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Norfolk Southern expects improved service to support railroad during down cycle

NS achieves quarterly records for operating revenue, net income

A Norfolk Southern train. (Photo: Shutterstock/M Huston)

Although economic indicators hint at a softening market in the coming months, Norfolk Southern expects continuing improved service to support the railroad through the down cycle.

“Our customers are telling us that there’s additional volumes out there that they want to put on the railroad,” said NS Chief Marketing Officer Ed Elkins during Norfolk Southern’s earnings call Wednesday to discuss third-quarter 2022 financial results.

Even if there is a backdrop of a declining market, there are still a lot of unfilled orders in the manufacturing sector, Elkins said, adding that even if the railroad (NYSE: NSC) is exposed to a weaker truck market, customers have been saying they would put more volumes on NS as service improves. 

Sequential improvements in velocity in the quarter also enabled NS to participate in lucrative spot opportunities, said President and CEO Alan Shaw.

Some of these opportunities were in the bulk market and for bulk agriculture, according to Elkins. Through improvements in train speed and dwell time, NS has been able to take advantage of these opportunities in a way that it couldn’t have done in prior periods, he said.

Other areas that could support NS in the fourth quarter and beyond include coal, buoyed by elevated natural gas prices, and domestic intermodal, which could find support in steady consumer spending levels. 


If NS needs to respond operationally to any broader economic downturns, the railroad will look to attrition, although it must also ensure there is a good hiring pipeline, said NS Chief Operating Officer Cindy Sanborn, noting that this current labor and recruiting market is different from past ones. 

NS will also work to get conductors qualified to run trains on more segments as a means to improve conductor availability, she said. 

“There’s a number of actions that we’ll take here to make sure we’re fortified and ready to go with any upturn” and downturn, Sanborn said. 

NS is encouraged by the number of conductor trainees in the pipeline and will continue to hire for specific locations, officials said.

Q3 2022 financial results

NS calculates that it lost between $20 million and $25 million, most of that in the intermodal markets, because it wound down operations ahead of a potential strike in mid-September by some railroad union members.

Even though that hurt the company financially, NS wanted to inform customers early on of its plans to restrict freight because of the railroad’s “goal is to gain credibility” with customers, Elkins said.

Yet even with this action, NS still saw quarterly records for operating revenue, net income and earnings per share. 

Net profit rose 27% to $958 million, or $4.10 per diluted share, in the third quarter of 2022, compared with $753 million, or $3.06 per diluted share, in the third quarter of 2021.

Railway operating revenues were $3.3 billion, up 17% year over year, on higher fuel surcharges and pricing. 

Operating expenses rose 21% to $2.1 billion on higher fuel prices, increased labor costs and costs associated with inflation and slower network velocity. 

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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.