Norfolk Southern Corporation (NYSE: NSC) announced Tuesday preliminary first quarter 2024 financial results.

Preliminary first quarter 2024 results

"In the first quarter, we delivered an adjusted operating ratio in line with our guidance, which called for a seasonal increase of 100-200 basis points sequentially from the fourth quarter," said Norfolk Southern President and Chief Executive Officer Alan H. Shaw. "We achieved this result despite macroeconomic challenges and the continued impact of our revenue mix being weighted towards lower-rated traffic, including international intermodal, which continues to be a significant driver of volume growth. We are encouraged that non-GAAP margin improved each month throughout the quarter. Looking ahead, we have strong momentum in our effort to achieve a full year 100-150 basis points improvement, including 400+ basis points of year-over-year improvement in the second half of the year."

"Norfolk Southern is becoming a more productive and efficient railroad. There is still work to be done to achieve industry-competitive margins and our target of a sub-60% adjusted operating ratio in 3-4 years and we are taking all the right steps to deliver on our promise," Shaw continued. "Our recently appointed Chief Operating Officer, John Orr, is executing precision scheduled railroading principles and accelerating our operational improvements, which are already yielding positive results. We are moving with urgency, and we are confident in our ability to achieve our near- and long-term operating and financial targets."

Norfolk Southern's first quarter results include the impact of a $600 million agreement in principle to resolve a consolidated class action lawsuit relating to the East Palestine derailment. Additionally, preliminary GAAP results include charges associated with the company's involuntary and voluntary separation programs that will eliminate management positions, as well as costs associated with the recruitment of a new chief operating officer, expenses associated with shareholder matters, and a deferred tax adjustment. Collectively, these increased the company's railway operating expenses by $691 million, increased its operating ratio by 2,300 basis points, and reduced earnings per share by $2.26. 

Despite 4% volume growth, revenues were down 4% due to RPU headwinds primarily from lower fuel surcharge and the continuation of adverse mix along the patterns we experienced in Q4 2023.  Additionally, lower Intermodal storage fees, persistent pressure in Domestic Intermodal RPU from over-capacity in the domestic truck market, and lower seaborne coal prices were headwinds to RPU in the quarter. While there were also adverse mix impacts within Merchandise, our laser focus on strong core pricing, supported by considerably improved service, helped deliver all-time quarterly records for revenue less fuel and revenue per unit less fuel in our Merchandise markets.

The unaudited results in this press release are preliminary and subject to the completion of accounting and interim review procedures and are therefore subject to adjustment. Norfolk Southern will announce its full first quarter 2024 financial results during a live conference call and internet webcast at 8:45 a.m. ET on Wednesday, April 24, 2024. Quarterly earnings results will be released in advance of the call and a press release will be posted on the Investors page of the company's website.

Accelerating Operational Performance
On April 4, the company announced additional initiatives to accelerate strategic and operational progress. These actions include changing the reporting structure in Operations to instill additional rigor, establishing near-term operational initiatives, classifying two hump yards as "High Performance Terminals" where the Company anticipates achieving 33% improvement in dwell time over the next 60 days, and executing a lane rationalization program.

Together, these changes are helping to increase the speed of the Merchandise network and open the door for broader network fluidity and efficiency. In just over two weeks tangible results have already been realized, including:

• Improved Terminal Dwell by 8%;

• Increased Merchandise Train Speed by 10%; and

• Decreased Active Train Count by 11%.

Expected Impact from Baltimore Bridge Collapse
In response to the March 26 Francis Scott Key Bridge collapse, Norfolk Southern is taking proactive steps to mitigate supply chain disruptions and ensure uninterrupted service for customers. Leveraging the company's extensive franchise footprint and strategic partnerships with ocean carriers, short line railroads, East Coast ports, and other transportation providers, Norfolk Southern is collaborating with customers of all commodity types. Already, the company has launched a new dedicated service to facilitate the flow of freight between the Elizabeth Marine Terminal at the Port of New York and New Jersey and the Seagirt Marine Terminal in Baltimore. Despite ongoing mitigation efforts, and depending on the duration of the port outage, we expect there to be a $50 – 100 million impact on revenue in the second quarter.

East Palestine derailment class action settlement
Norfolk Southern separately announced Tuesday that it has reached a $600 million agreement in principle to resolve a consolidated class action lawsuit relating to the East Palestine derailment. If approved by the court, the agreement will resolve all class action claims within a 20-mile radius from the derailment and, for those residents who choose to participate, personal injury claims within a 10-mile radius from the derailment. This settlement furthers the work Norfolk Southern has done to make it right in East Palestine and the surrounding communities, while providing finality and flexibility for settlement class members. This agreement does not include or constitute any admission of liability, wrongdoing, or fault. Norfolk Southern continues to pursue all applicable insurance coverage with respect to this agreement.

The press release pertaining to this announcement can be found at https://norfolksouthern.mediaroom.com/. To learn more about Norfolk Southern's commitment and ongoing remediation efforts for East Palestine and the surrounding communities, visit NSMakingItRight.com. 

To learn more ahead of Norfolk Southern's Annual Meeting, visit VoteNorfolkSouthern.com