Norfolk Southern Railroad has reported impressive earnings for the last quarter, thanks to its enhanced operational efficiency, even without considering the gains from insurance settlements linked to the derailment incident in East Palestine or the recent sale of two rail lines.
Based in Atlanta, the company announced a significant $287 million profit from divesting rail lines in Virginia and North Carolina. Furthermore, for the second consecutive quarter, it has secured more in insurance reimbursements than it has paid out regarding last year’s derailment near the Ohio-Pennsylvania border.
For the quarter, Norfolk Southern disclosed a profit of $1.099 billion, translating to earnings of $4.85 per share. This represents a substantial increase compared to the previous year, which saw profits negatively impacted by escalating costs linked to the derailment. When excluding one-off financial items, the railroad reported earnings of $737 million, or $3.25 per share, surpassing the anticipated $3.15 per share predicted by analysts from FactSet Research.
Mark George, the new CEO who took the helm last month, is not anticipated to make any major strategic alterations, as he was part of the team that developed the current operational plan a few years earlier. This plan emphasizes maintaining a workforce that can efficiently respond during economic downturns, which is critical for ensuring rapid recovery when the market rebounds.
“It’s really about building out consistent, safe, reliable service with a network that’s resilient and can bounce back from events,” stated George, who rose to CEO from the position of Chief Financial Officer after the firing of Alan Shaw for improper conduct with an employee. He highlighted Norfolk Southern’s capability to restore all major routes within 72 hours following Hurricane Helene’s impact.
The company gained significant public attention following the East Palestine derailment in February 2023, which sparked a nationwide discourse about railroad safety. Earlier in the year, Norfolk Southern also faced a takeover attempt by investment firm Ancora Holdings, although the investor managed to secure only three board seats, which were insufficient to effect the desired changes.
In response to prevailing economic challenges, Norfolk Southern intensified its cost-reduction measures in the spring, appointing Chief Operating Officer John Orr to help streamline operations by decreasing railcar switches and enabling the railroad to run fewer but longer trains. Overall operational expenses saw a significant drop of 34%, reaching $1.46 billion.
“We’re seeing the results. And I don’t have a whole lot of patience for lack of execution or acceptance of mediocrity,” George remarked, reflecting on the company’s performance.
Despite its accomplishments, Norfolk Southern reported revenues totaling $3.05 billion, which fell slightly short of the $3.09 billion predicted by analysts. As one of the largest railroads in the United States, Norfolk Southern operates an extensive network running throughout the eastern region of the country.