Norfolk Southern warns fuel costs will pressure coming quarters

By Apratim Sarkar

April 24 (Reuters) - Norfolk ‌Southern said on ​Friday ​that surging fuel prices will continue to pressure earnings in the coming quarters after higher fuel costs weighed on margins ‌and pushed first-quarter profit lower.

Fuel prices have climbed sharply in ⁠the wake of the U.S.-Israeli war on Iran, adding pressure to margins across energy-intensive sectors ‌including transportation and logistics.

"Fuel is ‌obviously going to be a wild card the remainder of the year, and we anticipate it will be a headwind in the ​second quarter," said chief financial officer Jason Zampi on a post-earnings call.

U.S. average gasoline prices rose above $4 a gallon in March for the ⁠first time in more than three years, marking the steepest monthly increase in decades.

Chief Executive Mark ​George said the company navigated the quarter but flagged impacts from a "dramatic rise" in fuel prices in March, severe ​winter weather and a rapidly shifting macroeconomic ‌environment.

U.S. railroad operators have seen operating costs rise as labor and maintenance expenses remain high, safety spending increases and ⁠severe weather disrupts networks.

Zampi said fuel expenses were $31 million higher than last year and more than $40 million above expectations, surging late in March and continuing into the ⁠second quarter.

Company executives said fuel surcharge revenue was the most immediate offset to higher ​fuel costs.

Railway operating revenue for the first quarter remained flat at $3 billion compared with a year earlier.

Atlanta, Georgia-based Norfolk reported an adjusted profit of $2.65 per share for ‌the quarter, compared with $2.69 per share a year earlier.

Union Pacific, which signed an $85 billion deal to buy Norfolk last ‌year, said on Thursday it expects a surge in fuel prices triggered ⁠by the conflict in the ‌Middle East to pressure the ​railroad operator's margins.

Shares of the company were down nearly 1% in morning trading.

(Reporting by Apratim Sarkar in Bengaluru; Editing by ‌Tasim Zahid)

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