July 29, 2020 3:45 PM, EDT

Norfolk Southern Sees Lower Q2 Earnings Due to Pandemic

Norfolk SouthernNorfolk Southern

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Norfolk Southern beat Wall Street’s expectations when the Class I railroad reported second-quarter earnings July 29.

Because of the COVID-19 pandemic and the recession, Norfolk Southern’s income was down 46%, to $392 million or $1.53 per share compared with $722 million or $2.70 a year ago. Still, that beat the Zacks Consensus Estimate of $1.39 per share.

Revenue declined 29% to $2.08 billion in the second quarter compared with $2.92 billion in 2019.

The company’s operating ratio worsened to 70.7 from 63.6 the prior year.

The operating ratio is a company’s operating expenses as a percentage of revenue and determines efficiency. The lower the ratio, the greater the company’s ability to generate a profit.

Revenue declined across all of the sectors that it moves freight:

  • Agriculture, forest and consumer products — 14% to $498 million from $577 million in the same period a year ago.
  • Chemical shipments 23% to $423 million from $544 million.
  • Metals and construction — 24% to $293 million from $384 million.
  • Merchandise — 26% to $1.31 billion from $1.75 billion.
  • Intermodal — 19% to $569 million from $701 million.
  • Coal — 55% to $209 million from $468 million.
  • Automotive shipments — 63% to $93 million from $251 million.

The railroad ended the quarter with 19.7% fewer employees as its average quarterly head count was 20,086, shedding almost 5,000 positions. Last year at this time, Norfolk Southern averaged 25,033 workers on the payroll.

Norfolk Southern is one of several Class I railroads that has aggressively moved to become more efficient by precision scheduled railroading. PSR involves moving freight with fewer railcars and locomotives using a more simplified, direct line of transport across the network.


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Company officials, in a statement, acknowledged the difficulty of maintaining a profitable railroad at a time when the U.S. economy was falling into a recession.

“In a period when working safely and delivering for our customers was abruptly redefined, our employees responded by protecting each other and innovating to serve rapidly evolving freight demand,” CEO James Squires said. “Underscoring our commitment to shareholder value, we forged ahead with our ongoing transformation by further reducing our hump yard footprint, achieving fuel-efficiency gains and increasing train size.

“These are astounding achievements while managing the unprecedented economic disruption and public health crisis. We are mobilized and driven to meet the challenges and opportunities that lie ahead.”

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