Tuesday, October 23, 2012

NS 3Q earnings just beat lowered Street expectations

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Norfolk Southern Tuesday afternoon reported net income of $402 million, or $1.24 per diluted share, down 27% compared with $554 million, or $1.59 per diluted share, in the third quarter of 2011. But earnings per share surpassed by one penny Wall Street consensus analysts' latest target of $1.23 per share.

Wall Street consensus analyst estimates of the railroad's third-quarter earnings slipped from $1.64 a share to $1.23 a share in the past month. The decline in estimates was based in part on NS's own warnings of a decline in coal and merchandise shipments, which was expected to reduce revenue for the quarter by about $120 million. In addition, fuel surcharge revenue was expected to be about $80 million below last year's levels.

NS's third-quarter operating ratio increased to 72.9%, compared with 67.5% in the third quarter of 2011.

Third-quarter revenue of $2.7 billion was slightly below estimates of $2.73 billion. Coal revenue declined 22% to $701 million compared with the third quarter of 2011. In addition, third-quarter 2012 fuel surcharge revenues were impacted by a $21 million unfavorable lag effect, while third-quarter 2011 fuel surcharge revenue included a favorable lag effect of $52 million, the Class I railroad said.

"Third-quarter results reflect weak market conditions, which resulted in declines in our coal and merchandise shipments," said NS CEO Wick Moorman. "We remain focused on controlling costs while continuing to provide high service levels for our customers and invest in projects that will support future growth."

Such growth did include intermodal revenue, up 3% to $567 million in the third quarter compared with one year ago.