Norfolk Southern Shares Rise on Surprise Profit Jump
23 4월 2016 - 3:16AM
Dow Jones News
By Laura Stevens
Shares of Norfolk Southern Corp. rose 10% Friday after the
railroad reported strong first quarter results a week after
Canadian Pacific Railway Ltd. called off a proposed merger.
North America's No. 4 railroad by revenues reported a surprise
25% rise in profit Thursday to $387 million. Driving first-quarter
results were savings due to the company's profit-improvement plan,
better weather and cost savings on labor and materials,
specifically the company's locomotive repair program.
Shares were trading up at $91.04 Friday midday, their highest
level since December.
On April 11, Canadian Pacific Railway called off its nearly $30
billion pursuit of Norfolk Southern after it was unable to overcome
a wall of opposition from rival railroads, shippers and U.S.
politicians. Canadian Pacific said it didn't plan to initiate
further merger talks with other railroads in this climate.
Both BNSF Railway Co. and Union Pacific Corp. warned after the
bid surfaced that a major merger would likely trigger a final round
of industry consolidation, reducing the number of major freight
rails from seven to a handful.
"I wouldn't want to speculate on what the future may hold in
terms of other ideas of consolidation," Chief Executive Jim Squires
said in an interview. Canadian Pacific's proposal was inadequate in
value and wouldn't have received regulatory approvals, he
added.
"We certainly remain open to any and all alternatives that would
create value for our shareholders," Mr. Squires said.
Mr. Squires, who took over in June, however warned that the
second quarter will be tougher than the first as weak commodity
prices continue to take a toll.
"We'll be working hard to leverage our service to produce
growth, but against a pretty difficult backdrop overall," he
said.
There are opportunities to grow, particularly in intermodal --
the transportation of containers and trailers also moved by truck
-- and some consumer goods, Mr. Squires said. But volatile pricing
and weakness in commodities are driving volume decreases. In the
first quarter, coal volumes declined 23% and comprised less than
15% of total revenues, down from 29% in 2010.
In a bright spot, the company was able to charge more this year
for moving cargo as more of its trains run on time, spend less time
stuck in rail yards, and service levels improve.
"It really comes back to service," said Mr. Squires. "We're able
to deliver customers' goods in a more reliable and in a timely way,
so that they're willing to pay more."
Write to Laura Stevens at laura.stevens@wsj.com
(END) Dow Jones Newswires
April 22, 2016 14:01 ET (18:01 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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