Norfolk Southern revenue falters in Q3

Core Viewpoint - Norfolk Southern reported a decline in third-quarter revenue, facing competitive pressure from BNSF and CSX, despite highlighting efficiency gains, strong service levels, and safety improvements [1][2]. Financial Performance - Adjusted operating income increased by 2% to $1.13 billion, with revenue also growing by 2% to $3.1 billion, after accounting for expenses related to a derailment and merger costs [2]. - Earnings per share, adjusted for the same factors, rose by 2% to $3.30 [2]. - The adjusted operating ratio improved slightly to 63.3%, down from 63.4% a year ago [3]. Traffic and Volume - Overall volume remained flat for the quarter, with merchandise traffic increasing by 6%, while intermodal volume decreased by 2% and coal volume declined by 5% [4]. - The traffic outlook is mixed, with expectations that competitive responses to the proposed merger with Union Pacific will negatively impact domestic, non-premium intermodal volumes [4][5]. Competitive Landscape - The BNSF-CSX intermodal alliance, announced in August, has begun to affect Norfolk Southern's intermodal volume, particularly in the Southeast [5]. - The company anticipates that revenue erosion from competitor reactions to the merger announcement will increase in the fourth quarter and pose challenges in the near to medium term [5]. Strategic Initiatives - Norfolk Southern executed a notable land sale of the 152-acre Mustin Yard site for $90 million, which is expected to enhance rail volumes in the future [4]. - The company maintains a competitive advantage in its domestic intermodal franchise due to its network and terminal footprint, which can deliver freight closer to consumers compared to CSX [6].