Norfolk’s 3Q’17 Earnings To Surge Backed By Higher Coal Shipments And Productivity Improvements
Norfolk Southern Corp. (NYSE:NSC), the Virginia-based railroad company, is set to release its financial performance for the September quarter on 25th October 2017((Norfolk Southern To Hold Third Quarter 2017 Earnings Conference Call, Norfolk News Release)). The market expects the company to post an annual improvement in its revenues as well as earnings driven by the rebound in coal shipments due to favorable government policies and rising natural gas prices. In addition to this, Norfolk has benefited from the declining operational performance of its competitor, CSX Corp., and has managed to attract more customers during the quarter. This should also boost the company’s performance for the quarter.
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Key Trends Witnessed During 3Q’17
According to Norfolk’s weekly shipment data, its coal and coke shipments continued to grow at a high rate of 11.5% in the third quarter, driven by the improving demand for coal due to the rising natural gas prices and favorable government policies. The company’s intermodal shipment volumes rose about 4% during the quarter, while its agricultural, industrial, and construction shipments remained largely flat. Overall, the company’s shipments grew 3.8% for the third quarter, which is notably higher than its rival, CSX Corp. As mentioned earlier, due to CSX’s poor operational performance in the last three months, Norfolk has gained a fair amount of new customers, which is likely to enhance its top-line and earnings in the current, as well as forthcoming, quarters.
Further, Norfolk appointed Fredric M. Ehlers as the Chief Information Officer (CIO) with immediate effect earlier this month. Ehlers is a railroad veteran who has been working with the company since 1985 and will continue to serve the Vice President for information technology, a position he currently holds. Given his strong track record of leadership, performance, and strategic thinking, the management believes that he can further enhance the company’s technology and digital capabilities that are crucial to maintain the company’s competitive operational performance.
Lastly, during the quarter, Norfolk has increased its share repurchase authorization by 50 million shares, to be completed by December 2022. This implies that the company now plans to repurchase 225 million shares over the next 4-5 years. The move is perceived to be a positive one by the investors as it indicates the company’s willingness to return value to its shareholders through share buybacks and higher earnings per share.
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