Norfolk Southern posts upbeat quarterly results on improving rail service, volumes

(Reuters) - U.S. railroad operator Norfolk Southern reported third-quarter profit and revenue above Wall Street estimates on Tuesday, helped by strength in its merchandise and intermodal segments.

Shares of the company rose 3.6% in early trading.

Improving intermodal volumes, higher-than-inflation pricing and a better operating ratio have helped the railroad shield profitability even as the freight industry continues to go through a downturn.

Atalanta, Georgia-based Norfolk Southern reported an adjusted operating ratio of 63.4%, representing a 570 basis point improvement from a year ago.

The ratio is a keenly watched metric that indicates operating expenses as a percentage of revenue. A higher operating ratio reflects an increase in costs.

Severe weather events in the quarter posed service challenges at railroads to which the company has responded positively, displaying operating ratio improvement and positioning itself better to capture volumes off highway.

"Our team drove productivity and grew volumes while demonstrating resiliency in dealing with weather challenges," CEO Mark George, who took over the top job in September, said in a statement.

"We delivered sequential and year-over-year margin improvement putting us on track to achieve our adjusted operating ratio targets for the second half and full year 2024," he added.

The company reported operating revenue of $3.1 billion for the third quarter, rising 3% from the previous year, beating analysts' estimates of $3.08 billion, according to data compiled by LSEG.

During the quarter, the company closed two railway line sales, resulting in cash proceeds of nearly $400 million and gains of $380 million, it said.

On an adjusted basis, the company reported a profit of $3.25 per share, above analysts' estimates of $3.11.

(Reporting by Abhinav Parmar in Bengaluru; Editing by Maju Samuel)

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