(The following story by Ruthie Ackerman appeared at Forbes.com on October 21.)
NORFOLK, Va. — Strong demand for coal and efficiency gains helped Norfolk Southern offset declining shipments of automobiles and housing-related products in the third quarter.
Investors were impressed by the freight railroad operator’s earnings, announced after the closing bell Tuesday, sending its shares soaring 6.7%, or $3.63, to $57.50 in after-hours trading. Norfolk Southern shares have jumped 6.8% since the beginning of the year.
Norfolk Southern has been able to insulate itself somewhat from the downturn in the U.S. economy by increasing prices, though some question how long the railroad will be able to continue the trend.
Norfolk Southern reported it earned $520 million, or $1.37 per share, beating the consensus analyst forecast of $1.21 per share. A year ago it earned 97 cents per share, or $386 million.
Revenue jumped 23.0% to $2.9 billion, up from $2.4 billion a year earlier, above analysts’ expectations of $2.8 billion.
The company said coal revenue surged 52.0% to $876 million as shipment volumes soared 6.0% year-over-year. Overall, traffic fell 1.0%, with automotive and housing-related shipments declining.
JPMorgan analyst Thomas R. Wadewitz said improved efficiency–the railroad’s operating ratio fell 2 percentage points to a record 69.1%–and falling diesel prices helped the railroad compensate for the slowing economy. He also said it should benefit going forward from cutting staff and the repricing of some long-standing contracts.
Wadewitz has an “overweight” rating on the stock.
Meanwhile, Norfolk Southern announced on Tuesday that it will pay its regular quarterly dividend of 32 cents per share on its common stock on Dec. 10 to stockholders of record on Nov. 7.
Last month, CSX raised its profit outlook, saying that rail demand in the U.S. is still robust, especially for coal and other commodity shipments. However, railroad stocks were rocked earlier this month on investors’ concerns that a looming recession portends that will not be the case.
A retreat in energy prices should help to cushion the pain.
(The Associated Press contributed to this article.)