Norfolk Southern Profits Jump 15% in Fourth Quarter, Beating Analyst Forecasts

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Norfolk Southern posted stronger earnings in the fourth quarter with a 15% increase in profits compared with the same period in 2015, beating the already favorable forecasts from industry analysts.

The railroad generated $416 million in profits in the three-month period that ended Dec. 31, or $1.42 per share. In the year prior, the company reported $361 million in profits. For the full year, Norfolk Southern posted $1.67 billion in profits, or $5.62, up from $1.56 billion in 2015.

“2016 was a pivotal year as Norfolk Southern began implementing its new strategic pan. We delivered $250 million of productivity savings and recorded our best-ever operating ratio, notwithstanding challenging business conditions,”  Norfolk Southern Chairman and CEO James Squires said.

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The productivity savings helped the company to compensate for a 1.1% drop in revenue for the quarter to $2.49 billion. Coal revenues dropped 6.9% to $403 million but intermodal climbed 3.4% to $583 million. While agriculture revenues went up 4% in the quarter, chemical, automotive, paper and forest revenues dropped between 5% and 7%.

For the full year, revenue fell 5.9% to $9.9 billion, including a 7.9% drop in intermodal to $2.2 billion and an 18% decrease in coal revenues to $1.5 billion.

Norfolk Southern transported 996,000 intermodal carloads during the fourth quarter, up 6.5% year-over-year. For the full year, volume in truck-rail freight virtually was unchanged.

Coal volumes suffered the biggest drop off among all commodities, continuing an industrywide downward trend. The number of carloads dropped 3.9% to 239,100 in the fourth quarter and plummeted for the full year 16% versus 2015 and 30% versus 2014.

The railway operating ratio, or expenses as a percentage of revenues, was 69.4% in the fourth quarter, a 510 basis point improvement year-over-year. For 2016, the ratio was 68.9%, a 370 basis point improvement compared with 2015.

Norfolk Southern came out 6 cents ahead of the consensus forecast in the quarter, according to a survey of analysts from Bloomberg News. For the full year, the company beat estimates by 3 cents.