Norfolk Southern 3Q profit soars as shipments rise

AP News
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Posted: Oct 27, 2010 6:06 PM
Norfolk Southern 3Q profit soars as shipments rise

Norfolk Southern Corp. on Wednesday predicted the economy will continue to improve slowly through next year, and its profit should rise as it controls costs and raises prices.

The economy, cost controls and higher prices combined to drive the company's third-quarter earnings up 47 percent.

"We continue to see an economy characterized by slow growth, but growth nonetheless," CEO Wick Moorman said in a statement.

Moorman added on a conference call with analysts that he expects shipping volume in the fourth quarter to rise at about the same pace as it has so far this year. In the third-quarter, Norfolk Southern's overall shipments rose 15 percent.

Norfolk Southern is the fourth major U.S. rail to report a significant jump in third-quarter earnings. Their strong results show that railroads have benefited from more shipments of a variety of goods, while raising shipping prices and taking business from trucks.

The Norfolk, Va., railroad company earned $445 million, or $1.19 per share, compared with year-ago net income of $303 million, or 81 cents per share.

Revenue rose 19 percent to $2.46 billion.

Thomson Reuters says analysts expected profit of $1.09 per share on revenue of $2.47 billion.

Norfolk Southern Corp. revenue from general merchandise shipments _ which include everything from clothes to cars _ rose 16 percent to $1.28 billion. That broad segment is the company's largest shipping category. Revenue from shipments of coal rose the most, by 24 percent. Coal is used to produce electricity and steel and has strong demand internationally.

The money Norfolk Southern made from transfers between trucks and trains, or intermodal shipments, rose 19 percent.

The railroad has brought back all the employees it furloughed during the recession. It's starting to hire more employees, but slowly. That's one of the major ways railroads are keeping costs low while the economic recovery is still tentative.

Union Pacific, the nation's largest freight railroad, said last week that higher shipments and prices, increased transfers from trucks and better efficiency drove its third-quarter earnings up 51 percent from a year ago. CSX, Norfolk Southern's main Eastern rival, said earlier this month that third-quarter earnings rose 43 percent as it ran longer, more efficient trains.

Kansas City Southern said Tuesday that its third-quarter earnings nearly doubled as shipping volume improved from a rough 2009, despite costs for damage and delays caused by Hurricane Alex in June.