ATLANTA — Norfolk Southern is back.
That was the message CEO Mark George and the railroad’s executive team delivered on the fourth-quarter earnings call Wednesday. They emphasized how operational improvements helped NS meet or exceed the financial targets it set amid last year’s nasty proxy battle with activist investor Ancora Holdings.
“Our network is running fast, our terminals are efficient. Service metrics are as strong as they have ever been. Our customers are noticing and rewarding us with more business, and we continue to exercise strong cost discipline,” George told investors and analysts on the call. “When you put it all together, we delivered a Q4 that was in line with the guidance we gave, wrapping up a year where we delivered or exceeded on all the commitments we made.”
The operational improvements included boosting average train speed by 10%, reducing terminal dwell by 15%, cutting the unplanned recrew rate by 20% and storing 500 locomotives even as traffic increased 5% for the year.
Running a faster, more fluid railroad produced $300 million in cost savings, which was $50 million above the target set in the spring. Even though annual revenue declined by 2% due to slumping coal rates and volume, NS was able to top its operating ratio goals.
“It’s not just the financial results that are worth celebrating,” George said. “Our safety metrics improved dramatically throughout the year.”
Norfolk Southern’s overall Federal Railroad Administration train accident rate improved 27% for the year, while its mainline accident rate declined by 44%. The personal injury rate rose, however, by 5% for the year.
Chief Operating Officer John Orr says the NS Precision Scheduled Railroading 2.0 operating model delivered both efficiency and service improvements.
“We finished the year very strong, culminating with a successful intermodal perfect peak season, year over year, handling 7% more parcel volume per day with zero controllable failures,” Orr says.
Overall, the railroad’s intermodal service composite was up 7 points for the quarter, to 86%, while merchandise trip plan compliance was up 6 points, to 80%, compared to a year ago.
“We now have reliable service that’s consistent, resilient and is built to grow in the market,” Chief Marketing Officer Ed Elkins said.
Fourth-quarter volume was up 3% overall thanks to a 5% increase in intermodal traffic. Merchandise volume was flat, while coal was down 1%.
The railroad’s volume outlook for this year is clouded by uncertainty over potential tariffs. “The potential for new tariffs will introduce some near-term uncertainty into many markets that we serve,” Elkins says. “Despite these uncertainties, we are confident that we’re well positioned to recapture market share.”