Summary
Norfolk Southern Corporation (NSC) reported its third-quarter and nine-month results for 2020, showing a decline in both revenue and net income compared to the prior year, largely attributable to the economic impact of the COVID-19 pandemic. Railway operating revenues decreased by 12% in the third quarter and 16% for the first nine months, driven by lower volumes across most commodity groups, particularly coal and chemicals. Despite these revenue challenges, the company managed to reduce operating expenses by 10% in the quarter and 7% for the nine months, primarily through decreased compensation and benefits, lower fuel costs, and operational efficiencies. Significant non-recurring items impacted reported results, including a $99 million impairment charge on an equity investment in the third quarter and a $385 million loss on asset disposal related to locomotives in the first nine months. Excluding these items, adjusted income from railway operations and adjusted net income showed more modest declines, indicating a resilient underlying business. The company maintained a strong liquidity position with substantial cash and cash equivalents and access to credit facilities, and continued its share repurchase program, albeit at a reduced pace compared to the previous year. Management is focused on operational improvements and cost management to navigate the ongoing economic uncertainties.
Financial Highlights
45 data points| Revenue | $2.51B |
| Operating Expenses | $1.67B |
| Operating Income | $840.00M |
| Interest Expense | $155.00M |
| Net Income | $569.00M |
| EPS (Basic) | $2.23 |
| EPS (Diluted) | $2.22 |
| Shares Outstanding (Basic) | 254.60M |
| Shares Outstanding (Diluted) | 256.10M |
Key Highlights
- 1Railway operating revenues declined 12% year-over-year in Q3 2020 to $2.5 billion and 16% for the first nine months to $7.2 billion, primarily due to lower volumes across key segments like Merchandise (down 10% in Q3) and Coal (down 38% in Q3).
- 2Operating expenses were reduced by 10% in Q3 2020 to $1.7 billion and 7% for the first nine months to $5.2 billion, driven by decreased compensation and benefits (down 15% in Q3), lower fuel costs (down 44% in Q3), and operational efficiencies.
- 3Net income for Q3 2020 was $569 million ($2.22 per diluted share), a decrease from $657 million ($2.49 per diluted share) in Q3 2019. For the first nine months, net income was $1.34 billion ($5.21 per diluted share), down from $2.06 billion ($7.70 per diluted share) in the prior year.
- 4The company recorded significant one-time charges: a $99 million impairment loss on an equity investment in Q3 2020 and a $385 million loss on asset disposal (locomotives) in the first nine months of 2020.
- 5Excluding these charges, adjusted diluted earnings per share were $2.51 for Q3 2020 (vs. $2.49 in Q3 2019) and $6.62 for the first nine months of 2020 (vs. $7.70 in 2019), indicating operational resilience.
- 6Cash flow from operations remained strong, totaling $2.8 billion for the first nine months of 2020, supporting investing and financing activities, including share repurchases totaling $960 million for the period.
- 7The company's liquidity position is robust, with $1.36 billion in cash and cash equivalents as of September 30, 2020, and access to credit facilities, with management confident in meeting ongoing obligations despite COVID-19 uncertainties.