Tuesday, July 28, 2009

Norfolk Southern 2Q earnings beat Street expectations

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Add Norfolk Southern to those Class I railroads exceeding Wall Street expectations in the second quarter. NS late Tuesday reported second-quarter net income of $247 million, or 66 cents per diluted share, compared with $453 million, or $1.18 per diluted share, for the second quarter of 2008. That exceeded by two cents per share Wall Street analyst EPS estimates of 64 cents.

NS said second-quarter operating revenue was $1.9 billion, down 33% from the comparable 2008 period, mostly due to a  26% reduction in traffic volume and also lower fuel-related revenue.


“Second-quarter results obviously reflect the impact of the recession," said Norfolk Southern CEO Wick Moorman. "However, the measures we are taking to control expenses while maintaining our industry-leading service levels have enabled us to post solid second-quarter results, while at the same time we continue to invest in projects that position us for the eventual economic recovery."

Railway operating expenses for the quarter were $1.4 billion, down 29% from the same period a year ago. Norfolk Southern’s operating ratio was 74.8%, up from 71.1% during the second-quarter of 2008.

After NS released its figures, New York investment bank Dahlman Rose & Co., in a statement, noted that “when removing a $21 million favorable adjustment to Materials and Other operating expenses related to settlement of a multi-year state tax dispute, EPS from continuing operations came in at $0.63, in line with consensus” and not exceeding it. Dahlman Rose also said NS “continues to implement cost control measures as evident in the sharp declines in operating expenses and the reduction of employee count.”

Morgan Stanley analysts commented that Norfok Southern’s “core operations fell short of consensus estimates,” but added, “That said, cost control was strong and NS performed remarkably well in the face of unprecedented weakness in some of its highest margin segments.”


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