In This Article:
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Volume Growth: 3% increase in volume for Q4 2024.
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Revenue ex Fuel: 2% increase in Q4 2024.
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Cost Reduction: Nearly $300 million removed, exceeding the $250 million target.
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Adjusted Operating Ratio: Ended at 65.8% for Q4 2024.
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Second Half Operating Ratio: 64.1%.
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Intermodal Volume Growth: 5% year-over-year increase.
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Merchandise Volume: Slight improvement with record RPU less fuel.
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Coal Volume: Decreased by 1% with a 9% decline in revenue.
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Full Year Volume Growth: 5% increase for 2024.
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Full Year Revenue: Flat due to $261 million fuel headwinds.
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Insurance Recoveries: $650 million in 2024 related to Eastern Ohio incident.
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Operating Ratio Improvement: 390 basis points year-over-year.
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Expense Decline: $153 million year-over-year improvement.
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CapEx Guidance: $2.2 billion for 2025.
Release Date: January 29, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
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Norfolk Southern Corp (NYSE:NSC) achieved a 3% increase in volume and a 2% increase in revenue excluding fuel in Q4 2024, demonstrating strong operational performance.
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The company exceeded its cost reduction target by removing nearly $300 million in costs, surpassing the initial $250 million goal.
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Safety metrics improved significantly, with a 27% reduction in FRA train accident rate and a 13% improvement in FRA reportable injury ratio in Q4 2024.
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NSC's PSR 2.0 approach led to a 10% improvement in system speed and significant gains in merchandise and unit train speeds, enhancing network efficiency.
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The company is entering 2025 with strong momentum, planning for 3% revenue growth and further productivity improvements, aiming for a 150 basis points margin expansion.
Negative Points
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NSC faced revenue headwinds due to lower fuel surcharge revenue and negative mix within the portfolio, impacting total revenue and RPU.
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The coal segment experienced a 1% volume decrease and a 9% decline in revenue, driven by reduced burn demand and lower seaborne prices.
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Despite strong operational improvements, NSC still faces significant headwinds from inflation, fuel prices, and depreciation, impacting operating ratio.
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The company anticipates potential challenges from new tariffs, which could introduce uncertainty in various markets.
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NSC's intermodal segment continues to face market headwinds with low truck prices affecting domestic intermodal rates.
Q & A Highlights
Q: Can you break down the $150 million productivity target for 2025 and discuss the potential for operating ratio (OR) improvements over the next few years? A: Mark George, CFO, explained that Norfolk Southern exceeded its 2024 productivity target and is confident in surpassing the 2025 target. The company aims for a long-term OR improvement of 100 to 150 basis points annually, with a potential path to a 60% OR as economic conditions improve. John Orr, COO, added that improvements will come from increased asset utilization, network infrastructure optimization, and aligning headcount with growth.