NORFOLK, Va. — Reflecting continued intermodal strength — as well cost savings resulting from the continued implementation of Precision Scheduled Railroading principles — Norfolk Southern showed increases in both volume and earnings during 2021’s first quarter, as well as a new record operating-ratio figure.
Quarterly revenue of $2.6 billion represented a 1% increase over the first quarter of 2020. Volume increased by 3% — thanks primarily to the 6% increase in intermodal traffic over the same period a year ago. Intermodal revenue was up 10%. Operating income was up 7% to $1.015 billion. The company decreased operating expenses by 3% and lowered its operating ratio to a record 61.5%, a 2.2% improvement over the first-quarter 2020 figure.
CEO James Squires called the results “pretty spectacular” during Wednesday’s quarterly earnings call with investors and analysts, and said the remained confident it will see a 9% growth in revenue over 2020. Squires also said NS expects to reach a 60% operating ratio by the end of the year. The railroad finished 2020 with a 64.4% operating ratio.
The increase in volume came despite an 11% decrease in the active NS locomotive fleet, as the company increased train length by 11% and train weight by 13%, adding the additional traffic to existing trains. Chief Operating Officer Cindy Sanborn said those efforts included continued increase of use of distributed power, up by 12% in the quarter after a record increase in the fourth quarter of 2020. “So we have a real good trajectory with distributed power which … is also beneficial from a fuel perspective,” Sanborn said. An initiative to use locomotives to the maximum capability of their horsepower continues, with the manifest network achieving that goal 13% to 15% of the time, “so we see some opportunity there,” she said.
To support the effort to run longer trains, Sanborn said the railroad has been begun extending one siding in its Chicago-Atlanta corridor and will begin work on two others later this year.
Other PSR-driven initiatives saw the company reduce its workforce by 12% compared to year-earlier figures, and hiring of some executives with PSR experience, most notably Hunt Cary, brought on in February as vice president operations efficiency [see “Digest: San Francisco Muni to resume …,” Trains News Wire, Feb. 12, 2021]. “There are several others in the organization that we have brought on, and if we have a need, we will continue to find good fits for them within NS,” Sanborn said. While the railroad has idled humps at six yards since 2019, that process may not be complete, she said. “We still have some structural work that we need to do, whether that’s from a train size perspective or continuing to move forward with some terminal efficiencies … but that’s going to depend on volume and where traffic wants to go.”
NS officials declined to comment on the competing offers by Canadian National and Canadian Pacific for Kansas City Southern beyond an observation by Squires that NS “will be protective of our shareholders’ interests and our customers interests. We will be active participants in any transaction that may transpire.”
