Norfolk Southern’s (NYSE: NSC) net profits for the second quarter slipped 46% to $392 million, or $1.53 in diluted earnings per share, compared with $722 million, or $2.70 in diluted earnings per share, in the second quarter of 2019.
A 26% decline in rail volumes contributed to the drop in profits year-over-year. Operating revenues fell 29% to $2.1 billion. Meanwhile, operating expenses slipped 21% to $1.5 billion on lower expenses for fuel, compensation and benefits and purchased services.
Income from railway operations was $610 million, a 43% drop from nearly $1.07 billion in the second quarter of 2019.
The profit decline in the second quarter comes as other Class I railroads also reported decreases in second-quarter net income because of adverse economic conditions exacerbated by the COVID-19 pandemic.
The steepest revenue declines in the second quarter came from automotive and coal.
But service metrics improved in the second quarter, with train speeds increasing 12% to 24.6 miles per hour and terminal dwell falling 1% to 18.1 hours.
Norfolk Southern’s (NS) operating ratio was 70.7% for the quarter, compared with 63.6% in the same period last year. Operating ratio, which is a company’s expenses as a percentage of its revenue, can be an indicator of the financial performance of a company. A lower percentage implies improved financial performance.
“In a period when working safely and delivering for our customers was abruptly redefined, our employees responded by protecting each other and innovating to serve rapidly evolving freight demand. Underscoring our commitment to shareholder value, we forged ahead with our ongoing transformation by further reducing our hump yard footprint, achieving fuel efficiency gains, and increasing train size. These are astounding achievements while managing the unprecedented economic disruption and public health crisis,” said NS President and CEO Jim Squires. “We are mobilized and driven to meet the challenges and opportunities that lie ahead, and we will continue to create collaborative change and relentlessly pursue increased productivity as a leading supply chain partner throughout the economic recovery and beyond.”