Norfolk Southern is gearing up to launch the next stage of its streamlined operational plan, with the goal of improving intermodal and bulk moves, executives said during the company’s first-quarter earnings call on Wednesday morning.
Top SPG, which stands for service, productivity, and growth, will be introduced in the second quarter of this year. It builds on the precision-scheduled railroading-inspired Top 21 plan, which aimed to improve efficiencies in NS’ manifest network in 2019.
This approach is expected to be implemented as NS (NYSE: NSC) and its Class I railroad counterparts aim not just to combat worsening rail service but also to restore shippers’ and regulators’ faith in freight rail.
On Tuesday, NS was one of two Class I railways that testified before the Surface Transportation Board about inadequate rail performance and the impact that increasing business headcount could play in alleviating present service concerns. On Wednesday, Union Pacific (NYSE: UNP), BNSF (NYSE: BRK.B), and the two Canadian Class I railways were slated to testify.
“To be clear, our first priority is restoring our service, and our entire company is laser-focused on achieving that goal,” NS President Alan Shaw said on a conference call with investors on Wednesday. “Once we’ve achieved that short-term goal, we’ll conduct a retrospective examination of how we got here.” And we’ll figure out what indications we missed, how we can enhance the process, and what safeguards we can put in place in the future.
“We fully believe that right now, a combination of our employee level and our service strategy [will restore service], which is why we very rapidly initiated… measures to expand our hiring and restructure our operational plan,” he stated. “The redesigned operating plan will improve our balance.” It will make our product more user-friendly. It will enhance the [execution] of our product” in the merchandise, intermodal, and bulk franchises.
The new strategy was developed as a result of NS evaluating how it connects its primary markets and then identifying how to streamline those connections between terminals.
“This will entail ensuring that assets flow across our network in a balanced approach so that less intervention is required for resources to be in the right place at the right time,” NS Chief Operating Officer Cindy Sanborn explained.
The proposal calls for adopting operational efficiencies for intermodal and bulk trains, such as deploying longer trains in some areas, such as the Midwest.
“What we’re actually doing is matching the train to the locomotive pulling strength and capability,” Sanborn explained, adding that employing distributed power on the trains also helps with train size.
“Right now, train length is quite beneficial to us. “It either increases or decreases our labor intensity,” Sanborn explained. “There comes a point where being unable to meet trains at many spots on a specific district may work against you.” … But I believe that where we can move more traffic with a single team, it is to our advantage.”
NS’ hiring initiative to increase the number of train and engine employees as a means of bolstering network capacity is well underway, with plans to increase that headcount sequentially throughout the rest of the year, according to Sanborn, who added that there are more than 800 conductor trainees on the railroad’s property.
According to her, NS is also maintaining the component of its locomotive fleet that responds to network surges operational.
According to NS Chief Marketing Officer Ed Elkins, the company expects continued customer demand to contribute to a year-over-year revenue increase in the balance of 2022. However, Elkins stated that NS is “closely monitoring the basis of uncertainty in the macroeconomic sector, including inflation at levels not seen in over 40 years, rising interest rates, the changing post-pandemic labor market, and continuous global geopolitical strife.”
Norfolk Southern’s financial figures for the first quarter of 2022
The Eastern United States Railroad’s net profit increased by 4% in the first quarter of 2022, with greater revenues compensating for higher expenses.
Net income in the first quarter of 2022 was $703 million, or $2.93 per diluted share, compared to $673 million, or $2.66 per diluted share, in the first quarter of 2021.
Despite a 4.5 percent drop in overall volumes, revenues increased by 10% to $2.9 billion. According to NS, a 16 percent rise in revenue per unit drove better operating revenues.
Operating expenses increased by 13% to $1.8 billion, owing to rising fuel prices, acquired services, and equipment leasing charges.
According to her, NS is also maintaining the component of its locomotive fleet that responds to network surges operational.
According to NS Chief Marketing Officer Ed Elkins, the company expects continued customer demand to contribute to a year-over-year revenue increase in the balance of 2022. However, Elkins stated that NS is “closely monitoring the basis of uncertainty in the macroeconomic sector, including inflation at levels not seen in over 40 years, rising interest rates, the changing post-pandemic labor market, and continuous global geopolitical strife.”
Norfolk Southern’s financial figures for the first quarter of 2022
The Eastern United States Railroad’s net profit increased by 4% in the first quarter of 2022, with greater revenues compensating for higher expenses.
Net income in the first quarter of 2022 was $703 million, or $2.93 per diluted share, compared to $673 million, or $2.66 per diluted share, in the first quarter of 2021.
Despite a 4.5 percent drop in overall volumes, revenues increased by 10% to $2.9 billion. According to NS, a 16 percent rise in revenue per unit drove better operating revenues.
Operating expenses increased by 13% to $1.8 billion, owing to rising fuel prices, acquired services, and equipment leasing charges.
Operating income was $1.08 billion, a 7% increase year over year and a first-quarter record.
