Norfolk Southern sales snap losing streak in turnaround push

Norfolk Southern Corp. revenue rose for the first time in five quarters as the rail company’s efforts to lure more volume while maintaining safety standards show signs of bearing fruit. 

Merchandise and intermodal volumes rose in the second quarter, offsetting a slump in the coal business, the company said Thursday. Revenue rose 2% to $3.04 billion, in line with analyst estimates. 

Norfolk Southern is trying to turn the corner after a tumultuous period in the company’s history, capped by a failed activist campaign this spring that had sought to push out Chief Executive Officer Alan Shaw and take over a majority of the board.

“The real clear signal from the proxy fight is that investors like our strategy and they want us to deliver results — and that’s exactly what we’re doing,” Shaw said in an interview.

Shares of Norfolk Southern rose more than 7% in extended New York trading. The stock is down 12% since a derailment in East Palestine, Ohio, on Feb. 3, 2023, which became one of the most high-profile railroad disasters in years.

Operating ratio, a measure of profitability for which a lower number is better, improved to 65.1% on an adjusted basis in the quarter, beating analysts’ expectations. 

However, Norfolk Southern lowered its revenue guidance for the year and now expects a 1% increase, down from 3% previously. Shaw described the economic environment as “mixed,” with weakness in agriculture markets and housing-related goods. Intermodal shipments, a category of freight that’s dominated by consumer products, should get a boost in next few months, Shaw said.

“Retailers are pretty confident in demand” for the upcoming peak season, he said. “They’re starting to really focus on stocking their shelves.”

(Updates with CEO comments beginning in fourth paragraph.)

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