier reported first quarter net income of $410 million—or $1.23 per share—which was up 26 percent compared to the first quarter of 2011 and ahead of Wall Street expectations of $1.12 per share. Company officials said that first quarter financials included a $58 million non-cash charge that reduced net income by $36 million or $0.10 per share. 

Quarterly revenue of $2.8 billion was up 6 percent, due mainly to a 5 percent increase in revenue per unit. And income from railway operations was up 24 percent to $745 million. Norfolk Southern’s operating ratio improved 5 percent to 73.3 percent annually and matched the company’s first quarter operating ratio record.

NS CEO Wick Moorman said on an earnings call that the real story for the quarter for NS was how the diversity of its franchise, coupled with a network helping to deliver excellent results at a high service level.

“I am pleased to report another record-breaking quarter for Norfolk Southern during which we achieved first-quarter highs in revenues, operating income, net income, and earnings per share,” said Moorman. “The benefits of our steady focus on service and operating efficiency are reflected in our results, and we continue to position our franchise for sustained growth through strategic investments in infrastructure.”

General Merchandise for NS saw all-time record first quarter revenue of $1.5 billion, which was up 13 percent, and intermodal revenue also hit a first quarter revenue record at $527 million for a 9 percent increase. Not surprisingly, coal was down 6 percent. Overall quarterly yield was up 5 percent at $2.8 billion, with volume up 1 percent, as merchandise and intermodal were each up 5 percent, offsetting coal’s 12 percent volume decline.

NS Chief Marketing Officer Donald Seale said on the call that of the $169 million in quarterly revenue growth, more than 80 percent was the result of higher revenue per unit, including pricing gains and fuel surcharge revenue, as well as higher volumes.

Revenue per unit for the first quarter was at an all-time high of $1,611, representing an $80 or 5 percent gain. Individually, merchandise was up 8 percent at $2,549 per unit, and coal was up 6 percent for revenue per unit and intermodal saw a 3 percent gain.

“During the quarter, we obtained pricing in excess of rail inflation to support balanced investment across our network and appropriate returns for our investors,” said Seale.

While Norfolk Southern did not offer up any insight regarding annual same-store pricing gains for the first quarter, Stifel Nicolaus analyst John Larkin said his firm estimates it was around 5 percent.

This increase, wrote Larkin, was a function of core pricing (up about 5 percent, incremental fuel surcharge revenue (up about 3 percent), and a negative impact from mix (estimated to be down about 3 percent).

“There were a lot of moving parts related to mix in the quarter both across revenue segments and within revenue segments,” Larkin noted. “We believe the dominant factor that drove the negative change in mix was: (1) intermodal, the company’s lowest revenue per unit segment, posted 5% volume growth in the quarter while (2) coal, which carries an above average revenue per unit, posted an 11.6% volume
decline in the quarter. With those moving parts in mind, we were not surprised that management reiterated on its call that pricing exceeded the rate of cost inflation in
the quarter.”


About the Author

Jeff Berman, Group News Editor
Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. Contact Jeff Berman

Subscribe to Logistics Management Magazine!

Subscribe today. It's FREE!
Get timely insider information that you can use to better manage your entire logistics operation.
Start your FREE subscription today!

Hub Group Resources
Not Your Grandfather's Intermodal
Transportation of freight in containers was first recorded around 1780 to move coal along England’s Bridgewater Canal. However, "modern" intermodal rail service by a major U.S. railroad only dates back to 1936. Malcom McLean’s Sea-Land Service significantly advanced intermodalism, showing how freight could be loaded into a “container” and moved by two or more modes economically and conveniently. As with all new technologies, there were problems that slowed the growth, which influenced many potential customers to shy away from moving intermodal.
Click here to download
Latest Whitepaper
Outsourced Transportation Management
All the benefits of owning a fleet without the headache of managing it.
Download Today!
From the August 2017 Logistics Management Magazine Issue
Which carriers, third-party logistics providers, and North American ports have crossed the service excellence finish line ahead of their competitors? Our readers have cast their votes, and now it’s time to introduce this year’s winners of the coveted Quest for Quality Awards.
BMW Takes the Inland Road to Efficiency
Global Logistics: No Shortcuts to Security
View More From this Issue
Subscribe to Our Email Newsletter
Sign up today to receive our FREE, weekly email newsletter!
Latest Webcast
Getting the most out of your 3PL relationship
Join Evan Armstrong, president of Armstrong & Associates, as he explains how creating a balanced portfolio of "Top 50" global and domestic partners can maximize efficiency and mitigate risk.
Register Today!
EDITORS' PICKS
34th Annual Quest for Quality Awards: Winners Revealed
Which carriers, third-party logistics providers, and North American ports have crossed the service...
2017 Top 50 3PLs: Investment and Consolidation Maintain Traction
The trend set over the past few years for mergers and acquisitions has hardly subsided, and a fresh...

2017 Salary Survey: Fresh Voices Express Optimism
Our “33rd Annual Salary Survey” reflects more diversity entering the logistics management...
LM Exclusive: Major Modes Join E-commerce Mix
While last mile carriers receive much of the attention, the traditional modal heavyweights are in...