Norfolk Southern Corp. (NSC) reported third quarter 2010 earnings of $1.19 per share, handily beating the Zacks Consensus estimate of $1.09 per share. Norfolk reported an improved quarter with earnings per share increasing 14.4% sequentially and 46.9% year-over-year.
Norfolk experienced a fifth consecutive quarter of increased volumes, which helped the company produce strong results. As with the other railroad operators, Norfolk Southern stands to benefit from reviving economy on higher volumes and tight capacity.
Norfolk reported revenue of $2,456 million, falling marginally short of the Zacks Consensus Estimate of $2,487 million. The reported revenue, nonetheless, surpassed its year-ago revenue by 19%, driven primarily by a 15% increase in traffic volume.
Revenue in all sectors increased significantly, with coal revenue increasing the most at 24% to $709 million compared to the same quarter last year.
General merchandising revenue grew 16.3% to $1,283 million and Intermodal revenue increased 19% to $464 million, both compared on a year-over-year basis.
Total operating expense increased 13.9% to $1,710 million. Operating ratio increased 3.2 percentage points to 69.6% compared with same quarter last year.
Management did not provide any guidance for the forthcoming quarter, but stated that their cost controls and investments in rail infrastructure and equipment will drive long-term shareholder value. They expect economic slowdown, but positive “growth nonetheless”.
Conclusion
Estimates for the quarter had been trending up in the run-up to the earnings release, with 5 analysts increasing estimates in the last 30 days. The current Zacks Consensus Estimate for fiscal 2012 of $4.58 is up from $4.56 thirty days ago. The full-year Zacks Consensus Estimate for fiscal 2011 also increased to $3.90 from $3.89 thirty days ago.
We currently have a Zacks #2 Rank, which translates a short-term Buy rating. Our long-term recommendation remains Neutral.
NORFOLK SOUTHRN (NSC): Free Stock Analysis Report
Zacks Investment Research
