Norfolk Southern railroad's first-quarter profit fell 27% because it didn't collect big insurance payments related to the East Palestine, Ohio, derailment and its planned merger with Union Pacific added to its costs.
The Atlanta-based railroad said Friday that it earned $547 million, or $2.43 per share. That's down from $750 million, or $3.31 per share, a year ago. The disastrous derailment in the small town on the Ohio-Pennsylvania border has generally boosted earnings in recent quarters as the railroad collected insurance payments, but that wasn't the case this time, so it combined with planning costs related to the merger, earnings per share were reduced by 22 cents. Last year's results were also helped by some land sales.
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Without those unusual costs, the railroad's profit would have beat Wall Street estimates. The analysts surveyed by FactSet Research predicted the railroad would earn $2.51 per share.
CEO Mark George said the railroad also dealt with the uncertain economy that reduced the shipments it delivered by 1%, along with severe weather and rapidly rising fuel costs.
“Despite these challenges, our employees safely delivered a solid service product, managed costs effectively, and earned the continued trust of our customers. As conditions improved, we captured momentum exiting the quarter, reinforcing the strength of our operating foundation and the dedication of the entire Norfolk Southern team,” George said.
The railroad's revenue was relatively flat at just under $3 billion. But its expenses jumped 15% compared to last year when insurance payments from the derailment added $185 million to Norfolk Southern's bottom line.
Norfolk Southern is working with Union Pacific to update its application to merge that the railroads plan to submit next Thursday. The U.S. Surface Transportation Board rejected the railroad’s first request to approve the $85 billion merger because the regulators wanted more information. The STB hasn’t yet decided whether the deal that would cut the number of major freight railroads down to five will enhance competition.
Norfolk Southern operates trains all over the eastern United States. Combining with Union Pacific's network west of the Mississippi River would create the nation's first transcontinental railroad.