Norfolk Southern Reports Record Numbers
Jul. 28–Like a cat on a hot coal hopper, Norfolk Southern’s profits and revenue jumped in the second quarter.
The company set a number of financial records.
Coal revenues increased 36 percent to a record $578 million compared with the same period of 2004.
Intermodal revenues rose 18 percent to $428 million for the second quarter.
“We met and exceeded expectations, even our own,” Chairman David Goode told analysts Wednesday morning.
The railroad earned $424 million, or $1.04 a share, in the quarter, compared with $213 million, or 54 cents a share, for the same period a year ago. The recent quarter included a $96 million gain related to tax reforms in Ohio, as well as an extra $24 million from the settlements of two coal-rate cases with Duke Energy and Carolina Power and Light.
Excluding those gains, net income still set a record for any quarter before accounting changes, at $304 million, or 75 cents a share.
The overall economy, combined with rail volumes, pushed profits and revenue, said L.I. Prillaman, the company’s chief marketing officer.
Accordingly, Norfolk Southern achieved record revenue and exceeded $2 billion for the first time, an increase of 19 percent over the second quarter of 2004.
“Contrary to most thinking, manufacturing production now stands 3 percent above the height of the last business cycle,” Prillaman said.
The index for new orders reached its strongest reading this year.
Looking at trends in Norfolk Southern’s business, intermodal service continued its upward spiral. International volume was up 14 percent for the quarter.
It is also expected that truck capacity will again tighten this fall, providing an opportunity for NS to increase its volume and pricing, Prillaman said.
Service improvements on Norfolk Southern’s network, the price of energy and an ongoing shortage of trucking capacity produced a favorable climate to increase rates, Prillaman said.
There was no argument from Andrew West, an analyst with Standard & Poor’s, which does not have any affiliation with NS.
Overall, railroads, including Norfolk Southern, raised their rates, West said. Fuel surcharges also helped. Norfolk Southern capitalized on a lack of alternatives for shippers, including the tight capacity and higher freight rates in the trucking industry.
The outlook for the remainder of the year is optimistic, Prillaman said.
Charles “Wick” Moorman, Norfolk Southern president, said the railroad is expected to have 102 new locomotives by the end of the year, and an additional 183 next year.
Moorman also cited the railroad’s July launch of TOP II, the next step in the railroad’s Thoroughbred Operating Plan, which went into effect in 2002.
That’s when NS did what no other railroad has ever done. It dismantled its merchandise rail network and rebuilt it to run on a schedule that bypassed as many terminals as possible. All those changes reduced operating costs and improved the company’s profit margins.
Norfolk Southern is taking the successes it has achieved from TOP and extending it to other traffic, including intermodal and some trains that only haul coal and grain.
Norfolk Southern shares closed at $36.10, up $1.57 or 4.5 percent, Wednesday on the New York Stock Exchange.
—–
To see more of The Roanoke Times, or to subscribe to the newspaper, go to http://www.roanoke.com.
Copyright (c) 2005, The Roanoke Times, Va.
Distributed by Knight Ridder/Tribune Business News.
For information on republishing this content, contact us at (800) 661-2511 (U.S.), (213) 237-4914 (worldwide), fax (213) 237-6515, or e-mail reprints@krtinfo.com.
NSC, DUK, PGN,