For the quarter, the railroad’s operating income declined 11%, to $962 million, as revenue fell 7%, to $2.9 billion. Earnings per share slumped 1%, to $2.55. NS’s operating ratio rose 1.4 points to 64.2%.
For the year, operating income rose 1%, to a record $3.9 billion, even though revenue declined 1%, to $11.2 billion. Earnings per share grew 8%, to $10.25. NS’s operating ratio was a record 64.7%, an improvement of 0.7 points. Volume for the year was down 5%.
“In the face of a challenging volume environment, we’re pleased to share results today that demonstrate this organization’s strong momentum in streamlining our operations and making substantial progress toward our long-term commitments,” CEO Jim Squires told investors and analysts on the railroad’s earnings call this morning.
Squires said the annual operating ratio improvement was “particularly impressive against the backdrop of declining volumes.”
NS in 2019 set all-time on-time performance records for merchandise and automotive traffic and posted its best intermodal on-time performance since 2009, Chief Operating Officer Mike Wheeler says.
Last year NS launched its TOP21 operating plan based on the principles of Precision Scheduled Railroading, which has made the railroad more fluid and reliable.
“Our network is running fast and on time,” Wheeler says, citing a 17% improvement in average train speed and a record low terminal dwell that was 30% below the levels of 2018.
The railroad is operating with the lowest number of train and engine crews ever, Wheeler says, as NS moves tonnage on fewer but longer trains. Crew starts were down 15% in the fourth quarter, well below the 9% decline in revenue ton miles.
The NS locomotive fleet was 20% smaller at year end, which Wheeler says allowed the railroad to furlough 600 mechanical positions across the railroad. An additional 135 layoffs are expected this year as the railroad matches the mechanical workforce to the smaller fleet size.
NS’s merchandise volume sank 6% in the quarter due to a slowdown in the industrial economy. Intermodal volume was off 8% amid loose truck capacity. And coal volume was down 21% as low natural gas prices put pressure on coal for use in electricity generation, and reduced steel production hit domestic metallurgical coal volume. The railroad’s export coal shipments also tumbled.
Chief Marketing Officer Alan Shaw says coal will remain challenged this year, but intermodal volumes should resume growth in the second half of the year. The outlook for merchandise traffic was cloudy given ongoing uncertainty in the industrial economy.
NS expects flat revenue this year, Squires says, but anticipates an operating ratio improvement of 2.35 points as the railroad continues to see productivity gains and cost reductions. NS also stuck with its goal of a 60% operating ratio for 2021.
The fourth quarter was the 12th straight that NS has seen growth in revenue per unit for all three of its business segments, Shaw says.
