Norfolk Southern Corp. (NYSE:NSC) is facing a tough situation after its railroad profits for 1Q2015 were unable to reach the analyst’s estimates. The lack of profits has been attributed to the recent drop in fuel surcharges and coal carloads. The situation is thought to worsen as the railroad had recently hired people to improve its service, hence increasing the labor costs. The new incoming CEO, Jim Squires, hinted that the present FY would fail to compete with previous one, amid concerns that coal would remain at low.
The Association of American Railroads also confirmed the company’s remarks. The stats from the association showed that there has not been any significant change in terms of carloads for the 1Q2015. This would leave the crashing fuel prices as the sole reason for diminished profits. After the release of the financial report NSC found itself declining in the market. In the report, the company stated that earnings had declined by 15% to $1 a share. The analysts, on the other hand, had predicted the earnings to be at $1.26. The decline is universal and has affected several other railroad companies in a similar way.
Additionally, the companies are also bearing further losses due to bad weather. Especially in the Northeast, the weather has been hurting train speeds and driving costs even higher. NSC also reported a 5% decline in revenue, reporting $2 billion, compared to analyst’s prediction of $2.67 billion. Norfolk is one of the worst affected by the fall in diesel prices, since it receives surcharges from customers on a per barrel price. The policy is that when diesel is at less than $50 a barrel, the company receives no surcharge from customers. Currently, the price is at an average of $48.57. The company would need to rethink its policy or revise service costs.
Norfolk Southern Corp. (NYSE:NSC) closed at $100.49, dropping by 4.18%. The company trades 308.24 million shares, as of April 14, with a 52-week range of $91.91-$117.64
