Norfolk Southern: A Class I Railroad Carrier
Norfolk Southern Corporation operates ~20,000 route miles in 22 states and the District of Columbia. The company mainly transports coal and general merchandise.
Dec. 23 2015, Published 12:04 p.m. ET
Class I railroad carrier
Norfolk Southern Corporation (NSC) operates ~20,000 route miles in 22 states and the District of Columbia. The company mainly transports coal and general merchandise. It also runs an intermodal network and offers accessibility to containers, equipment, and logistical solutions. The company serves major seaports, ten river ports, and nine lake ports in the Eastern US.
NSC’s association with more than 245 short line companies is the highest among all Class I railroad operators. A short line is an independent railroad company that operates over a short distance. These short line partners cover ~41,000 additional miles within its system.
According to the Association of American Railroads, a Class I railroad company is distinguished by generating operating revenues that exceed $467 million. There are seven Class I railroads in the United States:
These railroad companies form part of the Industrial and Transportation sector. Investors who would like diversified exposure to this sector can consider the iShares Transportation Average ETF (IYT), which holds 22% in Class I railroads and 7.39% in NSC. The SPDR S&P Transportation ETF (XTN) holds 2.81% in NSC with a total exposure of 7.11% to the sector.
Competition
Norfolk Southern Corporation (NSC) faces competition from marine, trucking, and other railroad companies. The segment, price, and reliability of service are the main considerations in assessing NSC’s competition. CSX Transportation is NSC’s main railroad rival, as they operate in similar territory.
In the intermodal segment, Norfolk also faces competition from truckload companies such as J.B. Hunt Transport (JBHT), Old Dominion Freight (ODFL), Swift Transportation (SWFT), and Averitt Express.
Key carrier subsidiary
Established in 1986, Triple Crown Services (or TCS), a subsidiary of Norfolk Southern, offers door-to-door truckload service using RoadRailer technology. The RoadRailer is a bimodal trailer that operates over the highway as a semi-trailer and on rail lines in trains.
TCS provides freight services to auto plants and suppliers in Detroit, St. Louis, Chicago, and Atlanta. Logistics Management magazine’s annual survey of ~5,000 logistics experts rated Triple Crown as the top intermodal service provider for the last ten years.
