Norfolk Southern’s Quarterly Profits Rise Despite Challenges
Norfolk Southern’s quarterly profits saw a significant rebound, boosted by insurance payments related to the 2023 derailment in eastern Ohio. The Atlanta-based railroad reported a $750 million profit, or $3.31 per share, in the first quarter, compared to $53 million, or 23 cents per share, last year. The previous year’s results were impacted by a $600 million class action settlement related to the East Palestine derailment.
Insurance payments have been a significant factor in Norfolk Southern’s recent financial performance. Since the second quarter of last year, the railroad has received more in insurance payments than it has spent on derailment cleanup and response. In the first quarter, insurance payments boosted net income by $141 million. Without this boost, the railroad would have earned $609 million, or $2.69 per share, compared to $2.49 per share last year. This performance beat Wall Street analysts’ average estimate by 3 cents per share when focusing on ongoing operations.
The railroad has received nearly $1 billion in insurance payments to date, helping to cover the approximately $2 billion spent since the East Palestine derailment. Chief Financial Officer Jason Zampi expects less than $100 million in remaining insurance payments.
While revenue remained essentially flat at just under $3 billion, Norfolk Southern managed to cut expenses as part of its efficiency efforts. The railroad faced about $35 million in winter storm-related costs but still delivered about 1% more shipments in the quarter. Consistent service has helped win new business, with CEO Mark George stating that improved service performance is increasing customer confidence and allowing the company to gain market share.
Norfolk Southern’s main competitor in the East, CSX railroad, experienced a 1% decline in volume during the quarter due to major construction projects and storms. This suggests that some shipments may have shifted between the two railroads. George remains optimistic, predicting another $150 million in productivity improvements this year and revenue growth of roughly 3%. However, he acknowledges the uncertainty surrounding the overall economy, particularly with the impact of President Donald Trump’s tariffs.
The railroad is monitoring volume closely due to fears of a potential recession later this year. While companies haven’t started cutting shipments yet, the economic environment remains uncertain. Edward Jones analyst Jeff Windau noted that the rails are likely to be impacted by the overall economy but are still seeing good opportunities and delivering on expectations.
Shares of Norfolk Southern rose about 3% in early trading before settling back down, ending up about 1.6% at $223.47 around midday. The company’s stock performance reflects the mixed outlook for the railroad industry amid economic uncertainty.
