We have another warning in the transportation sector. In March, Kansas City Southern (NYSE: KSU) warned that it would have a weaker-than-expected first quarter due to lower fuel revenues. It appears that Norfolk Southern Corp. (NYSE: NSC) is in that same boat.
Norfolk Southern released updated guidance for its first quarter. Earnings per share (EPS) are now expected to be $1.00, roughly 15% down from the same period in the previous year. At the same time, revenues for the first quarter are expected to be $2.6 billion.
Thomson Reuters had consensus estimates for the first quarter of $1.26 in EPS on $2.67 billion in revenue. In the same period of the previous year, the company posted EPS of $1.17 on $2.69 billion in revenue.
A significant decline in export coal volume continues to put downward pressure on coal shipments. Looking at coal broadly, merchandise saw growth in volumes, but revenues declined due to unfavorable revenue per unit from reduced fuel revenues. In terms of the intermodal category, increased volumes and core pricing gains roughly offset the impact of lower average revenue per unit due to fuel revenue reductions.
Following the weather-related challenges of the first quarter, volumes are expected to rebound in the second quarter, with the exception of coal, which will continue to be pressured, considering the current market dynamics. In the current energy environment, revenues for the year are expected to be less than revenues for 2014.
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According to the company:
The reduction in earnings is primarily due to lower than expected revenues, although certain expense items also affected the comparison. Revenue decreases reflect reductions in fuel surcharge revenue in each of NS’ three commodity groups, continued reductions in coal volumes, and a lower average revenue per unit related to the mix of business. Lower overall expenses were aided by declining fuel expense but hurt by weather and service recovery costs.
Shares of Norfolk Southern were down about 6% at $98.62 in premarket trading Tuesday. The stock has a consensus analyst price target of $113.50 and a 52-week trading range of $91.91 to $117.64.
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