(Bloomberg circulated the following article by Greg Bensinger on November 14.)
NEW YORK — Norfolk Southern Corp., the fourth- largest U.S. railroad, said sales may slow this quarter as it carries fewer shipments that move by a combination of trains and trucks. The shares fell the most since July.
“We expect continued challenges in the fourth quarter to intermodal growth,” James Squires, the railroad’s senior vice president of financial planning, said today at a Citigroup Inc. transportation conference in New York.
Norfolk Southern’s cargo by a train-truck combination contributed $1.48 billion in sales in this year’s first three quarters, behind only coal among individual freight categories. Squires said the company expected U.S. economic expansion to slow, damping demand for the consumer goods that account for most intermodal shipments.
“While we still see some economic expansion ahead, it may be less robust than what we experienced in the first half of the year,” Squires said. Fourth-quarter carloads are down and revenue will “moderate” compared with a strong quarter a year earlier, he said.
Norfolk Southern shares fell $2.67 to $50.01 at 3:20 p.m. in New York Stock Exchange composite trading. Earlier, they reached $48.59, a 7.8 percent decline that was the biggest since they dropped 14 percent on July 26.
By carloads, train-truck shipments were the largest category for Norfolk, according to a company report filed with U.S. regulators last month. Total revenue for the fire nine months of 2006 was $7.09 billion.
Long-Term Confidence
Squires’s comments come three weeks after the Norfolk, Virginia-based company reported a 38 percent increase in third- quarter earnings. The railroad joined its larger peers in raising rates, even as volume remained about the same.
“Short term, we have seen some declines in intermodal volumes and I think that reflects underlying weakness in demand,” he said. “We have tremendous confidence in our intermodal business long-term.”
Norfolk Southern’s fourth-quarter automotive shipping business “will be equally difficult due to plant downtime and additional closures,” Squires said. General Motors Corp., Ford Motor Co. and DaimlerChrysler AG’s Chrysler unit are cutting North American production because of sales declines.
It was the railroad’s only business that saw revenue decline in the third quarter.