(Adds market reaction, comments, CSX details and updates share
Jan 22 Norfolk Southern Corp on
Wednesday reported a 24 percent increase in fourth-quarter
earnings, beating Wall Street's expectations, as strong
chemicals, construction materials and auto shipments more than
offset a dip in coal volumes.
Shares of the railroad company rose as much as 7 percent in
morning trading in New York.
The railroad, which said it is planning to increase
investments in its business by 12 percent this year, said
shipments of crude and higher automotive production helped boost
traffic volume by 8 percent in the quarter. Revenue from coal
fell 2 percent.
Norfolk Southern said it worked on reigning in costs
throughout the year. In the quarter, its operating ratio, or
operating expenses as a percentage of revenue, was 69.4 percent,
a 5 percent improvement over the same quarter in 2012, the
company said. The ratio is considered an important measure of a
For the year, the ratio improved 1 percent to 71.0 percent.
At rival CSX Corp, by comparison, the ratio increased
slightly to 71.1 percent.
"That tells me that Norfolk Southern basically took the same
operating environment and did a better job of reining in
expenses," said Houston-based individual investor Ray Merola.
Merola said the market reaction to Norfolk Southern's
results was more a result of the better operating ratio than
revenue and profit gains, because an improvement in costs is an
indication of a well run company.
For the fourth quarter, Norfolk Southern earned $513
million or $1.64 a share, up from the $413 million, or $1.30 a
share, in the year-earlier quarter.
Revenue totaled $2.9 billion, an increase of 7 percent.
Analysts, on average, expected earnings of $1.50 a share on
revenue of $2.85 billion, according to Thomson Reuters I/B/E/S.
Norfolk Southern operates 20,000 route miles in 22 states
and the District of Columbia.
Weak coal shipment volumes have been a problem for Norfolk
Southern and CSX, as the shift to natural gas has caused utility
coal stockpiles to surge as demand for coal from power producers
declined. Both railroads have been looking at rising demand for
shipments of chemicals, autos and agricultural products to make
up for the weakness in coal.
Earlier in the month, CSX posted a fourth-quarter profit
that fell short of Wall Street's estimates. CSX is also more
exposed to coal than is Norfolk Southern. Coal shipments make up
25 percent of CSX's overall shipments. At Norfolk Southern, they
account for around 20 percent.
Shares of the company were up 5 percent at $93.15 on
Wednesday at mid-day.
(Reporting by Nivedita Bhattacharjee in Chicago; Editing by