Norfolk Southern reports second quarter 2024 results; reaffirms full-year adjusted operating ratio guidance

Rhea-AI Summary

Norfolk Southern (NYSE: NSC) reported strong Q2 2024 financial results, with income from railway operations at $1.1 billion and diluted earnings per share at $3.25. The operating ratio improved to 62.8% from 80.7% in Q2 2023. Adjusted for the Eastern Ohio incident and other charges, the operating ratio was 65.1%, showing a 160 basis point improvement year-over-year. Railway operating revenues increased by 2% to $3.0 billion. The company reaffirmed its full-year adjusted operating ratio guidance of approximately 66%. CEO Alan H. Shaw emphasized the company's success in leveraging its service product for volume growth, enhancing safety culture, and accelerating operational improvements.

Positive

• Income from railway operations increased by 96% to $1.1 billion
• Diluted earnings per share grew by 108% to $3.25
• Operating ratio improved significantly from 80.7% to 62.8%
• Railway operating revenues increased by 2% to $3.0 billion
• Adjusted operating ratio improved by 160 basis points to 65.1%
• Company reaffirmed full-year adjusted operating ratio guidance of approximately 66%

Negative

• Adjusted diluted earnings per share growth was modest at 4% year-over-year

Insights

Financial Analyst

Norfolk Southern's Q2 2024 results demonstrate a solid financial performance amidst ongoing challenges. The company reported $1.1 billion in income from railway operations, with an operating ratio of 62.8% and diluted EPS of $3.25. These figures, however, include the impact of insurance recoveries related to the Eastern Ohio incident, which positively skewed the results.

On an adjusted basis, excluding one-time items, the company's performance remains strong. The adjusted operating ratio of 65.1% shows a 160 basis point improvement year-over-year, indicating enhanced operational efficiency. This aligns with management's strategy to drive operational improvements and cost control.

Revenue growth of 2% year-over-year to $3.0 billion suggests modest top-line expansion. The company's ability to leverage its service product to secure volume growth is a positive sign, especially in a challenging economic environment.

The reaffirmation of full-year adjusted operating ratio guidance at approximately 66% demonstrates management's confidence in their strategy and ability to execute. However, investors should note that this guidance implies a slight deterioration in the second half of the year compared to the Q2 performance.

Overall, while the headline numbers are impressive, the adjusted figures provide a more accurate picture of Norfolk Southern's underlying performance. The company appears to be on track with its strategic initiatives, but maintaining this momentum in the face of potential economic headwinds will be important for long-term success.

Transportation Industry Expert

Norfolk Southern's Q2 results reflect the broader trends in the rail transportation sector. The company's ability to grow revenue in a challenging environment is commendable, indicating resilience in its business model and effective commercial strategies.

The improvement in operating ratio, a key metric in the rail industry, is particularly noteworthy. An adjusted operating ratio of 65.1% puts Norfolk Southern in a competitive position within the industry. This efficiency gain likely stems from a combination of cost control measures and operational improvements, such as enhanced network fluidity and asset utilization.

The company's focus on leveraging its service product to secure volume growth is a smart strategy in the current market. As supply chains continue to evolve post-pandemic, reliable and efficient rail service becomes increasingly valuable to shippers. Norfolk Southern's emphasis on enhancing its safety culture is also crucial, especially in light of recent incidents in the industry.

Looking ahead, the reaffirmed guidance suggests management expects to maintain this performance trajectory. However, potential challenges loom, including economic uncertainties, labor negotiations and regulatory pressures. The company's ability to navigate these issues while continuing to improve its operational efficiency will be critical in the coming quarters.

Overall, Norfolk Southern's Q2 performance indicates it's well-positioned within the rail industry, but ongoing vigilance and adaptation will be necessary to maintain this momentum in a dynamic market environment.

ATLANTA, July 25, 2024 /PRNewswire/ -- Norfolk Southern Corporation (NYSE: NSC) announced Thursday its second quarter 2024 financial results. For the quarter, income from railway operations was $1.1 billion, the operating ratio was 62.8%, and diluted earnings per share were $3.25. 

After adjusting the results to exclude the impact of the Eastern Ohio incident, restructuring and other charges, and shareholder advisory costs from the proxy contest, railway operating income was $1.1 billion, the operating ratio was 65.1%, and diluted earnings per share were $3.06. Notably, in the second quarter, the impact of the Eastern Ohio incident included insurance recoveries which were greater than the costs incurred in the quarter.

"The Norfolk Southern team delivered strong results, including on operating ratio and expenses, that are directly in-line with the targets we committed to our shareholders," said Norfolk Southern President and CEO Alan H. Shaw. "During the quarter, we demonstrated that we are leveraging our service product to secure volume growth, enhancing our safety culture, and accelerating operational improvements, while eliminating service recovery costs. These results show that our strategy is working and that our momentum is building. We are committed to accomplishing even more in the second half of 2024, and we reaffirm our guidance of a full-year adjusted operating ratio of approximately 66%."

Second Quarter Summary 

• Railway operating revenues of $3.0 billion, up $64 million, or 2%, compared to the second quarter of 2023. 
• Income from railway operations was $1.1 billion, an increase of $555 million, or 96%, compared to second quarter of 2023. 
  • Adjusting for the Eastern Ohio incident and restructuring and other costs, income from railway operations was $1.1 billion, up $71 million, or 7%, compared to second quarter 2023.
• Operating ratio in the quarter was 62.8% compared to 80.7% in second quarter 2023.
  • On an adjusted basis, the operating ratio for second quarter 2024 was 65.1%. This represents 160 basis points of improvement from second quarter 2023 which was 66.7%. 
• Diluted earnings per share were $3.25, an increase of 108% compared to second quarter 2023.
  • Adjusting for the Eastern Ohio incident, restructuring and other costs, diluted earnings per share were $3.06, up $0.11, or 4%, compared to second quarter 2023.

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.

Non-GAAP Financial Measures
Information included within this press release contains non-GAAP financial measures, including adjusted income from railway operations, adjusted operating ratio, and adjusted diluted earnings per share. 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).

Our second quarter 2024 non-GAAP financial results exclude the effects of certain expenses related to the Eastern Ohio incident, restructuring and other charges, and shareholder advisory costs. The following table adjusts our second quarter 2024 GAAP financial results to exclude the effects of those items. The income tax effects of the non-GAAP adjustments were calculated based on the applicable tax rates to which the non-GAAP adjustments related. We use these non-GAAP financial measures internally and believe this information provides useful supplemental information to investors to facilitate making period-to-period comparisons by excluding these costs. While we believe that these non-GAAP financial measures are useful in evaluating our 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.  With respect to our full-year 2024 adjusted operating ratio guidance, we are unable to predict or estimate with reasonable certainty the ultimate outcome of certain items required for the GAAP measure without unreasonable effort. Information about the adjustments that are not currently available to us could have a potentially unpredictable and significant impact on future GAAP results.

($ in millions, except per share amounts)				Second
				Quarter 2024
Income from railway operations		$		1,131
	Effect of the Incident and restructuring and other charges			(68)
Adjusted income from railway operations		$		1,063
Operating ratio				62.8 %
	Effect of the Incident and restructuring and other charges			2.3 %
Adjusted operating ratio				65.1 %
Diluted earnings per share		$		3.25
	Effect of the Incident, restructuring and other charges, and shareholder advisory costs			(0.19)
Adjusted diluted earnings per share		$		3.06

 

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SOURCE Norfolk Southern Corporation

FAQ

What was Norfolk Southern's (NSC) operating ratio in Q2 2024?

Norfolk Southern's operating ratio in Q2 2024 was 62.8%, a significant improvement from 80.7% in Q2 2023. On an adjusted basis, excluding the Eastern Ohio incident and other charges, the operating ratio was 65.1%.

How did Norfolk Southern's (NSC) revenue change in Q2 2024 compared to Q2 2023?

Norfolk Southern's railway operating revenues in Q2 2024 increased by $64 million, or 2%, to $3.0 billion compared to the second quarter of 2023.

What was Norfolk Southern's (NSC) earnings per share for Q2 2024?

Norfolk Southern reported diluted earnings per share of $3.25 for Q2 2024, an increase of 108% compared to Q2 2023. On an adjusted basis, diluted earnings per share were $3.06.

Has Norfolk Southern (NSC) changed its full-year 2024 guidance?

No, Norfolk Southern reaffirmed its guidance for a full-year adjusted operating ratio of approximately 66% for 2024.