Norfolk Southern Achieves All-Time Quarterly Operating Ratio Record

Norfolk Southern NSC reached an all-time quarterly record operating ratio (OR) in the first quarter amid a 7% increase in operating income.

Norfolk Southern's (NS) OR was 61.5% in the first quarter of 2021, compared with an adjusted OR of 63.7% in the first quarter of 2020. On an unadjusted basis, first-quarter 2021 OR was 78.4%. The adjusted figure accounts for NS' sale of 703 locomotives that it deemed that it no longer needed. The sale resulted in a $385 million loss, which was the estimated value of the locomotives.

Investors sometimes use OR to gauge the financial health of a company, with a lower OR implying improved health.

The year-over-year also affected NS' earnings per share (EPS). First-quarter EPS was $2.66 per diluted share, compared with an adjusted EPS of $2.58 in the first quarter of 2020 and an unadjusted EPS of $1.47.

Meanwhile, first-quarter net income was $673 million, compared with adjusted net income of $669 million a year ago.

Operating revenues were $2.64 billion, compared with nearly $2.63 billion a year ago, amid a 3% increase in rail volumes.

Operating expenses were $1.62 billion in the first quarter of 2021, compared to adjusted operating expenses of $1.67 billion and unadjusted operating expenses of $2.06 billion year-over-year.

Operating income was nearly $1.02 billion in the first quarter of 2021, compared with adjusted operating income of $953 million for the first quarter of 2020. On an unadjusted basis, operating income in the first quarter of 2020 was $568 million.

"Our steadfast commitment to improving productivity and executing our precision scheduled railroading strategy has propelled us to another record operating ratio performance while we grew revenues and earnings in the quarter," said NS President and CEO Jim Squires. "Our first-quarter results demonstrate our team's ability to deliver strong performance in the face of significant supply chain disruptions.

"The reopening of the economy provides meaningful tailwinds for continued strength in both the consumer and manufacturing sectors, and our long history of delivering sustainable transportation solutions for customers will continue to drive long-term value for our shareholders, customers and the communities we serve," Squires said.