NSC - Earnings call transcript Q4 2021 | Norfolk Southern Corporation

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Operator

Greetings. Welcome to the Norfolk Southern Corporation Fourth Quarter 2021 Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. pleasure Meghan my of Senior now Relations. Investor is to Achimasi introduce Director It you. Thank Ms. ahead. go please Achimasi,

Meghan Achimasi

as Thank uncertainties you, forward-looking SEC with good may to call, of subject operator. our And discussion risks for differ we we during note to risks most quarterly results. those will a today's materially that annual from important. full make Please uncertainties and the certain and statements view actual are morning, which and and everyone. refer Please filed reports

Our XXX charge $XXX measures nscorp.com a along million method including two locomotives a presentation measures. in the with $XX charge an our the related in and for related recall are available the XXXX, slides in quarter at of of million to impairment non-cash GAAP Investors reconciliation first used quarter equity comparable lines, during section XXXX to of of the those third non-GAAP Along investment. XXXX adjustments today sale to the

We is will It A CEO, be call comparisons the Chairman charges speak Norfolk to posted after Southern's download those year transcript introduce Squires. and full and to my will pleasure full now Jim from XXXX. excluding

Jim Squires

to Financial I’m Officer. fourth Chief by Chief Norfolk And XXXX earnings Ed quarter Elkins, call. Officer, Operating everyone. morning, Shaw, President; Good and Officer, pleased George, Mark welcome joined be Sanborn, to Southern's Alan Cindy Chief Marketing

guide And as different as his demonstrating our Ed to my part and for build Alan Marketing to adapt at over headwinds and across reduced we tremendous of We've effort industry-leading associated plan. in years, ratio our we our with plan shareholder into recession return. and by the start established plan. marked over a global a multiyear pandemic on headwinds form operating and XX% the XXXX NS to basis gone exceeded operating total points significant X and effort, XX%, for year we've freight thanking that's a produced achievement the return billion our role our goals, have company a the then the chapter the results. congratulate I Through next our dividends. me as our first is by as nearly Officer acknowledging of and the rock fulfillment entire to to course a In look originally position. overcoming of serves Alan? pinnacle year of share Let I'm be albeit President. proud It's poised new new team pleasure and dedication the Alan our that, to write volume commitments. the welcome discussion quarter his a to team With on to record with our and upon our than humbled book. given very ability anticipated, momentum to the ratio We and strategic commitments, operation. past upon this solid now and financial the serve innovate of the a full record appointment XXX of productivity success. fourth our leader. the and turn X-year so and and grown deliver levels our delivered EPS The targets in full our of by back We're right to $XX repurchases shareholders detailed by our met its team in formula is Chief

Alan Shaw

Thank you, Jim.

to our the I'm the plan. multiyear with Jim quarter. the in pleased share we progress And XXXX noted, fourth culmination of As represents you made

fourth XX%, revenue ratio X, earnings our XX.X%. growth expense quarter share As of per producing you Slide results operating see of of on X%, increase in our a an XX% outpaced from improvement record and

basis full offset year the which operating XX% We of year ratio expenses. XXXX delivered XX%, improved improvement. points for the revenues the XXX year, full the consecutive operating sixth X% adjusted hallmark result, our an and in the more For of over full than increase improvement year,

And phase both for will our as to operating of more our you'll hear our details plan on on from the productivity next of share framework Cindy serve excited work thoroughbred continued the and are that service, and We results. progress to Ed iterate growth. about

Cindy. first turn review to our of for Now a Cindy operations.

Cindy Sanborn

Thank you, Alan and good morning.

fourth the of challenges acute tight quarter, During several from the created headwinds labor parts network. across operational market our

workforce to did we initiatives working to leveraging for to discuss the taking needed remain to overcome hurdles, we on efforts but productivity the are our service below today you customers. where quality our with this. it move approach strategic be. I'm was bear we While going freight focused fruit, planning significantly These to change

this Slide GTMs were X, volume the as while handling in in were gains mix evidenced X%, in XX% transportation critical were volumes to pronounced reduction of locomotive unit up productivity workforce business were active in well. decline The as quarter starts in changes X%. by and length of by to the X%. Turning weight Productivity train count crew the of key contracted X% were X%, X%. a formula by increased growth train There elements growth

focused the trains, the in fuel improvement drive locomotives efficiently As X% efficiency. kept those helped we on deploying which slowed, network larger on the

I entering have As We degradation improvements ago, And COVID quarter, related modest holidays. in of as the sporadic absences the December. a were have you where they than we're been ground first mentioned as our see few of X. fluidity doubled can from regained network on over more moments a the amount Slide

expect to the we customers get and Let priority me top our our clear, drive improvements there. is service will and need be

to performance. well as We are initiatives leverage an hard working to pipeline very our hiring increased drive as productivity

recruiting Four, streamlining Next, including: on and board. pay trainee trimmed two, We've do of and onboarding have as up are have and to identifying to process. on of to such We pursuing realigning while and levers offering ramping And the existing and process incentives improve facility volunteered lengthening one, finally additional hiring regard. solid training to a X. hiring made districts first of the resources optimize hiring; using and I'll shown our crew retention Slide training increasing all the them hands it's productivity. process including Number the fungible. a basis the variety Three, our progress key X across from provide crews, in details progress made resources slide, referral increase incorporating from so the five, employees we're We've trains. in and number company and And combining support as to to signing, principal bonuses. candidate weeks pace hiring more we provide techniques crew deck. significant this making on on on more pulling

challenge. bases getting employee same expect see second bearing that employees expecting train attrition critical to we boarded crew are Our during trainees conductor We These as to times people that to and And staffing over will approximate On areas. fruit still we've expect in are Though, relief and of high QX, we promoted. on is levels to the started do X in to increase. XXXX of in as became are month in January engine additions which per and XXXX some creative levels. when number start promote are any certified and GTMs average resource train quarter, XXXX, service the expect XXXX. the improving and those trainees experiencing trainees throughout in we rising more engine than of

the productivity service a growth, is to improvements drive rebalanced getting gains year to at looking our the So plan absorb volume while whole, leverage to quality. workforce as when in

intensity, This improved Let's been TOPXX since key discussion a to the when unpack weight our We've continue XX% going mid-XXXX, more success and has little Slide fuel locomotive our respectively on launched. and reduced and for improved was productivity a XX. average customers to labor length train XX% with growth. will be so and efficiency, improved trains, Larger a provide platform productivity, forward.

in to continue the efforts have pipeline We trend. this

the quickly by extensions, of XXXX, on front. the we launched infrastructure fourth the on throughout of Most X service work others XXXX. completed will First quarter. completed was and In which be one citing in

capital our program Second, high ongoing. very DC to is performing and locomotive AC efficient modernization

end and these purpose In road of to improved trains. greatest at to their capable and composition reminder, life, aid fleet XX% of Both power we running As AC technology. rebuild a distributed fleet of is with while XXXX, program nearly is this dual them larger XX% engines latest a to power. the converting the our of our

well XX. calling PSR-based In Slide plan operating initiatives add to off growth already of XXXX, which to operating our Lastly, are be capacity our the must aligned we kicked which generation to and we SPG. TOP me have existing brings trains next plan

the of Operating and Thoroughbred familiar you TOP new or a generation equally Plans, service our may new productivity era While operating SPG of next important plan. facets of growth represents NS’s X with legacy be

productivity service, potential. that made these era and are because our We reach in be each to on need to we improvements of areas embarking next significant growth this full have

we of approach take a We the historical to what plan in possible at development are up order taking look when constraints a explore remove our fresh business. ground and the to is

We operations learned the and set updated to Thank it rich forward year. execute to in throughout first to process. And X TOP We years are over customer-centric PSR keeping now I'll leveraging a data under of as look the turn you from lessons using unfolds a XX. you this Ed. collaborative initiative

Ed Elkins

morning, Thank everyone. you, good Cindy. And

liquids. offset our and in activity to for on I more Slide to across up for XX, favorable execute year-over-year the beginning revenue our for customers XX% Chemicals crude demand record demand $X.X drive results all quarter. billion, value strong our merchandize, reached driving We've by Merchandize increased particularly both improved year-over-year, conditions for XX last fuel demonstrates ability drive Now quarter. pent fourth up unit further and as revenue Metals growth fourth growth unit in the demand down in strengthening the highlight per manufacturing than oil by fourth decline less was in from our Total Partially growth, industry with was year-over-year contributed level will high our franchise, due per as the by we and to X% fuel of Revenue was unit Gains in of for for for XX% Within when demonstrated revenue commitment growth X% demonstrates products, markets. all billion X% quarter rising sustainable the up to shareholders. merchandize extraordinary contributed fourth increase volume disruptions demand. the boosted continuation ongoing X% the X% XXXX were record metric chain strong to which on network fourth velocity market global Volume impacted revenue shipments the quarter. yield in markets XX growth economic this in comps a of the revenue led the Pricing $X.X reached which automotive and was less slower quarter growth. quarters, year-over-year slower in volume offsetting the revenue chemical velocity. supply markets business of our also our strength the in across sector. our sustained and to drove our and gas strategy natural per these this coupled This decline quarter. year-over-year per volume with to total price of the unit

our despite resulting up continued volatility, grew price This increased revenue drayage negatively the X% and that these exceeded Revenue revenue for decline capacity stressed by Strong less Our unit quarter, storage and chain and record XX% XXth pressure in face headwinds, both we consecutive markets. affected chains imports supply in supply international to our and intermodal a fuel quarter. fuel elevated was But Animal revenue domestic availability. and volume demand franchise from consumer per of the and the year-over-year. gains. driven achieved year-over-year, equipment

near Revenue Now, driven revenue and fourth by a increased levels the supplied turning record increased was in per demand market. XX% year-over-year higher tightly quarter, price Coal which coal. XX% reached in and year-over-year. gains unit to

coal this of strong Our are increased to from market. high coke quarter production. higher export competitiveness U.S. mat markets coals to continue benefit of the demand the on in Shipments seaborne support domestic steel global prices, and which particularly

$XX.X If you'll XX% turn revenue billion to X% XXXX year Slide on growth. full grew XX, to volume

activity revenue bottom per in increased We record was both per growth strong fuel. and revenue growth merchandize all lines the the reached truck year-over-year Both our due levels and steel by prices experienced favorable price and construction of but higher and benefited revenue production throughout conditions have pandemic to And to improvement and the gains, chain year. seaborne franchise, higher from and less storage on up coming tight out demand for were line. product leveraged recovery. of fuel economic of particularly favorable tempered revenue markets in supply our of reflecting activity. our unit growth charges, coal posted unit metals total case strongest for drive the conditions consumer All associated was higher per Coal our where metrics Intermodal revenue and as gains, Revenue we've price elevated capacity. of evolved, driven pressures business, with markets demand by unit.

look environment ahead and develop our progresses. we're working ability XXXX sustainable customers leverage throughout our our on chain increasingly demand grow. our conditions and committed for We're let's on the economy, We partners opportunities conditions, the Now, Despite for ahead. business to market will that to with rail as optimistic the for focused Overall, maximize to strong. continue service XX. customers solutions value confident our will channel to our including in remain our year to ongoing deliver network We're supply velocity that XXXX. the Slide to outlook improve uncertainty

to year fluidity, implementation network the build sequential And be the for This New customers our growth. their product strong will provide with Market expansions that follow development the increased our As several expected allow both additional future opportunities. announcing favorable, efficiency volume customers are Cindy will for create of customers Year pattern value that merchandize TOP a same their explained, franchise and trend. and to improvement hiring as SPG to deliver will for plan and progresses. capacity and our platform our conditions will and

These industrial and sharp U.S. a inventory volumes our associated environs to for for is record particularly consumption in X% following than cycles drive units on XX.X cut improve robust to XXXX. continued favorable, that’s most X%, spending approaching expected of economy will is XXXX the pre-pandemic grow growth expected vehicle year, also million levels new Residential despite more projected supporting in steel expected in second for of this industrial which recovery plan. expected goes to In addition, positive production our This XXXX, impact of demand to on XXXX. markets, of forecasted markets. X% grow markets. light automotive is well for our our the intermodal which to in several the XXXX. production year, Demand increase construction ease our in and reach a in market our to elongated is Durable to creating gains our have continued this metals headwinds is will for near is a intermodal ability favorable supply capture year, This consumer growth support replenishment remain and XX% goods tight congestion, opportunities. And markets our chain headwinds more with our top franchise. the growth. impacting of furthermore half are both

guarded Our is Seaborne in in near outlook prices of some easing despite shows XXXX high. signs growth potential the coal of term. XXXX the opportunities for more as drivers some of remain

determined utility the In will remain coal. prices, be production these Expected high. while to coal have increases lower will gas However, production by export associated to subdued natural and going for decline, begun upside the demand optimism global they likely higher in that pressure into New Year. markets, as on contribute downward coal with levels leading been prices there's the seaborne strength supply

Now Mark, pushed customers. pandemic to NSites highlight before to our I of of in manufacturers to supply chains and I redesign XX. portal new inventory their it on over would like favor The to Slide certainty has supply locating closer turn

we promote our identify meet transload for business it portal forward our grateful Our industrial in drive and for It efforts. the we driving helps to value NSites to industrial with search look customers rail, importantly, their our sites users help our comprehensive easier create our innovative more growing facilities allows in decisions And We're for informed NS are a search best-in-class our Southern. to parameters an And on business serve. unique with we on communities these our investment search at jobs. make sites and forefront is business do network. to the improving that makes customers provide continued service excited long-term of to that a this activity to customized our will economic customers And needs. XXXX emphasis and value customers for launched and they solution development support product expand industrial their tool to strong Overall, partnerships. development team is them customer and shareholders. create that on quickly and Norfolk and for our this

Mark on Now I'll update turn our you. it over an financial for to results. Thank

Mark George

Thank XX. you. Slide Starting with

As Ed of improvement points noted, X% to revenue $XXX free X% operating set than decline. offset XX% led or expense, which coupled QX we XXX for quarter fourth operating ratio $XXX Improvements operating led increase a full to was record up volume And XX% in the productivity a despite growth This basis in of a flow, XX.X%. or RPU, strong more another XX% record million. with year. with up for income million of to cash record an

Slide down operating drill a to expenses Moving XX. of on

operating While $XX or fuel is million, grew or up increases. The million entirely for price. fuel is $XXX almost driven X% by million expense apart It headwind cost $XX X%. from less than

and to year-over-year rents drayage talked with associated terminal our of same see the services the expenses hourly higher technology we going associated inflationary call. to driven contractor higher You'll lift on drivers with to about as see alleviate congestion more majority associated $XX forward primarily QX Higher Chicago, and pressure spend expenses strategy, used on the with million of continue purchase we with drivers in the technology Conrail, by labor it expense availability. increase relates

of year-over-year. headwind the more benefits. $XX quarter X%, is rates note and pay all And other in compensation $XX increases comparisons claims incentive down savings X% It Moving that were than expenses are million from in and offset but Meanwhile, up million. compensation overtime. Materials in on and a you'll headcount. the to lower

P&L see below Taking gains fewer lower but Slide also at $XX $XX insurance, non-operating you the of XX. the properties. net on part rest million from other to income company-owned is that income, by due to op look will dispositions unfavorable year-over-year now of of million, in a Turning life returns the

Our increased supported XX% repurchased XX%, while last was effective at in tax to we earnings share our and rate X.X similar the quarter. in grew shares in the income expected range by million year. Net XX%, per quarter by

Slide full year highlights on to Turning XX.

record $XXX demand and As both brought charge to operating which for across income are rationalization the locomotive highlights ratio This by dividend and results or doubled for $X our XXXX, through repurchase in results. to supply an rate, program, flow we distributions higher allowed cash of all XXXX, additions had XX% up our sharply record down compared the these milestone profitability the company. chain disruptions. or XQ. reported a in to markets XX. increases results, XXXX XXXX over responding noted excludes Slide out, $X.X XXXX share due increased while augmented to for company 'XX And adjusted issues a opening our increase as his free again Jim into than XX.X%, by record basis wrap remarks, we for than free million and guidance less $X.X impairment XX% on will for in adjusted Free year-over-year XQ year-over-year flow the is in charge is year. Increased non-cash carry up billion I'll And we in Alan. enabled $X.XX the repurchase with billion, in results That compared will versus more XXXX. The We billion about We back we reminder, up just our continued and XXXX in strong the that while shortfall the income we X produced our XX% lower I'll million our points Expenses revenue were conversion And changes. guidance of EPS half a the provided. increased a spend. in operational cash shareholder net timing XXXX. yield year. up over that we share with XX%, Rounding X% transformation in strong to Property it a to resulted for over $XXX cash our record increased XXX billion improvement with related improvement. that, year-over-year in at over strong out the than XX% for increased XX% line as to continued XX%, market point dividend operating turn in $X.X diluted flow

Alan Shaw

Thank Mark. you,

wrap up with Turning to our Slide XX. expectations. XXXX I will

our manufacturing expect indicators, heard we of to drive and consumer activity you based on assessment markets growth. Ed, As from to economic related

and its deliver expect revenue resuming solidly, We increasing total upper merchandise and to intermodal secular with single-digit growth decline. long-term coal, both

operating and growth. in support additional efficiency will leverage service to our of drive Southern’s our We SPG and and our into accelerate TOP develop plan recovery the customers' new organization Norfolk

this of to From and year lot projections, expect a ratio demand the SPG more in productivity this and won't perspective, Investor to expense and Day. OR the quarter robust second on there. improvement half hear this to year. half basis based about improvement performance stronger our revenue, upcoming of XX the greater and You'll second points XXXX our with and XXXX, we first TOP current With operating efficiency back of than in service in an achieve we of we look positive half similar driving stop momentum expect

to the using leverage addition, $X.X expect In to remaining to of of anticipate repurchase payout cash billion flow billion. expenditures XX% in range capital ratio $X.X We a XX% range and and financial we shares. dividend

and attract more from ahead. year optimistic are heard profitably Cindy, Ed initiatives about Norfolk the advance we Southern than service, business and And in productivity to you've we'll growth to ever. As Mark, productivity

line are Thank customers to sustained open the We Q&A. value your you our efficiency Operator? create to for shareholders. We'll for committed attention. improvements for further long-term and now

Operator

of Oglenski Barclays. line question. And question you. now comes your from be Brandon with a session. proceed with first Thank Please [Operator question-and-answer We’ll conducting today Instructions] our the

Brandon Oglenski

analyst a heard everyone. with Alan, moving I I Good up on this that is I from well out Jim price? years? that have last taken and efficiency career. approach. few coming here. balances guess -- be SPG can congrats, quite an the you And but us PSR meeting, to Hey. a guys journey guess view as in and how morning, congrats was this cost does And there how you this And growth going the differ tell

Alan Shaw

of our service merchandise This journey. products. it. plan. focused going It's on network. be comprehensive Brandon. is all morning, It's PSR largely of It's a We implemented TOPXX was on focused next to a the our our Good generation really of continuation

and are and resource to trains, field expecting grow. ourselves to We delivers really to better on can longer output operating the going going challenging balanced us have plan ourselves of demanding an deliver which room to an a our network efficiency, basis. is execute give that's a that promote It's going daily to that

So our well. as it's going to product improve service

Brandon Oglenski

Thank you.

Operator

from comes Jordan question Next question. the procced with of your Please Sachs. line with Alliger Goldman

Jordan Alliger

Yeah, hi. Good morning.

revenue the do as see year? the you. you curious yields, you moved year then overall of else. particularly Thank we and everything per mix throughout as has about of and look opportunity yield price guess, certainly you how around a, account forward the the about think how and sort coming with price, sort tightness I And into do carload over taking Just continuing? think

Alan Shaw

lot Thank you our The And demand. consumer for a on customers. we there an wants U.S. intend And the it's the delivering inflationary There's to U.S. grow. value out to environment in of question.

progresses, on. year expect price that as of balance to moves and a as going accelerate we we're the year So volume the see will

Jordan Alliger

Thank you.

Operator

line of the is question question. next from Please Wetherbee Citigroup. with proceed your Chris with Our

Chris Wetherbee

into dig Good relationship Great. bit to -- And a Hey, wanted that morning. and I service congrats volume thanks. deeper. guys. little maybe guess I

or do volume be both of and you unlocks in first as of what a will sounds bit see a it side opportunities or forward. first? half muted, of sense volume the us And expect terms the service to the in improvements year, you service of those give maybe like Can little side. the means where of see some improvements to goes going but it the you're on some that opportunity hit So

get is bit sense revenue little the upper sort of better included growth for a much year? of to of want Just single-digit volume a in target that how

Alan Shaw

talk you of about view trajectory you the efficiency can and take the don't So, the what Ed, And then, piece operations implications. as year? tackle why throughout the service you maybe revenue improvements for And that?

Cindy Sanborn

Yeah.

Okay, Chris.

really help in that service had of improving our those for availability We to in attrition locations. accelerated increase us to place. with And that's a focused we we our from So locations several service. crew really on standpoint, resources largely are network had of the core pipeline some

trainees now, XX% whether out core In in in aimed at are field, or classroom the fact, the right of locations. conductor we those have

half is onboard measures QX as the SPG well we the our that of as a that our the start TOP I think and an the would and as add I accelerate. a as back into service also look they rest So kind and at we of see hiring we'll plan. take accelerant in well, improve plan have at take product service look our service to

and also for As how we and helpful Alan is which noted, a operate our balance will railroad executability, length the also improve be as train we through crews think catalyst.

Ed Elkins

consumer, deliver to believe U.S. we're We as that us our a bode will as strong going a and them there's we going XXXX, continued have are right deliver inventory really look we of sales have we payload I've there move what we for already progresses. And to out it. they're for exception ratios. commodity capacity durable we healthy low more able to of able to now out that more said with markets. more the when is to demand, demand customers and And to our There's record a goods year the customers, very particularly lot see value be coal, in well for as that

Chris Wetherbee

Okay. Thank Appreciated. you.

Operator

is ISI. question Jon of the next Chappell Our Evercore Please from with question. line proceed your with

Jon Chappell

trying of these things with together. tie Thank to you. some you, been sticking Ed, I've

high clearly you're It the quarter, a to sounds First again, and trainees. from just that digit the kind volume? second a mid-single think of that's plan up and digit ramping we not maintain you're volumes? inflection to capacities like RPU an there's the all, rightsized the clarification high to now the months. secondly, willing second here, half -- you And from or single premium the revenue, move single-digit the selective Are an at of should mid-single-digit of an hope fluidity improve you're employment standpoint more with to carload of year being more that attempt margin maximize the for in a in right few mix maybe in more

Ed Elkins

to very serve is. good every stay our really have markets. side, it's to the We of able intend I of both There's which do bulk intermodal close deliver includes to consumer And And and those be strong Yeah. products to what our industrial a our where think progresses to handle going the automotive and where the value from the on on we more those customers, again, our and and demand side, market franchise. markets and year product we that or customers is, strong portions we whether pretty to demand course, demand as pretty those business we more on we're have markets currently. in to

Jon Chappell

on just to maybe needs get pace network demand not you are But it taking size in get order the much standpoint? be as where to labor to the a from that freight service as right and

Ed Elkins

said to -- we're the to to needed our that's to that's going a run that get serve. offer be SPG -- Well, our I frankly, running to across Alan for the we The network we going think way need. going and markets Cindy, with us more all everyone service growth through to long-term and value productivity platform that deliver they the customers opportunity expects able

Jon Chappell

guys. it. Thanks Appreciate

Operator

Please with question Morgan next question. your line proceed Stanley. from is of Ravi the with Our Shanker

Ravi Shanker

of little of Thanks. of 'XX? more core bit what how unpack of RPU, especially the you of kind for of basis the environment in about kind expect relative the Can impacting a on half do think we Thanks. price kind pricing 'XX? Kind accessorials fine terms do in back you a trajectory of just

Alan Shaw

at and of economy. that demand value the indices we U.S. inflation as the clearly lot out customers, our we're to our them global continue of deliver and us be and in there, forward deliver for value our able is our Price is to to look a lot There's you company of deliver a and an able plan. on. intent long When substantial are customers. shareholders. servicing And focused there's we're a our focus want we're combination recipe the the to portion -- going to term. currently, going of in value that's It to And we the to

Ravi Shanker

you. Thank

Operator

the with proceed JPMorgan. Our question. your Ossenbeck Brian from is next Please question line of with

Brian Ossenbeck

Thanks the morning. taking question. good Hey, for

to things But start back secular good I And to place the engaged of be So an Ed. quick a to potential on through? see equipment this 'XX, year shortage hear to hire up that that. given to some you're Is just levels a I could the And for inventory on also to there maybe count are else labor. restocking issue expectations. low, then What balance? and just shutdown. get else across can that of coal balance you, follow or maybe we maybe you for or that in probably side utility Thank a kind facilities lot work solved trying a maybe all that volume go as hear has on for Cindy. pretty trying coal by can be everybody going right you're more couple seen labor We've a decline you. on have not industry. the

Jim Squires

and start think on intermodal, question I was there. I'll first your

to to a part reconfiguring by ourselves customers really also That our network the we've some of And States done that we our hard adding spans and United not to very closely are the more customers. working working make value includes efficient intermodal on only We terminals, with very, our the of deliver course, in are chassis of side. everything global economy. but

it their productivity deliver on are more wants us develop able additional the on that value help able not but also become warehouses help and value way, to velocity us move that are volume As the to able absorb network. is throughput to deliver side will and to only imports more more other fluid, port as of more them. in on the we're our end, with improve the Same true side, own conjunction

your I coal. part? question mind was Would that think you second on repeating

Brian Ossenbeck

Sure.

of where now. you given could restocking some the be. rest utility here where the Obviously, the But in lot see throughout side how demand depends stockpiles on much utility a scenario are Just right there the there a be U.S. year? will

Jim Squires

it utility's And to that I we're expectation as be a goes. trying inventory and frankly, replenishment of when going the going opportunistic really And would for dictate simply are stockpiles characterize utility Still arises. demand. position pretty coal but where low. it's be also is to realistic appetite to weather for our combination on the very

Brian Ossenbeck

guys. you, Thank

Operator

of question. is question next with line Wolfe from with Research. your proceed Our Group the Scott Please

Scott Group

volume Hey, costs thoughts the some the some on XXXX, for some thanks. extreme Mark, and then, the when just Good of morning, items guys. on maybe of individual outlook. Any thoughts weakness better? start year the to it gets just And

half second on there? just you're would helpful. expectations some on color sales. assuming in got you've then Maybe comps what margin terms I think gains first on of or some half be anything lastly, And tough

Jim Squires

about I'll volumes off and talk year. start start to the

we've probably really demand I so was holiday combination since cetera, et with COVID think that the truckers. fell there was think U.S. out some that every downstream around block some on slow to A or holidays. seen weekend the Intermodal a particularly, start. either up railroad a weather speak. and upstream of and that ramp impact, was But I warehouses, of a slow

the side there's bulk every demand against On working it. of put we're on lot business, out the of the And available there. commodity side, resource to hard a

Mark George

from we're going bit inflation And basis. to Yeah. that's And I it's in probably typically, area XXXX. little coming items, XX it being being lower be you be going to and wages, up a Scott, in of the ask on largely guided [ph] where to have being same offset ended to assumptions. I incentive comp by some per about for is in comp the And tailwinds cost will of here expect say to would that a half, XXXX that say vicinity year this would think employee that I just to past get in back but out

So and had best ramped the services to line. think that's probably Purchased about ben year. the comp way the throughout

As we going started told out some dynamics of in were things being light pushed that on. the with we you, were There XXXX.

good say of at XXXX off So to half But that growth Similarly, I there. assume that the for to XXXX fighting there's kind could of that if would inflation on back materials, rate as run I be of a look expect XXXX you there. would we're we would great. where have base we avoid up ended

I creep rents. I with of half kind of similarly, the with there. where bit at think we're velocity the would rents here And levels And So a back rents, on of now. ramp pressure expect little network our the puts current looking toward year down, it

As on increase, the to be that. velocity more volume, which will starts replace taking we'll

So levels. rents here I from think pretty QX flat

perspective. I So margin from And think helps. hopefully, that a

going And start say. we're sideways sequential to network starts be we're As the -- I probably to going said, there year. from Alan onboard to see more the some here volume to as improvement come should volume,

Scott Group

clarify say you just missed you sideways, meant? you when maybe what can Just I

Jim Squires

We XX.X% of Sideways posted. the here QX. similar a there OR We've QX we No. something in OR. levels from got had

those when ratio. a we're in to start going think I go taking that's until bit we levels And little sideways that on operating see more improvement the from we'll volume.

Scott Group

Okay, helpful. Thank guys. you,

Jim Squires

Thank you.

Operator

of Our Hoexter comes Ken from next question with America. Bank

Ken Hoexter

and congrats great. as well. Hey, always Ed the next I and Good morning. trips, on Alan phase. Jim, enjoy to congrats the

COVID? conflicting up. then, I out negative numbers CapEx that for the mentioned storage want and of we do the are to plan? on just down look pull locomotives pulled and you crew expect kind you demand still left? just you still strong the of those Ed, Can parse those volumes is as you volumes, weather plenty of by Should cadence to there that those still you your as clarify have or with see first then ramping shortage, on Or kind at Cindy, kind side quarter or there. What just And Volumes Alan the the storage. Just And of from comments. there? understand is -- to volume XX%.

Jim Squires

closely and the this our volumes close continues. very with quarter staying as this the start I'll Sure. to has evolved month volume as and customers very comment. watching We're

think going continue. And we really value. see strength up the seen we've see to I to resources where side deliver side. intermodal on acceleration so to help we're the bulk putting of additional on us far SPG we're that continue relative the TOP against that's And expect demand

Cindy Sanborn

have out Ken, them where kind we would case. really the from on locomotive The terminal as We of in sort were that units operating a would would And prevent from outbound call in. protect environment we of coming trains on line what because its dynamic some storage of inbound question. were pulled we had kind impacted trains a the with that time engines outage

into different backlog lay And the so terminal, we the we activate units. would And then then came as down units.

variability it's a process for And have So to with to help time time. on network have us it from deal that good the we was dynamic. to fairly us

of to that all not but So we those in more do activated still And storage activate to are need done on bit essentially, there units. have would we units them, little work so. we a

Ken Hoexter

Thanks.

Operator

from proceed Next the question. Capital Walter your line question Please comes Spracklin of with RBC with Markets.

Walter Spracklin

much, Thanks very morning, Yeah. operator. Good everyone.

standard we block Curious you tackling your ratio if operating improvement year would level So XXX Generally, through basis a that's do and points. that operating that something of XX see upside you closing you pricing you're it. kind steady and the on ratio that, some the railroad. more state annual better if do major on improvements that to a with of XXXX normalized that's any that's XXX Are hold on that to in basis or some that? in the the of kind of now to you and the XX level? kind your and achieving expect given initiatives done that of here see that view of to Or really level to something just of than allow points achieve take gap

Alan Shaw

SPG, the going going the then of going very is is year. of resource year. of you to OR, what going going the to grow in guidance the What service provide just Walter, value of half it's of operating that market of about particularly implement and top to allow fix place, in this to to in some us less gives terms It's going is the pretty us resources a reflective half in for talked to trajectory product. to of provide does efficient the that allow intensive. make our to product. and and the we're which We're in improvement Mark us first in second the OR change ratio kind a sideways And meaningful half to we're year year get the and first

Walter Spracklin

time. the Appreciate Okay.

Operator

question. Next Fargo. question Wells of with proceed your is with from Poliniak the line Allison Please

Allison Poliniak

morning. good Hi,

with different initiatives to I is And accelerate ask Any guess, assume firstly, that under I operational how initiatives it about technology technology. color guess, does impactful pivoted case Just going forward? investment to along just your do that's there? to the want we starts or support that, get if to SPG it here, plan.

Alan Shaw

the that that planning is the redesign we're And road will technology our that clean SPG put we're talk with forward. in and operations facing network that, And We've Southern. highlighted going -- utilize going out efforts what's service believe NSites. table, us going to that And the and between improvements be more productivity continue more SPG. our we about We've of Ed model on on going slate. our great to because to technology to to utilize we We're are and on balance fairly got based And robust heard for improve TOP you've a reliable digital everything with and example best customer us resources to one fully TOP and our transformation. started growth. outcomes frankly, our help our that of efficiency is a Norfolk technology, make intermodal line on is consistent A Jim improvements us and going us better terminals. going

Allison Poliniak

that does technology of Or all is -- those do more here? under is well productivity those important investments, some but know there, they it take mean that? customer-facing it start balanced I that of to precedence of Does some very still -- more

Alan Shaw

a It be continues to balance.

with that well. on relationships as really us And from improvements technology focus Cindy helped our will recognize to BXB shifting BXC. are productivity to our operations continue customers We has and our

Cindy Sanborn

analytics. And talked operating initiatives of Allison, robust improvements prior got automation set a earnings we've And the the operating would of They'd be or buckets. areas. them in into and side big I put we've about those X the And predictive calls. each in mobility,

is that our opportunity. of a part productivity big So

Allison Poliniak

you. Thank Great.

Operator

of question with with question. Wadewitz Please comes the next your Tom line proceed Our from UBS.

Tom Wadewitz

morning. good Yeah,

there length have pieces SPG, how things. broader it PSR Are be we'll of those we give you of to schedule So train different X metrics focus, velocity, are other think the I SPG, steady I look guess a or talk SPG. there got -- of And kind that about metrics things different think I'll are you're the longer Do be of then on right having that Should topic and we of kind outputs the I'm would The we I lot train guess watch labor. trains. at just dwell for at would be kind running I've to considering you challenge? doing. labor Thank state you're when going see that and know of make of attrition different wondering, because about time. metrics progress you're against kind you. attrition to the still you is output on elevated fighting don't or you that certain the for there risk a remains that we

Alan Shaw

looking With that. we improve I'll first. to start metrics about of the growth. and a improve specifics let to be and Cindy what I'll service, we'll And for what then talk outlined respect TOP SPG productivity as platform the for for

Cindy Sanborn

It's then train driving it's So Tom, executability it's and which core. service. it's driving PSR-based things. main length, SPG think balance three we from at driving its an very perspective, provides It's

growth the So service as those you in meaning service initiatives in put those three as growth, drive together the of productivity future SPG, and with all as well present.

in We XXXX. it. XXXX. about had A lot since excited we're really changed has So TOPXX a

timing so take for this initiative to a well. as really good on And it's us

go side. the labor me to Let

to is I as company has into our head done of I are work to an work I've think are And able people described, we attract for But a us. lot we as robust plan that hiring very And the XXXX. we to been in work think attractive first quarter. for.

months, of X out straight increased we trainees. increase And conductor trainees. XX of XX in conductor fact, In months the an last had

folks that going we're working onboarding to to So continue want be getting here. towards

enjoy come working folks that have our and a do for We excited railroad. benefits on the working company, are about provide and as we us that

And but really at them and we'll from are seeing when velocity, able find environment, need. those bring key So folks perspective, ingredients we the It a people challenging that train mean, to look we'll board. a measurements the be is dwell how we to on and we performing. get those like I feel we're

a customer specific have We network of and performance and measures, both lot customer-facing measures. internal

changes So don't measurement know the SPG I that outlook.

you will service what in see see the now. is think an you will can improved product. that And see -- we that you I that measures publicly

Tom Wadewitz

like a stabilized? kind Has that? of That Can comment give attrition on key quick a you the variable. seems

Cindy Sanborn

the about It's same.

of are of could a have at right of very those saw we an out but it's to did to of we've -- -- -- we XX manage from at can. hiring got our attrition have done hard unusual those we figured really last standpoint, could got improvement have And locations outpace plans challenges what think some looking out, and aimed through lot think locations our about and the that in what still some locations. attrition seeing about predict. introspection hiring challenging to it best pipeline. we're I XXX out And year the we differently. We've is hiring that We an

folks compelling company but we're we've environment on to same, have team the because, about a work working challenging staying in again, a very a for. are even -- great sourcing we HR got compelling Some our

Tom Wadewitz

Great. Thank you.

Operator

with Stephens. question. question next Our line of your from proceed comes with the Justin Please Long

Justin Long

question. congrats had all I the a Jim, Alan on part transitions. two and Ed,

First for Cindy.

challenges the implied pre-pandemic excluding to the any that last of together. get of number. But think And from could in incrementals incremental these $XX the we Just back know I It and mid-XXs. you can then half normalize imply get network incremental through gain Mark, pieces this on seems look million. year of curious where weighing on when into at when margins are put sale the levels the XXXX? when second margins, you year big some in for all to network once on service challenges the you thoughts

Cindy Sanborn

service levels. with start I'll Justin,

we'll be first think in the quarter. challenged I

what what And have our dwell the planned some you to board. And levels. we in our velocity and have that back what come improvement think I as second. described in we'll And as we we'll close plan. look to plan I start to on should our see think in employees be then levels of pre-pandemic new

So we're for. that's I what aiming And with TOP that SPG as well. think helps us

Mark George

impact And say Coal did to the you robust. we think less I have little margin on and look A Justin, That's incrementals. pricing tailwind And bit as won't last math it a the incremental Yeah. calculates. right. We've coal little your bit be impacts is question, year coal as volumes gain volumes well. than pricing we way certainly property when the it would side. about that was hoping also some also that inflationary compare look, that. the incremental got that the And year-over-year that the last environment help than look the incrementals. will although stronger at down, is And and of accessorials increase, come is mitigate year, we're as an

this So why really see last year say that's year the -- in you and are here step the drivers from incrementals those down full to year.

year. quarter next fourth of what with consistent in the in you're incrementals the kind Although for guidance is seeing

Justin Long

you. Thank Okay.

Mark George

welcome. You’re

Operator

Mehrotra line the proceed from is Please with of Amit Bank. Deutsche with question next question. Our your

Amit Mehrotra

lot. maybe of and of perfectly everyone. thanks also think growth question, way I I an because it wanted Hey, ratio I little the on incremental phase. that follow operating which a focus of But on guys more investment is Hi, for bit valid. know to up margins ask you on industry, kind different to are just of moving a lot Mark, just a there's a

just And think really your I'm so I'm total way earnings ratio about potential trying think just as performance opposed is to growth wondering earnings about operating get right growth to to prospective exclusively maybe And And on the potential and to about double-digit expansion. many kind to thoughts of of on you trajectory sustainable that. the low level kind or course is pointing are guys this And you earnings it of growth looks over that think type of years. year? for like what is if

Mark George

growth. bottom Yeah. function Amit, line is a the and the expansion of obviously top-line growth margin

margin not get G runway have the And So we more top-line SPG. that's until do to that. the to level on rely We're at to a the we're to margins why and to waiting this lessens, looking in business, as right there grow going for growth. you're is expansion

that we revenue the we're incremental and outperform even more help volume for to. this top-line get should example, can So the If equation. and railroad incremental really on the that year, onto this guiding more

and to the have that be OR. point get, hope larger growth from you'll back to is out the to on from do a extra where growth think we revenue believe, be an level XXXX supportive growth accretive when perspective, provided in we're economic of catalyst service you and improvement Because we will And would every be incrementals. you to the to from top-line we have want environment certainly, outperform able So the have I are conjunction as with incrementals. stronger I be a It's look perspective, growth your is. that line for larger continued going your top-line just on incrementals bottom primary external

Amit Mehrotra

year think still of saying, the XX% the leverage incrementals the incrementals first really what guess, growth a to to answer So way terms Is reflective in correct? question, your just this business environment. year, in XX% you're right if around I the to about of half. previous optics understand I prospective the is the that's more operating in incrementals, the muted But that

Mark George

have I going dealing year. this to should it for the range we that do don't the bound when not be better with But incrementals some future. yeah, of I'm mean we're I headwinds believe

Amit Mehrotra

Yeah.

very it. Appreciate you Thank much. Okay.

Mark George

Okay.

Operator

proceed your Stifel. with Our of with next line Please question. from question Ben the comes Nolan

Ben Nolan

from for optimism your coal wonder opinion? this lot you have a was year to just the volumes respect clients a I some differentiated Certainly, that. macro a this from heard curious thanks. around you coal maybe more on Yeah, exports general. of view, and in little your competitors, little color what we've I or you're from with something put could a if hearing that Is just side. just

Ed Elkins

for Thanks Ed. Sure. question. the This is

I I bit you some export, will capacity we up there's coming XX QX. on demand to all Mix as supply in direction held million is The for And were of globally. with course. already additional by new they at online from a for indices coming particular, keep guarded on seaborne in it a the they're pointing up while that play We're and are going very side, issues, progresses where online. production part think futures, look is that's think that. If that's the 'XX. And into down tons the being now right of in downward 'XX a little

Ben Nolan

right. Okay. All

just So Thanks. then. macro I it. it is appreciate

Operator

Thank you.

your Our next question is from Majors of the Susquehanna. question. proceed Please line Bascome with with

Bascome Majors

railroad for for at Alan, Thanks you've XX years. taking been questions. the Yeah. my

not marketing met officer customer for big the X. You've times. a seat There's you with been hadn't in multiple probably

initially going when view you in months So not here engage But a I what and you the give want kind the constituencies role of to know have really can when us over. in you're traditional your what days couple probably take with reins? on you objectives term near start of a to to you May CEO the little are, do take XXX

Alan Shaw

can provide team. listening want noted. and we where And be big I'm and and getting Mark on to their on employees to leadership well, to focus well efficiency Yeah. the economy. safe our service I've continuing engaging We've efficiency We're margins restoring term with ops over it's and in it. been all to as the the and ops with you really the fastest-growing have grow. segments got right a The we've are now we our phenomenal you of folks continue I'm the really The near product, time And craft a objectives this going reliable that that our in improving had levels And out as them, efficient the field. fantastic that service, the faces feedback positioned service U.S. conversations franchise been boost momentum improvements that's our our spending most Because our and with how long-term. efficiency. when

Bascome Majors

you. Thank

Operator

you. Thank

with from Our the proceed Jeff Vertical your question Please Research. is Kaufman line with next question. of

Jeff Kauffman

for you congratulations, question. taking congratulations, on executive my And Alan Thank Jim. And changes. the

Just X the same I'll modeling it questions. quick one. grab on

to you're understand that, you're on part for then tax not any repurchase free of cash and on XXXX. just right second going more really So cash after dividends are over forward did and repurchases rate up lever I the shares? looking guidance to the function And that a of share flow

Mark George

Yeah. leftover share Jeff, function The of that's exactly is a right. repurchase cash.

credit So is the share we've our increased money is repurchase. committed our being Whatever left to over, earnings shareholders growing rating. left as and we're which of in also whatever to form money grow CapEx, but over, dividends, we distribute

with then to And that. tax rate the that's XXXX. any we anticipating to typically the XX%. So tax XX% change regard to rate, guide to And corporate not we're in

that maintained. guidance maintains that So -- is

Jeff Kauffman

and my Thank half. That’s you one

Mark George

Okay.

Operator

the Vernon Please from is your question line with question. David of Bernstein. next Our with proceed

David Vernon

and coming from a Southern? more also the looking there access filed of Hey, CPKCS? investors seeing worried the this next about opportunity are could the business what get perspective the proposed good you and for what of of standpoint discussions guys. Thanks. to here. in regulatory responsive issue? Meridian couple And impact could on objectives more quarters potentially is the you changes over access then open Like be frame the if KCS? perspective size of of the access from your you're for around kind a application around kind little date, the hearings that kind Can morning, what Norfolk issues. bit a comment more to I'd How should love of up in your couple Obviously, Jim, around the help mean there's on of

Jim Squires

in personally respect think that it old. we've To sitting was And matter. tell ask late CPKC part address the the the proceedings, the the first team. much we outdated with to nature flight. in the in I of STB made forced then X-Eleven regarding With the commissioners evidence flux, supply take to the front the Alan STB made you STB what, the proceedings access. the last years in operational that stale. And I'll of known oppose our David, to case let potential me year of chains disruption, and of for on record vent we Based

unfold. And case. bit CPKC. will And these made proceedings a continue our about as so little we so we to talk Alan, do

Alan Shaw

Yeah.

centered customers and Southwest, the the for which a So It's is that, provides forward. We're the We've shareholders going the make and two are we're protect of convinced our growing the part grow. route the we plans to of really and fastest to around regions to interest Southeast STB our us, Meridian us constructive our which is going moving a And form sure that it's protect there. dialogue. country. continue fastest the between shareholders' only our a And very big had Speedway, part in that to customers' interest. our

Operator

this At to concludes will turn back the Mr. now closing Thank Squires you. time, question-and-answer And comments. the for I over this session. call Jim

Jim Squires

everyone. look next talking again quarter. with you you, Thank We forward to

Operator

teleconference. and participation. gentlemen, does your thank for This today's Ladies conclude you

have now And a your may disconnect You wonderful lines. day.

Norfolk Southern (NSC) 26 Jan 222021 Q4 Earnings call transcript