Norfolk Southern books another charge for Ohio derailment and misses on profit again

Norfolk Southern books another charge for Ohio derailment and misses on profit again

Shares of Norfolk Southern Corp. were hit hard Friday after the rail operator extended its streak of quarterly profit misses and booked yet another charge associated with the train derailment in East Palestine, Ohio, nearly a year ago.

The company said it was also taking actions to cut costs and eliminate inefficiencies in an effort to boost profitability, including cutting 7% of its management headcount this year.

The stock sank 3% in morning trading, enough to pace the Dow Jones Transportation Average decliners. The stock has now shed 4.6% since closing at an 11-month high of $241.56 on Tuesday.

The company reported before the opening bell net income for the quarter to Dec. 31 of $527 million, or $2.32 a share, down from $790 million, or $3.42 a share, in the same period a year ago.

Excluding nonrecurring items, such as a $150 million charge associated with the East Palestine train derailment in early February 2023, adjusted earnings per share declined to $2.83 from $3.42 and were below the FactSet consensus of $2.87.

That marked the third straight quarter Norfolk has missed EPS expectations and the fourth straight quarter it has booked a charge associated with the Ohio incident. The company has now announced charges totaling $1.12 billion since the first quarter of 2023.

In the latest quarter, those included $137 million in charges related to the extension of ongoing testing and other work in streams near the site of the derailment and $89 million in legal costs, minus $76 million in insurance payouts.

Revenue slipped 5.1% to $3.07 billion, just shy of the FactSet consensus of $3.09 billion.

The Ohio derailment was just one of the challenges the company faced in 2023. Others included network disruptions, extreme weather events and supply-chain congestion, compounded by what it called a “stubbornly weak freight market.”

The stock has rallied 24.5% over the past three months but has lost 4.3% over the past 12 months. Meanwhile, the Dow Jones Transportation Average has climbed 11.1% over the past year and the Dow Jones Industrial Average has advanced 12.5%.