Norfolk Southern Railway Company's profits exceed expectations due to sustained strong freight demand

Reuters, October 22 - Norfolk Southern Corporation (NSC.N) reported on Thursday that its third quarter adjusted profit exceeded Wall Street expectations. Despite rising fuel costs, the railroad operator largely offset this expense through surcharges, while also benefiting from strong freight demand.

Due to a shortage of truck drivers, some shippers have turned to rail transport, allowing the rail industry to benefit from tight truck transport capacity, especially in the intermodal sector, which competes directly with long-haul trucking.

The industry has mitigated the impact of rising fuel costs—caused by conflict in the Middle East—by passing on surcharges to customers, while also benefiting from improved operating efficiency and stable intermodal freight volumes.

According to the American Automobile Association (AAA), U.S. gasoline prices have remained above $4 per gallon since March (link), with Thursday's average at about $4.27 per gallon, continuing to put cost pressure on the entire transportation industry.

Atlanta, Georgia-based Norfolk Southern reported adjusted earnings per share of $3.62, compared to $3.30 in the same period last year. According to data compiled by LSEG, analysts had previously expected adjusted earnings per share of $3.47.

The company's rail operating revenue for the quarter jumped 12.9% year-on-year, reaching $3.5 billion.

On an adjusted basis, the company's operating ratio—a key efficiency metric—for the quarter was 67.4%, worsening by 280 basis points compared to last year.

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