NS Reports Record Profits

NS Reports Record Profits

Copyright 2004, Traffic World, Inc.

In the race for financial success among railroads, Norfolk Southern was first out of the starting gate in 2004 with record profits and operating numbers. Its first quarter announcement came as eastern rival CSX struggles to get its railroad under control and western carrier Union Pacific Railroad fights to avoid another meltdown.

NS recorded revenue of $1.7 billion, up eight percent compared with the same period last year. First quarter income from railway operations was a record $346 million, up 50 percent from 2003. NS''s operating ratio - an indicator of operating efficiency - improved 7 percent to 79.6 percent (versus 85.2 percent in first quarter 2003), a first-quarter best for the railroad since the Conrail integration. Operating expenses were up only 1 percent over the same period in 2003.

NS''s strong performance caught Wall Street offguard.

"Even adjusting for a very big jump in coal yields that appear sustainable, the results are very impressive," said Morgan Stanley''s James Valentine. "Given the large upside surprise, we anticipate Street estimates will rise sharply in the next few days."

"Our network velocity reached an all-time high as our average train speed exceeded our goal and was among the best in the industry," said NS chairman, president and chief executive officer David Goode. "We improved our terminal dwell time performance over year-earlier levels. And finally, our network fluidity continued to improve as we handled 109,000 more carloads in the quarter but our cars on line remained constant."

Spurred by a rousing economy, the company''s coal revenue was up in the first quarter, increasing 12 percent to $398 million in the first quarter of 2004 compared with the same period last year. NS said export coal benefited as a result of weakness of the dollar and higher ocean-going bulk rates. In the domestic market, utility steam coal carloadings were up three percent in the first quarter compared with last year.

A record $967 million in general merchandise revenue for the quarter was led by the railroad''s metals and construction sector, which reported an increase of 10 percent. NS said that increased steel shipments from nearly all the mills it serves helped grow this category. Chemicals also set a record, with revenue increasing six percent over the same period in 2003 and driven by increased shipments of petroleum.

Intermodal revenue increased 13 percent to $328 million over first quarter 2003. Increased demand for consumer products and traffic growth from new truck-competitive, transcontinental services and consistent service performance, helped drive the growth, NS said.

"Looking ahead, we remain optimistic about the health of the industrial economy," Goode said. He noted that the five percent increase in carloadings for April were led primarily by intermodal. "Our strong and improving service gives us an increasingly valuable product going forward."