Norfolk Southern beats quarterly profit on strong merchandise volumes

By Anshuman Tripathy

(Reuters) -U.S. railroad operator Norfolk Southern beat Wall Street estimates for third-quarter profit on Thursday, aided by strong volumes in its merchandise segment in its first earnings report since the merger announcement aimed at creating the nation's first transcontinental freight rail with Union Pacific.

"While not big in the third quarter, we started to see some of the revenue erosion from competitor reactions to the merger announcement," CEO Mark George said on an earnings call.

The deal, which drew a positive response from U.S. President Donald Trump, is still subject to regulatory clearance from the Surface Transportation Board.

Norfolk reported weaker quarterly volumes in its intermodal and coal segments.

Trump's tariffs have resulted in a slowdown in freight and softer consumer markets, affecting railroads.

Company executives flagged in the earnings call that coal prices have remained pressured with significant uncertainty around export trade, and that they expect utility demand to see continued support from growing electricity consumption and lower existing coal stockpiles.

Railroad operators' volumes of coal shipments have lagged due to weak demand as consumers turn to cheaper natural gas for energy.

Atlanta, Georgia-based Norfolk reported an adjusted profit of $3.30 per share for the quarter, compared to analysts' estimates of $3.19 per share, according to data compiled by LSEG.

Its total operating revenue for the quarter rose 2% to $3.1 billion, which came roughly in line with analysts' expectations.

On an adjusted basis, the company's operating ratio — a key metric for efficiency — was 63.3% for the quarter, a 10-basis-point improvement from the same period last year.

Earlier on Thursday, Union Pacific topped Wall Street's profit estimates on strong coal volumes. Last week, peer CSX beat quarterly estimates on improving intermodal volumes and higher pricing in its merchandise segment, offsetting lower coal prices.

(Reporting by Anshuman Tripathy in Bengaluru; Editing by Alan Barona)

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