Norfolk Southern’s Q1 2017 Earnings Review: Higher Shipment Volumes Drive Earnings Growth

by Trefis Team
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Norfolk Southern
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Norfolk Southern released its Q1 2017 earnings result and conducted a conference call with analysts on April 26. [1] The company reported a significant growth in its earnings driven by an increase in the company’s shipment volumes.

NSC Q1 2017 Earnings Review 1

The growth in shipment volumes was driven by higher coal and metals shipments. Higher gas prices have resulted in an increase in demand for coal from utilities, with Norfolk Southern’s coal shipments rising around 21% year-over-year in Q1. [2] In addition, higher domestic steel production as a result of improved market conditions boosted volumes in Norfolk Southern’s Metals/Construction shipment category by 9% year-over-year. [2]

Besides top line growth, the company’s productivity improvement initiatives helped prop up earnings growth as well. Fleet rationalization, labor headcount reduction, train length expansion, and better locomotive fuel efficiency are some of the measures that the company is adopting to realize a targeted $100 million in productivity gains in 2017. [1] Going forward, the company intends to aggressively pursue productivity improvements, targeting $650 million in annual productivity gains and an operating ratio of 65% by 2020. The continued focus on productivity improvements in order to boost profitability bodes well for the company’s earnings in the coming quarters.

Have more questions about Norfolk Southern? See the links below.

Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Norfolk Southern

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Notes:
  1. Norfolk Southern’s Q1 2017 Earnings Call Transcript, Seeking Alpha [] []
  2. Norfolk Southern’s Q1 2017 10-Q, SEC [] []
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