Charles W. Moorman, chairman, president and CEO of eastern-U.S. carrier Norfolk Southern Railway, was already looking ahead when he reported the carrier’s “excellent financial performance” for the first quarter. “We see continuing opportunities for growth in almost every segment of our business,” Moorman said, “and we’re optimistic about our prospects for the balance of 2011.”
NS profit jumped 26 percent in the first three months of 2011 from a year earlier to $325 million, outpacing a 17 percent gain in rail operating revenue to $2.6 billion.
At Canadian National Railway, President and CEO Claude Mongeau said the carrier “anticipates strong demand from most business segments” the rest of this year, and it stiffened an already solid outlook for earnings and its business markets.
Its first quarter profit rose 31 percent to nearly US$702 million. Although that included an after-tax gain of $267 million from the sale of tracks to a Toronto-area transit agency, it was a solid performance; smaller rival Canadian Pacific Railway saw net income shrink as it battled harsh winter weather.
CN was also slowed some by one of the worst winters on record, analysts said. But CN’s bottom line benefited from “a well-executed winter operating plan” that helped it cope with heavy storms, Mongeau said, including more use of distributed power-equipped locomotives throughout its trains for greater control over car movements and more pulling power.
That underscored a similar strength CN and NS brought to bear this year — a payoff from long-term capital investments.
Analyst Cherilyn Radbourne of TD Newcrest said CN’s deployment of more distributed power locomotives allowed it to tuck more railcars into trains, which averaged 3 percent longer than a year earlier. Mongeau said the strategy also took advantage of longer siding tracks it has built on its routes.
And Radbourne said CN was able to provide “surge capacity” to Canadian Potash Exporters, allowing Canpotex to have record first quarter export tonnage.
For NS as well, “strategic investments are beginning to bear fruit,” said Matthew Troy of Susquehanna Financial Group.
The carrier has added locomotives, coal cars and employees in the past year, while adding to its double-stack intermodal network. That helped position it to handle 11 percent more coal traffic in the first quarter than a year earlier, and 10 percent more intermodal.
NS is far from done with its capital plan. Late last month, it broke ground on a big new intermodal hub it will build in Memphis, Tenn., as part of the Crescent Corridor stacktrain route it will develop from the Mississippi Delta into the Northeast.
Analysts said even with a still-sluggish economic recovery, rail investments and efficiency upgrades are drawing loads away from trucks.
Contact John D. Boyd at email@example.com.