Norfolk Southern Corp. says its third-quarter profits improved 2 percent because it cut costs enough to offset a 4 percent decline in railroad freight volume.
The Norfolk, Virginia, based railroad said it earned $460 million, or $1.55 per share, in the quarter. That’s up from $452 million, or $1.49 per share, a year ago.
Analysts surveyed by Zacks Investment Research expected the railroad to report earnings per share of $1.45.
The railroad’s revenue declined 7 percent to $2.5 billion from last year’s $2.7 billion because of the slower volume and a decline in the amount the railroad collects from fuel surcharges.
Chairman and CEO Jim Squires said the railroad now expects to eliminate $250 million of costs by the end of the year, up from a previous estimate of $200 million. That’s part of a multiyear plan to eliminate $650 million in costs by 2020.
“As we move forward, we are well positioned for growth opportunities longer term and confident in our ability to drive shareholder value,” Squires said.
Norfolk Southern cut its costs 10 percent to $1.7 billion. The railroad also reduced its capital spending plans for the year to $1.9 billion, down from the original $2.1 billion.
Norfolk Southern has idled more than 1,000 miles of its rail network and reduced speeds on some secondary lines to reduce the amount of maintenance needed for those tracks.
Edward Jones analyst Logan Purk praised Norfolk Southern’s latest cost cuts. “I think they’re putting the company in a good position if we see volumes come back,” Purk said.
Coal revenue fell 18 percent to $397 million on weak demand because utilities continue to have large stock piles on hand and natural gas prices remain low. Coal remains a major challenge for railroads because cheap natural gas prices and environmental concerns have pushed many utilities to switch fuels over the past several years.
Norfolk Southern shares fell $1.47, or 1.6 percent, to $91.80 in morning trading. Its shares are up 14 percent over the past year.
Norfolk Southern Corp. operates about 20,000 miles of track in 22 states and the District of Columbia.
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Elements of this story were generated by Automated Insights (http://automatedinsights.com/ap) using data from Zacks Investment Research. Access a Zacks stock report on NSC at http://www.zacks.com/ap/NSC
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