Norfolk Southern bracing for economic headwinds

Fourth-quarter 2022 net profit up 4% to $790 million

Norfolk Southern reported fourth-quarter 2022 earnings Wednesday.

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. 

To continue reading this article...

Already have an account? Sign In

Create a Free Account

No payment required

By signing up with your email, you will receive newsletters, special offers, and occasional third-party promotions from FreightWaves.com and its family of brands.

    Need Help? Contact Us

    Joanna Marsh

    Joanna is a Washington, DC-based writer covering the freight railroad industry. She has worked for Argus Media as a contributing reporter for Argus Rail Business and as a market reporter for Argus Coal Daily.