Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: THURSDAY, April 27, 1995 TAG: 9504270062
SECTION: BUSINESS PAGE: B-8 EDITION: METRO
SOURCE: GREG EDWARDS STAFF WRITER
DATELINE: LENGTH: Medium
NS on Wednesday reported record first-quarter earnings of $170.7 million, and its earnings per share of common stock also set a first-quarter record of $1.29. It was the third straight quarter of record earnings per share.
NS Chairman, President and Chief Executive Officer David Goode said the profits included an $18.8 million after-tax gain, equal to 14 cents per share, from the sale of an NS interest in the First Union office tower in Charlotte, N.C.
However, Goode said first-quarter net income and earnings per share would have set records even without the real estate gain because NS's income from operations of $249.1 million also set a record for the first quarter and was 12 percent ahead of last year's figure.
Securities analysts said NS's performance was in line with that of other railroads and reflects the strength of the economy.
"My only problem with a lot of these guys is: Where do you go from here?" said Cornelius Sewell of Argus Research in New York. He asked how Norfolk Southern, which already has cut employment and expenses sharply, can maintain its profit gains with the expected slowdown in the national economy.
Burton Strauss Jr., an analyst with Lehman Brothers in New York, pointed out that NS's stock was trading 50 cents lower Wednesday afternoon in the wake of the good earnings news. Investors have concerns about where the economy is headed and the effect it will have on NS and other railroads, he said.
NS's stock closed Wednesday at $65.621/2, down 371/2 cents per share from Tuesday's close.
Goode told a briefing for analysts in New York on Wednesday that NS expects 1995 to be a good year for both the corporation's rail operations and its and North American Van Lines subsidiary. NS expects gains in both coal and merchandise revenues for all of 1995 and believes the slowing of the U.S. economy will be modest, he said.
NS's total operating revenues in the first quarter were up 6 percent and its operating expenses up 4 percent. The result was a drop in the railroad's operating ratio - the percentage of revenue spent on operations - to 75 percent from 76.2 percent in last year's first quarter.
The money NS made from its rail-freight hauls was also up 6 percent to $999.2 million, another quarterly record and the fourth consecutive quarter the railroad has set freight volume and sales records..
The sharpest sales gain among the various types of freight the railroad hauls was in intermodal traffic - trailers or containers that move by rail, truck or ship - where revenues were up 18 percent. The second-highest revenue gain was in the category of metals freight, which was up 17 percent. Revenue from hauling new automobiles was up 11 percent.
Although coal traffic was up 4 percent in the quarter, coal revenues were down slightly. Henry Watts, NS's executive vice president for marketing, told analysts that revenues were down because electric utilities needed less coal because of mild weather this winter. Export shipments of coal also weren't up as much as NS had hoped, he said.
Goode said coal is important to the railroad but the coal business is cyclical. That is why, he said, NS is looking at other types of freight, particularly intermodal, to provide the railroad with more consistent and predictable earnings.
In answer to analysts' questions, Goode said he hoped the railroad can reach an amicable contract settlement with its labor unions this year. Health and welfare costs, which have risen, need to be addressed in the talks, he said.
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Norfolk Southern continues to improve its productivity by making better use of its assets such as the closing of two freight car shops recently in Spartanburg, S.C. and Knoxville, Tenn., which will save the railroad $8 million to $10 million annually, Goode said. With the closings NS will make most of its major repairs in Roanoke.
"It is indicative of our efforts at NS to achieve continuous relentless improvement," he said.
by CNB