Norfolk Southern sees 2023 as an opportunity to further test its new operational plan amid considerable economic headwinds, according to executives’ comments during the railroad’s fourth-quarter ’22 earnings call.
Those headwinds include how inflation not only affects NS and its customers but also the broader industries, such as industrial production and manufacturing as well as consumer sentiment.
“Our outlook for 2023 reflects the uncertainty of a challenging macro landscape, in which the path of the demand environment and inflation are unclear,” NS President and CEO Alan Shaw said in prepared remarks to investors during the call. “At this time, we see [a] full-year revenue level with 2022 performance. We expect to be able to absorb volume pressure with share recapture, thanks to our proving service product. RPU [revenue per unit] will be down to flat as we deal with pressure from softening coal pricing, lower fuel surcharge revenue and the eventual unwinding of accessorial revenues as supply chains unblock. RPU will benefit from another year in core pricing gains.
“There are a lot of variables that are hard to predict in an uncertain environment. But in a flat revenue environment. It will be difficult to grow operating income in 2023, with the cost benefits from an improving service product being more than neutralized by inflation as well as the RPU headwinds I had just described.”
How NS achieves volume growth in 2023 and “how the top line evolves” will partly depend on whether there’s an economic recession and how it affects demand destruction, according to NS CFO Mark George.
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