Norfolk Southern reports fourth quarter and full-year 2023 results

Rhea-AI Summary

Norfolk Southern Corporation (NYSE: NSC) announced its fourth quarter and full-year 2023 financial results, reporting a decline in railway operating revenues and income from railway operations compared to the previous year. The fourth quarter results include a charge associated with an incident in Eastern Ohio, impacting diluted earnings per share. Despite the challenges, the company's President and CEO expressed confidence in their ability to drive further productivity gains and deliver industry-competitive margins in 2024.

Positive

• Adjusted income from railway operations for the fourth quarter was $958 million, down 19% from the previous year.
• Adjusted diluted earnings per share for the fourth quarter were $2.83, down 17% from the previous year.
• The company invested in its people and enhanced service performance, focusing on safety and productivity.
• The President and CEO expressed confidence in the company's ability to achieve growth and industry-competitive margins in 2024.

Negative

• Railway operating revenues for the fourth quarter were down 5% compared to the previous year.
• Income from railway operations for the full year was down 18% compared to the previous year.
• Diluted earnings per share for the full year were down 15% compared to the previous year.
• Railway operating expenses for the full year increased by 3% compared to the previous year.

Insights

Financial Analyst

The financial results of Norfolk Southern Corporation reflect a significant impact from the Eastern Ohio Incident, evidenced by a substantial $150 million charge. This event has evidently affected their quarterly and annual financial performance, with a notable 32% year-over-year decline in railway operations income for the fourth quarter. The adjusted figures, excluding the incident, still show a downward trend with a 19% decrease in income from railway operations and a 17% decrease in diluted earnings per share for the same quarter. This suggests that, beyond the incident, there may be underlying operational challenges or market conditions affecting the company's performance.

Investors should consider the long-term implications of the company's focus on service enhancements and safety improvements, which could potentially lead to increased operational efficiency and customer satisfaction. However, the increased operating expenses, up by 3% when adjusted for the incident, driven by factors such as higher compensation, inflation and network congestion, may continue to pressure margins if not effectively managed. The commitment to aggressive cost management and productivity gains mentioned by the CEO will be critical for the company to achieve industry-competitive margins and capitalize on anticipated growth.

Market Research Analyst

From a market perspective, the 5% decline in railway operating revenues year-over-year indicates a potential softening in the demand for freight transport or increased competition in the sector. The mention of ongoing network congestion could also be indicative of systemic inefficiencies within the industry or company-specific operational challenges. However, the company's optimism about growth on the horizon suggests confidence in the resilience of the freight transport market and the potential for recovery and expansion in the coming years.

Stakeholders should monitor industry trends closely, including shifts in trade volumes, changes in the regulatory environment and technological advancements that could affect the railway sector. Norfolk Southern's ability to navigate these factors while maintaining service quality and safety standards will be crucial for its success. The company's performance relative to its peers will also provide insight into its competitive positioning and strategic execution.

Economist

The reported financials of Norfolk Southern Corporation, particularly the adjusted figures, offer a glimpse into the broader economic landscape. The increase in operating expenses, partially attributed to inflation, suggests that the company, like many others, is facing macroeconomic headwinds that could persist into the future. Inflationary pressures can erode profitability and necessitate price adjustments, potentially impacting demand for freight services.

Moreover, the company's strategic focus on cost management and operational discipline may be a response to these economic challenges. The effectiveness of such measures in mitigating the impacts of inflation and other cost drivers is of interest to stakeholders. The company's performance and strategic adjustments serve as a microcosm for how firms in the transportation sector and the wider economy are adapting to a potentially protracted period of economic uncertainty and pressure.

ATLANTA, Jan. 26, 2024 /PRNewswire/ -- Norfolk Southern Corporation (NYSE: NSC) announced Friday its fourth quarter and full-year 2023 financial results. For the quarter, income from railway operations was $808 million and diluted earnings per share were $2.32. These fourth quarter results include a $150 million charge associated with the incident in Eastern Ohio inclusive of $76 million in insurance recoveries.

Adjusting for the effects of the incident charge, fourth quarter results included income from railway operations of $958 million and diluted earnings per share of $2.83.

Norfolk Southern President and Chief Executive Officer Alan H. Shaw said, "The fourth quarter marked the end of a challenging, yet transformational year for Norfolk Southern. I'm proud that the team responded with unwavering dedication while continuing to advance our strategy that strikes the necessary balance between service, productivity and growth. We invested in our people, enhanced our service performance and made a safe railroad even safer. Norfolk Southern enters 2024 with positive momentum and a focus on driving further productivity gains and operational discipline through aggressive cost management. We see growth on the horizon, and we are confident in our ability to deliver industry-competitive margins over time."

Fourth Quarter Summary 

• Railway operating revenues of $3.1 billion, down $164 million, or 5%, compared to fourth quarter 2022. 
  
  
• Income from railway operations was $808 million inclusive of a $150 million charge associated with the Eastern Ohio Incident, a 32% decline compared to $1.2 billion in the fourth quarter of 2022. 
• Adjusting for the Eastern Ohio Incident, income from railway operations was $958 million, down $223 million, or 19%, compared to fourth quarter 2022.

• Diluted earnings per share were $2.32, a decline of 32% compared to fourth quarter 2022.
• Adjusting for the Eastern Ohio Incident, diluted earnings per share were $2.83, down $0.59, or 17%, compared to fourth quarter 2022.

2023 Summary 

• Railway operating revenues were $12.2 billion in 2023, down 5%, or $589 million, compared with 2022. 
  
  
• Railway operating expenses were $9.3 billion inclusive of a $1.1 billion charge associated with the Eastern Ohio Incident, an increase of 17% compared to 2022.
  • Adjusting for the Eastern Ohio Incident, railway operating expenses were $8.2 billion, up 3% compared to 2022, driven by higher compensation and benefits, inflation, and ongoing network congestion. 
    
    
• Income from railway operations was $2.9 billion inclusive of the $1.1 billion charge associated with the Eastern Ohio Incident, down 41% year-over-year.
  • Adjusting for the Eastern Ohio Incident, income from railway operations was $4.0 billion, down 18% compared to the prior year.
    
    
• Diluted earnings per share were $8.02 inclusive of the $1.1 billion charge associated with the Eastern Ohio Incident, down 42% compared with 2022. 
  • Adjusting for the Eastern Ohio Incident, diluted earnings per share were $11.74, down 15%. 

About Norfolk Southern
Since 1827, Norfolk Southern Corporation (NYSE: NSC) and its predecessor companies have safely moved the goods and materials that drive the U.S. economy. Today, it operates a customer-centric and operations-driven freight transportation network. Committed to furthering sustainability, Norfolk Southern helps its customers avoid approximately 15 million tons of yearly carbon emissions by shipping via rail. Its dedicated team members deliver more than 7 million carloads annually, from agriculture to consumer goods, and Norfolk Southern originates more automotive traffic than any other Class I Railroad. Norfolk Southern also has the most extensive intermodal network in the eastern U.S. It serves a majority of the country's population and manufacturing base, with connections to every major container port on the Atlantic coast as well as major ports in the Gulf of Mexico and Great Lakes. Learn more by visiting www.NorfolkSouthern.com.

Forward-looking statements
Certain statements in this press release may be considered "forward-looking statements" within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, as amended. These statements relate to future events or our future financial performance and involve known and unknown risks, uncertainties, and other factors that may cause our actual results, levels of activity, performance, or our achievements or those of our industry to be materially different from those expressed or implied by any forward-looking statements. In some cases, forward-looking statements may be identified by the use of words like "may," "will," "could," "would," "should," "expect," "plan," "anticipate," "intend," "believe," "estimate," "project," "consider," "predict," "potential," "feel," or other comparable terminology. We have based these forward-looking statements on our current expectations, assumptions, estimates, beliefs, and projections. While we believe these expectations, assumptions, estimates, and projections are reasonable, such forward-looking statements are only predictions and involve known and unknown risks and uncertainties, many of which involve factors or circumstances that are beyond our control. These and other important factors, including those discussed under "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the Securities and Exchange Commission (the SEC), as supplemented in Part II, Item 1A of our Form 10-Q filed with the SEC on October 25, 2023, may cause actual results, performance, or achievements to differ materially from those expressed or implied by these forward- looking statements. The forward-looking statements herein are made only as of the date they were first issued, and unless otherwise required by applicable securities laws, we disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

Reconciliation of Non-GAAP Financial Measures
Information included within this filing includes non-GAAP financial measures, as defined by SEC Regulation G. Non-GAAP financial measures should be considered in addition to, not as a substitute for, the financial measures reported in accordance with U.S. generally accepted accounting principles (GAAP).

GAAP financial results are adjusted to exclude the effects of a February 3, 2023 train derailment in East Palestine, Ohio that included 11 non-Company-owned tank cars carrying hazardous materials, fires associated with the derailment that threatened certain of the tank cars, and a controlled vent and burn procedure conducted on February 6, 2023 on the five derailed tank cars containing vinyl chloride (the Incident).  The Company recognized expenses of $150 million during the fourth quarter and $1.1 billion for the year ended December 31, 2023 related to the Incident.  The income tax effects of these non-GAAP adjustments were calculated based on the applicable tax rates to which the non-GAAP adjustment related.  The Company uses these non-GAAP financial measures internally and believes this information provides useful supplemental information to investors to facilitate making period-to-period comparisons by excluding the effects of the Incident.  

While the Company believes that these non-GAAP financial measures are useful in evaluating the Company's business, this information should be considered as supplemental in nature and is not meant to be considered in isolation from, or as a substitute for, the related financial information prepared in accordance with GAAP.  In addition, these non-GAAP financial measures may not be the same as similar measures presented by other companies.  

($ in millions except per share amounts)		Fourth Quarter 2023
Income from railway operations	$	808
Effect of the Incident		150
Adjusted income from railway operations	$	958
Diluted earnings per share	$	2.32
Effect of the Incident		0.51
Adjusted diluted earnings per share	$	2.83

 

		Year Ended December 31, 2023
Railway operating expenses	$	9,305
Effect of the Incident		(1,116)
Adjusted railway operating expenses	$	8,189
Income from railway operations	$	2,851
Effect of the Incident		1,116
Adjusted income from railway operations	$	3,967
Diluted earnings per share	$	8.02
Effect of the Incident		3.72
Adjusted diluted earnings per share	$	11.74

 

 

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SOURCE Norfolk Southern Corporation

FAQ

What were Norfolk Southern's adjusted income from railway operations for the fourth quarter of 2023?

Norfolk Southern's adjusted income from railway operations for the fourth quarter of 2023 was $958 million, down 19% from the previous year.

What were Norfolk Southern's adjusted diluted earnings per share for the fourth quarter of 2023?

Norfolk Southern's adjusted diluted earnings per share for the fourth quarter of 2023 were $2.83, down 17% from the previous year.

How did Norfolk Southern's railway operating revenues for the fourth quarter of 2023 compare to the previous year?

Norfolk Southern's railway operating revenues for the fourth quarter of 2023 were down 5% compared to the previous year.

What was the impact of the incident in Eastern Ohio on Norfolk Southern's financial results?

The incident in Eastern Ohio resulted in a charge that impacted Norfolk Southern's diluted earnings per share for the fourth quarter of 2023.

What were Norfolk Southern's railway operating expenses for the full year of 2023?

Norfolk Southern's railway operating expenses for the full year of 2023 were $9.3 billion inclusive of a charge associated with the Eastern Ohio Incident, an increase of 17% compared to 2022.