Summary
Norfolk Southern Corporation (NSC) reported a decrease in railway operating revenues for both the second quarter and the first six months of 2016 compared to the prior year, primarily driven by a decline in volumes and lower average revenue per unit, largely due to reduced fuel surcharge revenues and weakness in the coal markets. Despite these revenue pressures, the company demonstrated strong operational efficiency, with its operating ratio improving to 68.6% for the second quarter and achieving a record 69.4% for the first six months. This improvement was attributed to significant reductions in railway operating expenses, particularly in fuel, compensation, and purchased services, stemming from cost control initiatives and lower fuel prices. Net income for the second quarter of 2016 was $405 million ($1.36 diluted EPS), a decrease from $433 million ($1.41 diluted EPS) in the prior year's second quarter. For the first six months, net income rose to $792 million ($2.65 diluted EPS) from $743 million ($2.41 diluted EPS) in the comparable period of 2015. The company continued its commitment to returning capital to shareholders through dividends and share repurchases, though repurchase activity decreased year-over-year. NSC maintained a solid financial position, with a debt-to-capitalization ratio of 45.1% at the end of the second quarter.
Financial Highlights
46 data points| Revenue | $2.45B |
| Operating Expenses | $1.68B |
| Operating Income | $770.00M |
| Interest Expense | $138.00M |
| Net Income | $405.00M |
| EPS (Basic) | $1.37 |
| EPS (Diluted) | $1.36 |
| Shares Outstanding (Basic) | 294.70M |
| Shares Outstanding (Diluted) | 296.60M |
Key Highlights
- 1Railway operating revenues declined by 10% in Q2 2016 and 8% in the first six months of 2016 compared to the prior year, driven by lower volumes and reduced fuel surcharge revenues.
- 2Operating ratio improved significantly, reaching 68.6% in Q2 2016 (vs. 70.0% in Q2 2015) and a record 69.4% for the first six months of 2016 (vs. 73.1% in the prior year).
- 3Net income for Q2 2016 was $405 million ($1.36 diluted EPS), down from $433 million ($1.41 diluted EPS) in Q2 2015. First six months' net income increased to $792 million ($2.65 diluted EPS) from $743 million ($2.41 diluted EPS).
- 4Railway operating expenses decreased by 11% in Q2 2016 and 12% in the first six months of 2016, primarily due to lower fuel costs, compensation, and purchased services.
- 5The company repurchased $400 million of its common stock in the first six months of 2016, a decrease from $765 million in the same period of 2015.
- 6Cash provided by operating activities was $1.43 billion for the first six months of 2016, down from $1.50 billion in the prior year, impacted by higher income tax payments.
- 7The company issued $600 million of 2.9% senior notes due 2026 during the second quarter of 2016.