Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: THURSDAY, April 29, 1993                   TAG: 9304290022
SECTION: BUSINESS                    PAGE: B8   EDITION: METRO 
SOURCE: DANIEL HOWES STAFF WRITER
DATELINE:                                 LENGTH: Medium

NS HOLDS LINE ON EARNINGS DESPITE SLIPPING COAL TRAFFIC

Coal traffic, accounting for nearly one-third of the company's annual revenues, continued to flag in the first three months of this year. Revenue from coal, coke and iron ore dropped 8 percent from the same time last year, the company reported Wednesday.

Norfolk-based NS took a $27 million gain from property sales and continuation of its stock buy-back program for its first-quarter performance to keep pace with the 1992 period.

"The severe March storm increased our operating expenses, and coal revenues continued to be affected adversely by the sluggish European economy," Chairman David Goode said in a statement.

"However, strength in other commodity groups, particularly automobiles and intermodal, coupled with gains from the sale of some properties, enabled us to stay even with last year's first quarter."

Accounting changes required by the Financial Accounting Standards Board resulted in the report of a first-quarter profit of $362 million, or $2.58 per share. But $223 million of that came from the accounting changes; a one-time gain from property sales also inflated the first-quarter performance.

Jeffrey Medford, an analyst with Wheat, First Securities Inc. of Richmond, said he considered the NS performance disappointing.

He noted that the property sales gain accounted for 13 cents of the 99-cents-per-share earnings. With coal traffic still sluggish and increases in other commodity lines barely making up the difference, the already-lean railroad appears to be finding it difficult to wring improvement from some parts of the company.

Medford called NS "the worst-performing rail stock over the last year and a half" - but not because of any glaring mistakes by the railroad. Instead, the company's efficiency and cost control have led some analysts to recommend other railroads that appear to have more room for improvement.

Still, NS continues to insist on the soundness of its fundamental strategy: that coal markets will revive, perhaps as early as next year, and become a growth commodity for the next decade, said William Bales, vice president for coal, coke and iron ore traffic.

"Most of the sluggishness was in our export market. We expect that to continue for the rest of the year," he said. "We still believe our traditional domestic markets will be good for us this year. We still believe the export market will be good; it will come a lot slower than we anticipated."