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Rail News: Norfolk Southern Railway

NS announces record Q3 results, plans to implement PSR

"Our demonstrated progress toward the goals of our strategic plan is significant," said NS Chairman, President and CEO James Squires.
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Norfolk Southern Corp. this morning announced record third-quarter financial results, including operating net income of $1 billion — a 14 percent increase compared with the same period a year ago.

While announcing Q3 results, NS officials also shared plans to implement aspects of precision scheduled railroading (PSR) as part of a new operating plan, the details of which will be unveiled at the Class I's investor day event to be held in Atlanta in February 2019.

Additionally, NS Chairman, President and Chief Executive Officer James Squires confirmed media reports that the company is considering moving its headquarters from Norfolk, Virginia, to Atlanta.

In the third quarter, NS' net income jumped 39 percent to $702 million as result of the railway operations income increase and a lower tax rate. Diluted earnings per share were $2.52, up 44 percent year over year and a third-quarter record, NS officials said in a press release.

NS posted railway operating revenue of $2.9 billion, a 10 percent year-over-year increase due to higher volumes and revenue per unit, including more fuel surcharge revenue and increased rates. Overall, volumes rose 5 percent, which reflected growth in intermodal and merchandise traffic. The growth in those major categories helped offset a decline in coal volume.

Railway operating expenses increased 9 percent to $1.9 billion in the quarter compared with a year ago, driven by higher fuel prices, additional volume-related expenses and increased costs associated with overall lower network velocity.

The Class I posted a 65.4 percent operating ratio — a third-quarter record — compared with 66.5 percent in Q3 2017.

"Norfolk Southern continues to deliver record financial results that reflect our careful and determined pursuit of a balanced and flexible strategy," said Squires. "Our demonstrated progress toward the goals of our strategic plan is significant, and our ongoing pursuit of new initiatives to benefit customers and shareholders will further strengthen our organization."

As for the new operating plan, PSR will be used "as long as it improves customer service and enhances shareholder value," Squires said in a conference call with analysts.

"We are looking at everything out there including elements of PSR that are complementary to our strategy," said Squires.

The company has recruited people with PSR experience "and will continue to do so," he said. The plan will feature aggressive goals aimed at reducing the operating ratio and improving the bottom line.

NS has begun the "clean sheeting" process as part of developing the plan, which will be rolled out in "cadences," said Executive Vice President and Chief Operating Officer Michael Wheeler.

Contact Progressive Railroading editorial staff.

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