Norfolk Southern Heads North

Norfolk Southern Corp.’s (NSC - Analyst Report) third-quarter earnings per share stood at 81 cents, compared to a profit of $1.30 in the year-ago period. The fall in earnings was due to lower volume on the back of subdued demand for shipped goods. However, EPS results were ahead of the Zacks Consensus Estimate of 79 cents per share.

Operating revenues fell 29% to $2.1 billion, driven by a 35% drop in coal revenues and a 31% drop in intermodal revenue along with lower fuel surcharge recovery.

Operating profit came in at $562 million, driven by a 20% reduction in volume but partly offset by a 25% reduction in operating expenses. Operating ratio stood at 72.8%, up 370 basis points year over year.

Total volume was 1.5 million units, down 20% year over year. However, traffic volumes stabilized during the quarter, as witnessed by an 8% increase sequentially.

For the fourth quarter, domestic intermodal volumes are expected to be flat to positive.  However, volumes are expected to resume growth for 2010 as highway conversions improve and economic activity picks up.  International volumes are however expected to be down until consumer demand picks up.

Though Norfolk’s revenues as well as volumes have remained under pressure, the company is continuing cost control measures to retain profitability. Going forward, an improvement in sequential volumes and revenues is expected as economic and project related activity gather strength.

Peer Burlington Northern Santa Fe Corp. (BNI), last week, reported earnings of $1.36 per share. Similar to Norfolk, its results were also negatively affected by a decline in freight volumes, partially offset by reduced costs.

Read the full analyst report on NSC

Read the full analyst report on BNI