Norfolk Southern profit jumps

NEW YORK Wed Apr 27, 2011 7:45pm EDT

NEW YORK (Reuters) - U.S. railroad Norfolk Southern Corp (NSC.N) reported a quarterly profit that beat Wall Street estimates as shipments of goods from coal to autos picked up, even as higher fuel prices raised costs.

Fuel costs and truck capacity shortages have driven more traffic to railroads and intermodal businesses, where transportation costs have risen less.

Intermodal refers to the shipment of containers that can be moved from one form of transport to another, such as from train to ship.

"Looking ahead, we feel confident that the economic recovery is well under way and, barring some extraneous event, it will continue well on into 2012," Chief Executive Wick Moorman told analysts on a conference call.

The company said there is a "pervasive interest" and "ongoing building momentum" in shifting from highway transport to more fuel-efficient intermodal for supply chain support.

Norfolk, Virginia-based Norfolk Southern, the third-largest publicly held U.S. railroad, on Wednesday reported an adjusted first-quarter profit of $1 per share, topping the average forecast of 90 cents, according to Thomson Reuters I/B/E/S.

Revenue rose 17 percent to $2.6 billion, driven by an 8 percent rise in revenue per unit and traffic volume, the company said. It topped the average forecast of $2.48 billion, according to Thomson Reuters I/B/E/S.

"They went out and got the pricing they ought to be getting because the commodities they are transporting are higher in value, and they ought to be able to extract more value, especially on the export coal side," said Jason Benowitz, portfolio manager at Roosevelt Investments, which holds Norfolk Southern shares.

The railroad also handled disruptions from severe winter weather better than some competitors, he said.

The company moved 7.4 million tons of coal for export, and sees demand staying robust based on demand from Asia, Europe and South America.

Coal revenue jumped 30 percent compared with a year ago, while intermodal revenue rose 18 percent and general merchandise revenue rose 10 percent.

The company's operating expenses rose 20 percent from a year ago to $2 billion, propelled by fuel costs and the effects of an unfavorable insurance arbitration ruling.

With volume rising, the company plans on a net addition of about 1,100 jobs this year, putting employment back to about 2008 levels, as well as adding new coal cars and other assets. It remains on track to spend just over $2 billion on capital improvements this year.

Norfolk Southern's net first-quarter profit was $325 million, or 90 cents a share, up 26 percent from $257 million, or 68 cents per share, a year ago.

The company operates about 20,000 route miles in 22 states and the District of Columbia and serves all major container ports in the eastern United States.

Norfolk Southern's shares closed flat at $68.41, and rose about 3 percent to $70.50 in after-hours trading.

Before the results were released, the shares had risen nearly 9 percent so far this year, outperforming the 6.7 percent gain in the Dow Jones Transportation Average .DJT.

Union Pacific (UNP.N), CSX Corp (CSX.N) and Kansas City Southern (KSU.N) railroad companies previously also reported increased first-quarter results in the face of unusually harsh winter storms and steep fuel cost increases.

(Editing by Gunna Dickson, Robert MacMillan, Phil Berlowitz)

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