Norfolk Southern’s (NSC Quick QuoteNSC - Free Report) third-quarter 2023 earnings (excluding 55 cents from non-recurring items) of $2.65 per share fell short of the Zacks Consensus Estimate of $2.74.  The bottom line contracted 35.4% on a year-over-year basis.

Railway operating revenues were $2,971 million in the quarter under review, surpassing the Zacks Consensus Estimate of $2,942.3 million. Yet, the top line decreased 11.1% year over year, with all key segments including Merchandise, Intermodal and Coal registering deterioration in revenues.  Inflation-related woes have brought about a reduction in consumer demand for goods, in turn, hurting freight volumes hauled by rail. This has dented NSC’s performance.

Total revenue per unit dipped 9% year over year. Income from railway operations decreased 41% to $756 million including a charge of $163 million associated with the Eastern Ohio incident.

Railway operating expenses shot up 7% on a year-over-year basis to $2,215 million primarily due to a double-digit increase in costs related to materials apart from the expenditure of Ohio derailment.

Norfolk Southern’s operating ratio (operating expenses as a percentage of revenues) reached 74.6% in the third quarter from 62% in the year-ago quarter due to higher costs. A lower value of the metric is preferable. Our estimate for this key metric was 68.5%.

In the first nine months of 2023, NSC paid out dividends worth $920 million and repurchased shares worth $503 million.

Segmental Performance

Merchandise’s revenues declined 7% year over year to $1,800 million, lower than our estimate of $1,899.9 million. Volumes inched down 3% and revenue per unit dipped 4% year over year.

Revenues from Intermodal plunged 22% year over year to $737 million, which lagged our projection of $742.7 million. While segmental volumes decreased 1%, revenue per unit tumbled 21%.

Coal’s revenues totaled $434 million, down 8% year over year. Actual segmental revenues exceeded our expectation of $388.7 million. Coal volumes contracted 9% year over year. Revenue per unit inched up 1% in the reported quarter.

Liquidity

Norfolk Southern exited third-quarter 2023 with cash and cash equivalents of $1,506 million compared with $456 million at the end of 2022. NSC had a long-term debt of $16,179 million at the end of the quarter under review compared with $14,479 million at 2022 end.

Currently, Norfolk Southern carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Outlook

Driven by the weak demand scenario, Norfolk Southern expects 2023 revenues to be down 4% from 2022 actuals. Current-year capex is expected to be $2.2 billion.

Performances of Other Transportation Companies

J.B. Hunt Transport Services' (JBHT Quick QuoteJBHT - Free Report) third-quarter 2023 EPS of $1.80 missed the Zacks Consensus Estimate of $1.85 and declined 30% year over year.

JBHT’s total operating revenues of $3,163.8 million also lagged the Zacks Consensus Estimate of $3,224 million and fell 18% year over year. Total operating revenues, excluding fuel surcharges, decreased 15% year over year.

Delta Air Lines (DAL Quick QuoteDAL - Free Report) reported third-quarter 2023 EPS (excluding 31 cents from non-recurring items) of $2.03, which comfortably beat the Zacks Consensus Estimate of $1.92 and improved 35% on a year-over-year basis.

DAL’s revenues of $15,488 million outpaced the Zacks Consensus Estimate of $15,290.4 million and jumped 11% on a year-over-year basis driven by higher air-travel demand.

Alaska Air Group (ALK Quick QuoteALK - Free Report) reported third-quarter 2023 EPS of $1.83, which missed the Zacks Consensus Estimate of $1.88 and declined 28% year over year.

Operating revenues of $2,839 million fell short of the Zacks Consensus Estimate of $2,876.1 million. The top line inched up 0.4% year over year, with passenger revenues accounting for 92.2% of the top line and increasing 0.1%.