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BUSINESSThursday 28 January 2016
Norfolk Southern 4Q profit falls 29 percent as volume slows
A Norfolk Southern locomotive is seen on Chicago’s south side. Norfolk Southern reported finan- takeover bid from rival Ca- quarter profit 10 cents per
cial earnings Wednesday, Jan. 27, 2016. nadian Pacific. share.
The Norfolk, Virginia, rail- The additional cuts it plans
(AP Photo/M. Spencer Green) road said Wednesday it will should save about $130
cut about 1,200 jobs this million in 2016 and create
JOSH FUNK year and the rest by 2020. more than $650 million in
AP Business Writer It also plans to reduce annual cost savings by
OMAHA, Neb. (AP) — overtime costs, eliminate 2020, the railroad said.
Norfolk Southern Corp.’s about 1,500 miles of little- Norfolk Southern execu-
fourth-quarter profit slid used track and improve tives have said they be-
29 percent as the railroad efficiency by upgrading its lieve the railroad and its
delivered 6 percent less locomotive fleet. investors will fare better if
freight. It plans to cut 2,000 “We have the right team it remains independent, so
jobs, or 4 percent of the and the right plan to ad- it has rejected Canadian
workforce, as it fends off a dress the current head- Pacific’s roughly $30 billion
winds and deliver superior offers.
value as we move through Canadian Pacific officials
2016 and beyond,” said have said they could cre-
Jim Squires, who took over ate a more efficient rail-
as Norfolk Southern’s top road by combining with
executive last summer. Norfolk Southern. They pre-
In the fourth quarter, the dict roughly $1.8 billion in
railroad reported net in- annual cost savings if the
come of $361 million, or railroads merged with most
$1.20 per share. That’s of the savings coming from
down from $511 million, or Norfolk Southern’s opera-
$1.64 per share, a year ear- tions.
lier. Norfolk Southern officials
The analysts surveyed by say they think the cuts Ca-
Zacks Investment Research nadian Pacific envisions
expected earnings of $1.28 would go too deep and
per share. hurt customer service.
Fourth quarter revenue fell “This plan will enable us to
12 percent to $2.52 billion. achieve significant annual
Analysts expected $2.59 expense savings beginning
billion. in 2016 without compro-
Norfolk Southern said re- mising the company’s abil-
structuring costs of $31 mil- ity to capitalize on volume
lion weighed down fourth- and revenue growth op-
portunities,” Squires said.
“We are making progress
despite a challenging op-
erating environment.”
S&P Capital IQ analyst Jim
Corridore said even if Nor-
folk Southern achieves all
the goals in its improve-
ment plan, it will still lag
behind the performance
of other major freight rail-
roads.
For the year, Norfolk South-
ern reported profit of $1.56
billion, or $5.10 per share.
That was down from $2 bil-
lion, or $6.39 per share, a
year ago.
Revenue fell nearly 10 per-
cent to $10.51 billion.
Norfolk Southern shares
gained $1.61, or 2.3 per-
cent, to sell for $70.51 in
afternoon trading Wednes-
day.
Norfolk Southern shares
have dropped 19 percent
since the beginning of the
year, while the Standard &
Poor’s 500 index has fallen
nearly 7 percent. The stock
has declined 35 percent in
the last 12 months.
