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Norfolk Southern’s Q1 Earnings Beat Estimates

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Earnings beat the estimates

On April 24, Norfolk Southern (NSC) reported strong first-quarter results. The company’s top and bottom line beat analysts’ estimates and marked a YoY (year-over-year) improvement. The railroad’s first-quarter EPS of $2.51 beat analysts’ estimate of $2.18 and rose ~30% YoY.

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Increased revenues and lower costs mainly drove the company’s first-quarter bottom-line results. The latest financial results marked the tenth consecutive quarter of double-digit earnings growth.

The first-quarter revenues were $2.84 billion—higher than analysts’ estimate of $2.82 billion. The quarterly revenues rose 4.6% YoY mainly due to a 4% increase in rates and higher fuel recoveries.

Norfolk Southern’s cost-cutting efforts also drove its first-quarter bottom-line results. According to the cost-cutting plans announced in 2016, the company intends to save $650 million in annual costs by 2020. The railroad company is lowering its operating expenses by running fewer but longer trains, shedding unproductive assets, and reducing employee counts.

The ongoing initiative has helped Norfolk Southern minimize its operating expenses and improve its operating ratio or operating expenses as a percentage of revenues. The operating expenses for the quarter were $1.87 billion—down slightly from $1.88 billion in the first quarter of 2018. As a result, the company’s operating ratio improved by 330 basis points YoY to 66% from 69.3% in the same quarter the previous year.

During the first quarter, Norfolk Southern returned $730 million through share buybacks and dividend payments—about $225 million higher than it returned during the same period the previous year. In 2018, the railroad company returned $3.63 billion to its shareholders.

Peers’ performance

All of the listed Class I railroad companies (IYT) have reported their first-quarter results. Union Pacific (UNP), Kansas City Southern (KSU), and CSX (CSX) posted a YoY increase of 15%, 18%, and 31% in their respective first-quarter EPS.

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