Norfolk Southern Corporation announced Tuesday preliminary first quarter 2024 financial results.
“In the first quarter, we delivered an adjusted operating ratio in line with our guidance, which called for a seasonal increase of 100-200 basis points sequentially from the fourth quarter,” said Norfolk Southern President and Chief Executive Officer Alan H. Shaw. “We achieved this result despite macroeconomic challenges and the continued impact of our revenue mix being weighted towards lower-rated traffic, including international intermodal, which continues to be a significant driver of volume growth. We are encouraged that non-GAAP margin improved each month throughout the quarter. Looking ahead, we have strong momentum in our effort to achieve a full year 100-150 basis points improvement, including 400+ basis points of year-over-year improvement in the second half of the year.”
“Norfolk Southern is becoming a more productive and efficient railroad. There is still work to be done to achieve industry-competitive margins and our target of a sub-60% adjusted operating ratio in 3-4 years and we are taking all the right steps to deliver on our promise,” Shaw continued. “Our recently appointed Chief Operating Officer, John Orr, is executing precision scheduled railroading principles and accelerating our operational improvements, which are already yielding positive results. We are moving with urgency, and we are confident in our ability to achieve our near- and long-term operating and financial targets.”
Norfolk Southern’s first quarter results include the impact of a $600 million agreement in principle to resolve a consolidated class action lawsuit relating to the East Palestine derailment. Additionally, preliminary GAAP results include charges associated with the company’s involuntary and voluntary separation programs that will eliminate management positions, as well as costs associated with the recruitment of a new chief operating officer, expenses associated with shareholder matters, and a deferred tax adjustment. Collectively, these increased the company’s railway operating expenses by $691 million, increased its operating ratio by 2,300 basis points, and reduced earnings per share by $2.26.
Despite 4% volume growth, revenues were down 4% due to RPU headwinds primarily from lower fuel surcharge and the continuation of adverse mix along the patterns we experienced in Q4 2023. Additionally, lower Intermodal storage fees, persistent pressure in Domestic Intermodal RPU from over-capacity in the domestic truck market, and lower seaborne coal prices were headwinds to RPU in the quarter. While there were also adverse mix impacts within Merchandise, our laser focus on strong core pricing, supported by considerably improved service, helped deliver all-time quarterly records for revenue less fuel and revenue per unit less fuel in our Merchandise markets.
-via Press Release
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