OMAHA (AP) — Norfolk Southern's third-quarter profit surged 20 percent despite weak coal deliveries thanks to rising volumes and rate increases elsewhere.
The company easily topped Wall Street expectations and shares hit an all-time high in early trading.
The Norfolk, Va., railroad posted $482 million in net income, or $1.53 per share. That's up from $402 million, or $1.24 per share, a year ago.
Revenue grew 5 percent to $2.8 billion as it hauled 4 percent more carloads.
Analysts had been looking for per-share earnings of $1.39 and $2.77 billion in revenue, according a poll from FactSet,
The railroad said Wednesday that strength in shipments of chemicals, construction materials, intermodal containers and vehicles offset a 9 percent decline in coal revenue. And railroad officials say they think coal may stabilize around current levels.
Coal demand has been hurt by several factors. Relatively cheap natural gas prices prompted many utilities to switch fuels, and utility stockpiles remain high with electricity demand still weak.
In addition to those utility factors, demand for coal exports has been hurt by a global oversupply and the economic problems in Europe.
"We, along with the rest of the industry, are in the midst of a significant transition in our markets as our traditional coal business continues to be challenged," CEO Wick Moorman said.
Edward Jones analyst Logan Purk said the railroad's numbers are promising because the volume of most commodities is better than it has been in a couple years.
The growth in shipments that are tied to the health of the economy, like construction materials, remains strong and suggests the economy is growing steadily.
Norfolk Southern, like all the major freight railroads, is also benefiting from the growing business of shipping crude oil as new techniques allow oil to be mined from shale deposits nationwide. The railroads also haul in much of the sand and other materials needed for hydraulic fracturing oil wells.
Norfolk Southern Corp. operates 20,000 miles of track in 22 eastern states and the District of Columbia. Major freight railroads like Norfolk Southern are considered indicators of the health of the economy because of the wide array of goods they haul.
The other major railroad in the eastern United States, CSX, said last week that similar factors drove its results. CSX said volume increases and higher shipping rates helped it offset weak coal revenue and drive net income up 2 percent to $463 million or 46 cents per share.
Union Pacific also delivered 10 percent higher profits last week as higher shipping rates offset weak coal demand. UP reported net income of $1.15 billion, or $2.48 per share.
Shares rose 3 percent to $83.80, after earlier reaching as high as $84.80.
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