Norfolk
Southern Corp.
(
NSC
), one of the leading U.S. railroad companies reported first
quarter adjusted earnings of $1.13 per share that surpassed the
Zacks Consensus Estimate by a penny and rose 25.6% from 90 cents in
the year-ago quarter. The year-over-year growth was driven by
higher revenue, particularly from general merchandise and
intermodal that compensated for the subdued Coal results.
Adjusted earnings for the quarter excluded the impacts of $58
million (or 10 cents) related to non-cash charges.
Total operating revenue climbed 7.8% year over year to $2.8
billion, which was in line with the Zacks Consensus Estimate. On a
year-over-year basis,
Coal
,
General
Merchandise
and
Intermodal
revenues grew 6.1%, 13.4% and 8.7%, respectively. The
year-over-year growth was buoyed by strong shipments along with
higher revenue per unit thanks to growth in freight rates and fuel
reimbursements.
In the first quarter, operating income was $745 million, up
24.2% on 500 basis points (bps) improvement in operating ratio
(defined as operating expenses as a percentage of revenue) to
73.3%. Fuel expenses for the quarter increased 6.2%.
Cash Position
Norfolk exited the quarter with cash and cash equivalents of $
829 million compared with $276million at the year-end 2011. Cash
from operations increased to $1,035 million compared with $652
million in the same period a year ago.
Our Analysis
We remain encouraged by the company's all time financial records
in last year including revenues, operating income, net income, and
earnings per share. Consequently, we expect 2012 to bode well for
the company's financials as management remains committed to enhance
services, maintain railroad safety and network efficiency, and
thereby improve cost and productivity. We believe strong pricing
trend continued to aid volume growth and heavy investments in key
projects that will remain major growth drivers.
We expect these growth factors to substantially compensate for
headwinds such as increased headcounts, rising locomotive material
cost and fuel prices, tightened railroad regulation, market
uncertainties and competitive pressure from other leading railroads
such as
Union Pacific Corporation
(
UNP
) and
CSX Corp.
(
CSX
) that will likely limit the upside potential over the near
term.
We are currently maintaining our long-term Neutral rating on the
stock. For the short term (1-3 months), the stock retains a Zacks #
3 Rank (Hold).
CSX CORP (
CSX
): Free Stock Analysis Report
NORFOLK SOUTHRN (
NSC
): Free Stock Analysis Report
UNION PAC CORP (
UNP
): Free Stock Analysis Report
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