By JOSH FUNKAP Business Writer
OMAHA, Neb. (AP) - Norfolk Southern Corp. said Tuesday that the weak economy contributed to a 27 percent drop in profits as the company hauled less coal and other merchandise.
The railroad earned $402 million, or $1.24 per share, in the third quarter. That's down from $554 million, or $1.59 per share, Norfolk Southern reported last year but in line with the revised forecast officials offered last month.
The company, based in Norfolk, Va., said revenue fell nearly 7 percent to $2.7 billion.
Analysts expected earnings of $1.25 per share and $2.73 billion in revenue, according to FactSet. Many analysts lowered their forecasts after the railroad said Sept. 19 that it expected earnings of between $1.18 and $1.25 per share for the quarter because of the revenue drop.
Norfolk Southern officials said a modest improvement in intermodal shipments, where the railroad moves containers from ships and trucks, couldn't offset weakness in coal and merchandise shipments, which includes everything from vehicles and chemicals to building materials.
Coal revenue alone dropped 22 percent to $701 million in the quarter. Fuel surcharge revenue was $72 million lower than last year, contributing to the decline.
Railroads have been dealing with weaker coal demand all year because of the current low natural gas prices and last year's mild winter. The slower economy in the third quarter, especially overseas, hurt demand for coal exports and metallurgical coal used to make steel.
Norfolk Southern CEO Wick Moorman said he expects weak coal demand to continue at least into the first half of next year, so the railroad is working to reduce expenses wherever possible.
"We will continue to remain very focused on cost control, and making sure that we have the appropriate levels of resources employed to handle our business levels while maintaining a high level of network performance and efficiency, along with superior customer service," Moorman said during a conference call with analysts. "Over the longer term, we remain very optimistic about our prospects."
As revenue fell, Norfolk Southern's expenses grew 1 percent to $1.96 billion.
The railroad has furloughed 234 employees and put another 200 on light duty as part of its effort to cut costs. It has also stored 200 locomotives it owns and returned 160 less-efficient leased locomotives.
Norfolk Southern railroad operates 20,000 miles of track in 22 eastern states and the District of Columbia. Major freight railroads, like Norfolk Southern, are considered indicators of the health of the economy because of the wide array of goods they haul.
Shares fell $1.51, or 2.3 percent to $64.50 in after-hours trading. In the regular session, the stock fell 82 cents to close at $66.01.
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Norfolk Southern Corp.: www.nscorp.com
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