Skip to content
Search AI Powered

Latest Stories

newsworthy

Norfolk Southern posts strong Q1 results, led by solid operating improvements

Operating ratio drops more than 6 percentage points over 2015 quarter.

Norfolk Southern Corp. (NS), fresh from beating back an acquisition attempt by Canadian Pacific Railway (CP), yesterday reported first-quarter results well above Wall Street's expectations, an indication its five-year plan to improve operating efficiencies is gaining traction despite persistent weakness in volumes and revenues.

Perhaps the most striking improvement for NS was in the all-important operating ratio, which is a company's operating expenses as a percentage of its revenue. NS posted a first-quarter operating ratio of 70.1 percent, a reduction of more than 6 percentage points from the same period in 2015. That was a record for the quarter, and much better than analysts' most optimistic projections. Norfolk Southern's operating ratio has lagged that of its rail peers for years and was used by CP executives as ammunition to convince investors and shareholders that NS was an inefficient operation that in the right hands could be turned around.


On April 11, Calgary-based CP said it would abandon its six-month quest to acquire NS for US$28 billion. The deal would have created North America's first end-to-end transcontinental rail network.

In releasing its results, NS' management reaffirmed its plan to hit a 65-percent operating ratio by achieving $650 million in annualized productivity savings by 2020. The railroad's first-quarter revenue fell 6 percent year-over-year on a 3-percent drop in volumes and a 3-percent decline in per-unit revenue. Backing out the impact of declining fuel-surcharge revenue, revenue per unit rose 1 percent year-over-year.

Analysts were uniform both in their praise and in their surprise over the performance. "It's real, and it's spectacular," wrote Scott Group, analyst for Wolfe Research LLC, in a note today, paraphrasing a line made famous in the 1990s sitcom Seinfeld. However, they noted that NS' performance was driven by better-than-expected progress in cost cuts and efficiency improvements, not by stellar top-line growth. The macroeconomic environment for rails remains difficult—especially in the carload sector, as coal demand continues to weaken due to competition from cleaner-burning natural gas and the surge in shale oil and gas exploration recedes, meaning fewer energy-related loads for the rails.

Intermodal, which for the most part has held its own, has also been affected by dramatically lower diesel fuel prices that make truck traffic more cost-competitive with rail.

John G. Larkin, lead transport analyst for the investment firm Stifel, acknowledged in a note that NS "has made great operating strides." He cautioned, however, that all rails face tough challenges in managing through the tough operating environment.

The Latest

More Stories

screen shot of onerail tech

OneRail raises $42 million backing for fulfillment orchestration tech

The Florida logistics technology startup OneRail has raised $42 million in venture backing to lift the fulfillment software company its next level of growth, the company said today.

The “series C” round was led by Los Angeles-based Aliment Capital, with additional participation from new investors eGateway Capital and Florida Opportunity Fund, as well as current investors Arsenal Growth Equity, Piva Capital, Bullpen Capital, Las Olas Venture Capital, Chicago Ventures, Gaingels and Mana Ventures. According to OneRail, the funding comes amidst a challenging funding environment where venture capital funding in the logistics sector has seen a 90% decline over the past two years.

Keep ReadingShow less

Featured

screen display of GPS fleet tracking

Commercial fleets drawn to GPS fleet tracking, in-cab video

Commercial fleet operators are steadily increasing their use of GPS fleet tracking, in-cab video solutions, and predictive analytics, driven by rising costs, evolving regulations, and competitive pressures, according to an industry report from Verizon Connect.

Those conclusions come from the company’s fifth annual “Fleet Technology Trends Report,” conducted in partnership with Bobit Business Media, and based on responses from 543 fleet management professionals.

Keep ReadingShow less
forklifts working in a warehouse

Averitt tracks three hurdles for international trade in 2025

Businesses engaged in international trade face three major supply chain hurdles as they head into 2025: the disruptions caused by Chinese New Year (CNY), the looming threat of potential tariffs on foreign-made products that could be imposed by the incoming Trump Administration, and the unresolved contract negotiations between the International Longshoremen’s Association (ILA) and the U.S. Maritime Alliance (USMX), according to an analysis from trucking and logistics provider Averitt.

Each of those factors could lead to significant shipping delays, production slowdowns, and increased costs, Averitt said.

Keep ReadingShow less
legal scales and gavel

FMCSA rule would require greater broker transparency

A move by federal regulators to reinforce requirements for broker transparency in freight transactions is stirring debate among transportation groups, after the Federal Motor Carrier Safety Administration (FMCSA) published a “notice of proposed rulemaking” this week.

According to FMCSA, its draft rule would strive to make broker transparency more common, requiring greater sharing of the material information necessary for transportation industry parties to make informed business decisions and to support the efficient resolution of disputes.

Keep ReadingShow less
chart of trucking conditions

FTR: Trucking sector outlook is bright for a two-year horizon

The trucking freight market is still on course to rebound from a two-year recession despite stumbling in September, according to the latest assessment by transportation industry analysis group FTR.

Bloomington, Indiana-based FTR said its Trucking Conditions Index declined in September to -2.47 from -1.39 in August as weakness in the principal freight dynamics – freight rates, utilization, and volume – offset lower fuel costs and slightly less unfavorable financing costs.

Keep ReadingShow less