ATLANTA - Norfolk Southern Corporation (NYSE: NYSE:NSC) on Tuesday reported its preliminary financial results for the first quarter of 2024. The railway company announced an operating revenue of $3.004 billion and adjusted railway operating expenses of $2.1 billion, leading to an adjusted income from railway operations of $904 million. The adjusted operating ratio stood at 69.9%, while the diluted earnings per share were $2.49.
The adjusted results excluded a $600 million charge related to the settlement of a class action lawsuit stemming from the East Palestine derailment. The settlement, which is subject to court approval, aims to resolve all class action claims within a 20-mile radius of the derailment site and personal injury claims within a 10-mile radius. Norfolk Southern emphasized that the settlement does not constitute an admission of liability or fault.
Despite a 4% increase in volume, the company's revenues declined by 4% compared to the previous quarter, affected by lower fuel surcharges, over-capacity in the domestic truck market, and lower seaborne coal prices. However, Norfolk Southern highlighted records for revenue less fuel and revenue per unit less fuel in its Merchandise markets.
The company's preliminary GAAP results included additional charges from restructuring efforts, recruitment of a new chief operating officer, shareholder matters, and a deferred tax adjustment, which collectively increased operating expenses by $691 million, raised the operating ratio by 23 percentage points, and reduced earnings per share by $2.26.
Norfolk Southern also provided updates on operational improvements, including changes in reporting structures and the classification of two hump yards as "High Performance Terminals," expected to improve dwell time by 33% over the next 60 days. The company has already seen an 8% improvement in Terminal Dwell, a 10% increase in Merchandise Train Speed, and an 11% decrease in Active Train Count.
The company is taking steps to mitigate the impact of the March 26 Francis Scott Key Bridge collapse on supply chains, launching a new service between New York and New Jersey's Elizabeth Marine Terminal and Baltimore's Seagirt Marine Terminal. The impact on second-quarter revenue is estimated to be between $50 million and $100 million, depending on the port outage duration.
Norfolk Southern reaffirmed its full-year 2024 adjusted operating ratio guidance, projecting a 100-150 basis points improvement, including a 400+ basis points improvement in the second half of the year.
The information provided is based on a press release statement, and Norfolk Southern will announce complete first-quarter 2024 financial results during a webcast on April 24, 2024.
InvestingPro Insights
Norfolk Southern Corporation (NYSE: NSC) has shown resilience in its financial performance despite the challenges outlined in the preliminary results. An InvestingPro Tip highlights that the company has raised its dividend for 7 consecutive years, indicating a commitment to returning value to shareholders even in the face of adversities such as the East Palestine derailment. Additionally, the company has maintained dividend payments for 43 consecutive years, underscoring its long-term financial stability.
From a valuation standpoint, another InvestingPro Tip suggests that Norfolk Southern is trading at a high earnings multiple, with a P/E Ratio of 31.22, which is above the adjusted P/E ratio for the last twelve months as of Q4 2023, which stands at 20.93. This may reflect investor confidence in the company's profitability, which analysts predict will continue this year.
InvestingPro Data metrics reveal a robust gross profit margin of 44.27% for the last twelve months as of Q4 2023, indicating efficient cost management relative to revenue. The company's revenue, however, has experienced a slight contraction, with a -4.62% revenue growth over the same period. Despite this, Norfolk Southern has managed a significant 29.5% price total return over the last six months, showcasing the market's positive reception to its operational strategies and future outlook.
For readers interested in a deeper analysis, there are additional InvestingPro Tips available on the Norfolk Southern page at: https://www.investing.com/pro/NSC. These tips can provide further insights for those considering investment opportunities. Use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, offering a more comprehensive understanding of the company's financial health and market performance.
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