Key Moments
- Norfolk Southern reported third-quarter adjusted earnings of $3.62 per share, above analyst expectations of $3.47 per share.
- Railway operating income for the quarter rose 12.9% year-over-year to $3.5 billion.
- The adjusted operating ratio weakened to 67.4%, a deterioration of 280 basis points from a year earlier.
Freight Demand Supports Earnings Beat
Oct 22 (Reuters) – Norfolk Southern exceeded Wall Street expectations for its third-quarter adjusted profit on Thursday, supported by robust freight demand that offset the impact of higher fuel expenses. The railroad operator said increased fuel costs were largely passed through to customers via surcharges.
Railroads have been helped by constrained trucking availability, as a shortage of drivers has pushed some shippers to shift loads to rail, particularly in the intermodal business that directly competes with long-haul trucking.
Fuel Costs and Industry Dynamics
The sector has cushioned the effect of elevated fuel prices – attributed to the war in the Middle East – by applying fuel surcharges to customer bills, while also benefiting from operational efficiencies and stable intermodal volumes.
US gasoline prices have remained above $4 per gallon since March and averaged about $4.27 per gallon on Thursday, according to AAA data, sustaining cost pressures across the transportation industry.
Quarterly Financial Performance
Atlanta, Georgia-based Norfolk Southern reported adjusted earnings of $3.62 per share for the third quarter, up from $3.30 per share in the same period a year earlier. Analysts had projected adjusted earnings of $3.47 per share, based on data compiled by LSEG.
The company’s railway operating income increased 12.9% from a year ago to $3.5 billion in the quarter.
| Metric | Current Quarter | Year-Ago Quarter | Change |
|---|---|---|---|
| Adjusted earnings per share | $3.62 | $3.30 | Above LSEG consensus of $3.47 |
| Railway operating income | $3.5 billion | Not specified | +12.9% |
| Adjusted operating ratio | 67.4% | Not specified | Deteriorated by 280 basis points |
Efficiency Metrics Under Pressure
On an adjusted basis, Norfolk Southern’s operating ratio – a key measure of efficiency that compares operating expenses to revenue – came in at 67.4% for the quarter. This represented a deterioration of 280 basis points from the same period last year.
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