NSC - Earnings call 3 2023 | Norfolk Southern Corporation

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Operator

Greetings. Welcome to the Norfolk Southern Corporation's Third Quarter 2023 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce Luke Nichols, Senior Director of Investor Relations. Mr. you, Thank now may Nichols, begin. you

Luke Nichols

harbor results. Thank you, or subject materially of during actual the XXXX. uncertainties Please Private future safe that and These are statements future of morning, call, good meaning Litigation we events from Act the within performance everyone. which today's statements will note forward-looking Norfolk to differ the Corporation, to and risks make Reform of may provision relate and of Securities certain Southern

Please annual full with of we our refer SEC those the most as uncertainties filed to reports quarterly and and for important. disclosure a view risks

slides are presentation non-GAAP Investors of in the any section, measures. along measures used Our the at our to reconciliation available with today norfolksouthern.com GAAP comparable

now Southern's my introduce Alan It's to Officer, Executive X. President Chief honor Norfolk Shaw. distinct Slide to and Turning

Alan Shaw

and earnings. Good third our to morning, of discussion quarter welcome

our are Chief Chief Ed Officer; me and Mark with Here Financial George, our Duncan, Officer; Operating Officer. our Paul Elkins, Chief Marketing

thanking focus colleagues begin forward. business. want Norfolk and a operational require our we our the powerful strategic potential industry, understood our full across for our of and enhanced serving franchise unlocking new my aspect customers charted we I an working When in plan safely, on of the resilience driving to by course excellence would Southern every

We outages. into a technology of some saw that franchise. opportunities reveals with in our X transformation Our third strengthen more customer-centric organization operations-driven to the quarter service

was XX, August on a in vendor first by The defect the caused software.

a issues. were and cybersecurity unrelated XX, September incidents involved were on firmware maintenance second These issue. The not

we importantly, reoccurrence there. measures stopping are to taking We a not and prevent are

experts. in driven assistance our includes of of business every means and of review pursuing top-to-bottom leading infrastructure technology a excellence launched with have IT. our that aspect operational the Operations third-party We

incidents operating through and our crew and to limited greater enabled in service manage resiliency, enhanced leadership, recovery. plan building the customers grow our capacity, progress volume us the with operations to disruption technology strengthened Demonstrating our

do to when strategy. we'd we exactly do, what our we quarter, we third continue announced the Throughout said

We in are making investments smart and resilient service. safe, reliable

volumes unwelcome will approach or forward. diminished strong we low changed way abnormally last leveraged a capture labor will increase in will year's of be environment and recover, cost is Mark macroeconomic market wage with quarter, better it craft growth prices higher has not as poised The on incremental including provide strategy and historic headwind, margins. a the an that to colleagues. drivers is our our confidence Although detail fuel of result costs for the and our our other

significant low strategy and in These costs the volumes in sequentially. and historically quarter ratio, of the deteriorated contributed our investments combined operating our backdrop with which to pressure year-over-year on

these We not results. are satisfied clearly with

from these our operating recover will We impacts to ratio. short-term

continuous As approach. strategy, we when is our improvement articulated our productivity of we balanced element core a launched

competitive maintaining to achieving We the long industry and term. are committed over margins

of year-end in the and strategy on There through among to normal trainees to against our other and point conductor reducing are unrelenting. productivity as us Operations, And service have on strong a the increasingly stable allowing of iterate an for his compliance describe, focus more profit growth steps, progress quarters our high is the Paul encouraging of several we balanced we and with challenges will of Our plan leadership and demonstrate degree plan that Paul pipeline productivity. Under improvement ahead. team levels, the developments were quarter. to in network the

business. customers was us a above of the function sequentially, both us awarding Volume XXX,XXX a allowing Notably, weeks, business. onboard in level with to part, each a have new the more and X as well since third year-over-year consistently seen we running of quarter turned carloads. XXXX. corner In and to service improved improved That's appears haven't the quarter of last second this

marketing to innovative talk more team deliver the value will weak Our we solutions Ed amplify see of environment. that about and to making later. a even our are is freight service consistent, creating in service, this customers commitment more the reliable

addition service In volume to safety in and gains, improvements as well. we delivered

mainline progress Mark on investing safety our Palestine an site XX% regularly and as than on update culture provide with down we year-over-year we In efforts Our costs communities, to to strengthen East our our make and things visit future. as community's right. performance. accident the more and the continue is in will we associated make ongoing I commitments. the train significant rate deliver surrounding cleaning

turn now it to over Mark. I'll

Mark George

Thank I'll Slide derailment. to start on related on the with accruals you, Alan, Eastern everyone. morning, good our Ohio and X an update

report soil this that expect the to time ongoing the we as derailment extension. million account of ensure pleased safety testing air, soil line of continued be QX completing to site are through water will that to removal And there XXXX. such, for will but from April and be in $XXX accrued we We shortly, efforts

we notification recognized offset first to cost Additionally, we incurred with the We of to for as our reimbursement the during the other $XX in our the this received last quarter, week. we'll recorded initial accumulate. policy cash reimbursement another million quarter. actually an costs and our our under Of receive legal was quarter. note, did third in continue of did The and accordingly file claims as million third $XX for costs and claim file insurers incurred

there XX are encouraged at initial exposure reimbursement, of parties the in dozens we are layers sharing insurance of by While this the speed tower.

be cost the $XXX far, through half this September spent as process million, in XXXX. in just be quarter rest the half Also, expect Of the been paid million XXth. to has and recovery expense be expect the $XXX of we So roughly thus recorded to to spent fourth than remaining more I'd protracted.

and I for continue that many we these will to through will issues this working remains you remind situation fluid, quarters come.

to fees, as have cannot yet expect settlements, legal at additional there as We fines time. and the related amount we be will penalties future that costs that been well and incurred predict not this

third these the of quarter Slide to costs our X, Moving impact on illustrate results. where we

comparisons we in QX our for note accounting the to year. results row to of Our the financials our be adjusted while financial the the the the the the discussion. of isolate results At the remainder of the talking results related response. and are our adjusted I'll GAAP prior chart, first incident about X on row, to you'll bottom

recall income tax comparison. we the and expense On were down XX%. ratio state were modestly. QX XX% Revenues year, was from Adjusted year-over-year The includes down net adjusted change down XX.X%, and respectively. million last operating was operating points impacts. notably income a EPS XX%, operating benefit distorting enjoyed But from was for headwind of income a basis basis, fuel XX%. XXX price an $XXX Net adjusted of down which

Slide of equates as revenue. operating an X%, the it's have The last will of which back a meaningful revenue And reduction details. and quick of getting our surcharge the for QX market are we down to Volumes of million were to XXXX. in intermodal revenue fuel decline, decline year-over-year in X storage in through advance more highlighting is $XX the drivers reduction are revenue to tough to continue we a normal the overview $XX turn biggest from driver and into year Ed now Let's compares of revenue change revenues. million, the in at here look levels the

other. the on we collectively rate as about positive later mix well million and dynamics the the of quarter mix as pricing $XX in have traction talk will inform Ed that

operating for comparison X% with or lower X, quarter year-over-year from million were Fuel $XX down $XX or Ben charge expenses. and retroactive On took X% as into down $XX related last year-over-year and QX operating to the was let's year levels down Slide employee basis. pay a expense rates on by drill expenses the driven prices. the accruals. were favorable million higher Comp wage we was Adjusted or offset fuel by million the XX%, a million $XX mainly

expense engineering to as also guidance. on The with was driven was as and up Depreciation as due lower an other higher technology in up activities were comp network spend. our settlement up year associated by of was our higher Property well services line favorable on with sales increase quarter. materials last costs in this Purchased locomotive and materials legal as for well million consumption a repairs. $XX adverse earlier primarily

X. Slide to Moving

in to with additional moderate quarter begin quarter, expect costs only issues third we While service unwinding challenges in resulted delay the related a the in easing. to service past the

We here expect fourth quarter. unwind in accelerate the to the

related Now years the offsetting these building fourth resiliency areas increase costs a an to in in that couple quarter of key incremental savings in will dividends be pay ahead. will

and Firstly, recoveries. faster locomotives to there growth our are hiring of investments both in the support future in in continuation order

that workforce, costs, are productivity. overall investments These allow like higher investments along craft of for accommodation of cover paid more sick our will enhancements the life in help including the Second, the leave. should these with volumes quality

income was Other in Slide below a company-owned The couple returns On million life by driven let's was the $XX guide. our items XX.X%, with income. to quarter, in normally of favorable effective adjusted operating up P&L we tax rate what from insurance. talk line XX,

And from billion, dividend year, operating results our and of prior over due the higher X free distributions with Slide combination derailment-related thanks and and the a remainder lower half flow lower the to were than CapEx. free flow core and months turning to activity. first on share months, solid cash repurchase $X.X continued X through same $X.X Shareholder distributions XX, was shareholder billion to expenditures cash

the proposed asset of vote place will to purchase I the November. approve that take CSR will citizen in remind in Cincinnati $X.X the billion

capital reserving mid-March that for which capacity in of potential are transaction, close So XXXX. we would

I'll provide now Paul our update hand Operations. on off to an to

Paul Duncan

At and good Norfolk Southern, safety. Thank with starts everyone. you, morning, Mark, everything

XX So let's an Slide to turn update. for

significant quarter, have strides. In made the we

has Our ago. X injury versus where but we year, rate from up just improved is XX% slightly last were years

from makeup is put years, mainline accident implemented and also a been X continue many efforts reduction have rate we forth, rules the year. Our earlier through significant including our this we the maintain in in to we rate where the to initiatives train our accident have enhancements down and past trending

adjustment required terms While period now improvement. in significant those this a of are of they year, operational mainline earlier off rate accident our paying enhancements

in operations. and exposures also and remain focused terminal on We very our yard improving outcomes reducing

our goal including well as fronts, industry training satisfied towards are of safety. leadership programs being made not all of these will investments our continue development. further leader the have in PPE but We results to we our people, are the enhancements in as On to encouraging, and drive and

progress resumed is this have speeds challenging Slide quarter. sustained we Turning an second improving last our Train on another on were have before where This XX trajectory quarter. the made to they area Service. for update

and and improve QX that in while Ed reduce highest We now up developing progress will since have level also in while weekly improved We're sustaining pushed our this October terminals, bringing which in their outline. level schedule offerings dwell XXXX, to service will to best years. its rigor to new car loadings X

our further As progress. scheduled part of we though, drive will railroad model

railroad, the safe, resilient service across We dwell, reliable have sustain minimize continue to velocity productivity. to car maximize and drive and

X this. the cover we we On will to how plan next slides, accomplish

Turning to Slide XX.

Our locomotive year-over-year. velocity was flat

this velocity that seeing focused train are we opportunity we driving improvements in. productivity are Now and terminal in is and dwell, on an further velocity

T&E still qualified As them are we sized improve see that our conductor this locations. to track now per last a hold terminal velocity efficiency workforce have initiatives is above takes appropriately hour, we the the We expect year-end XX we our get investing as to quarter. below with additional pipeline step next although discipline aggregate, tonnage and training its all XXX network. bring further We're network right by take on in to have the as miles metric along indicated fuel in onto

of and hold productivity measure as initiatives this As will take improve from GTMs our here. increase,

XX we gains railroad and it are model ultimately, Moving with growth. improvement and to translate scheduled how resilience, will aligned our how additional to service in productivity into driving Slide discuss

our It and cars we're Intermodal our train execution our to merchandise trains ensure departing terminal plan X of on driving the dwell it's trains high-frequency disciplined by getting ensuring right leveraging operating right and adherence balance Intermodal plan plan on flows yards on facilities, to is of cars involves starts precision and maximizing facilities. to are to within We're execution. both switching our terminal intermodal the First the At arrival. performance, with trip This the in time. model. arriving minimizing hours containers strict connection

point. The second bullet

will culture terminals. driving a reductions are this compliance consistency even that plan, operating further in to unit and the drive and train car greater We our and dwell both of strict the in intermodal at level expect

modernizing to our Next, we're become resilient our in and and more workforce productive. people investing

the while today. receiving locomotives conductor to conductors gives or year. this assignments resilience protecting us growth XXX investment whether and are example, an This future engineered engineer flexibility For is training with fill need an a

terminals XXX X We across the key the board are first of at network. moving forward phase extra consolidations, with cross-training employees

what is. Let this me explain

evolved that merged qualified labor At them with and assignments. from potential agreements we're offering our employees worked folks get we've within labor their boundaries, resilience, over locations, remain focus and and work to enhanced As to hold new of craft many collaboratively to qualified in have efficiency. assignments prevented the providing them investing were boundaries assignments railroads to flexibility those to employees these getting geography. and all greater With but Southern operational yet decades, territorial working our remove certain have Norfolk work opportunities with more and on

To labor modernization further colleagues, life negotiated work implementing streamline crew are our scheduling. groundbreaking productivity. complement initiative these which and also drive we work will predictable management efforts, craft back-office with functions balance our A

additional reliable delivering our driving productivity a last-mile off that to service. kicking first-mile a network. This most are we Lastly, and initiative initiative and productivity importantly, growth drive with enhance is substantial the system-wide service, aligned will

safe, principles growth. consistency, generate and create improve a resilient productivity and close, these using going scheduled service capacity for To running railroad to greater reliable is

I'll to now turn Ed. the call over

Ed Elkins

on morning Thanks, Paul, and good to call. the everybody

recognize we I want for and between the into pay as our our value to seeing before starting for move it's Operations off. Marketing collaboration Now we're in think customers. and to solutions deliver to here, that's to as shareholders along and get we out I organizations that service these innovate and but we it about our improve steady I'll more numbers, call teams the deep progress important talk the

serve. respectively, Southern compared sand markets X% year-over-year crude and third Coast Slide energy quarter. several decline was where fuel prior with year-over-year were Within third discourage East oil a volumes refineries the and declines NGLs. increased fuel low results volume Crude negatively due driver and Let's rail Helping impacted that XX%, surcharge offset to declines the X% to Revenue merchandise, prices X% our price we quarter. down natural outpaced markets automotive, unfavorable revenue the the challenged energy quarter. was in in total of Also, start in gas and XX for on by in differentials intermodal to leading lower revenue storage weakness in of shipments third volume. those by that and review Norfolk strength in the volume period. shipments to

driven down high volume. revenue strength was revenue and Growth X% due by as for to lower ground demand finished vehicles, fuel as Merchandise from continued was shippable and lower surcharge well counts.

new improved and mix unit, per revenue price X%, record showing it However, excluding sustained fuel, a improvement. as set

quarter been of where This XX XX marks merchandise growth last year-over-year fuel. the excluding out in per quarters consecutive we've able to unit achieve revenue

on Intermodal. was domestic. slightly offset largely declines in with Moving growth compared down year last as Intermodal international to Volume in

capacity On freight side, challenge persistently the domestic truck and volume. weak demand abundant

a also international storage loose seeing negative unit, followed mix XX% improved in international declined freight pressure effects per of impact the strong the competitive return service. to by to and IPI environment. Lower business. as decline trucking within revenue side, from of on mix revenue volume While customers this than as X/X adverse the was down international Intermodal represented persistent excluding more volumes continued effects fuel, Intermodal XX%. fees We're

quarter that of are headwind shippers lower second, in First, and shipments. during expect lower-yielding outpacing this to growth level, empty second in Intermodal next to to highway normal yielding shipments returned lanes the storage a is pandemic; has lap the to returning we shifted year. also short-haul the and loaded

in prices producer by and Lastly, prior than our in outages. levels offset prolonged customer dropped utility with low down XX% export markets, markets. Utility within year volume was X% natural roughly volume high and and our weak strength more coal, stockpiles year-over-year coal driven gas conditions which from

primarily also and year-over-year fuel modest in new revenue. lower per as coal due Revenue Export stronger-than-expected a to seaborne offset by and mix Coal revenue a than unit driven set Asian per more and demand. decline declined excluding record volume. revenue unit volume fuel damages liquidated X%, strong increased positive pricing increased surcharge

to Turning Slide XX.

uncertain slow slowing on some contraction recovery us in manufacturing economic data and the volume the to the quarter, For we rise. that see is amid September presented to expect onshoring conditions. the encouraging U.S. fourth is with

as surrounding Fed strike our in However, we uncertainty future cautious geopolitical pronounced. actions, is outcomes and remain very tension optimism

Although talk development about we business steadfast environment initiatives, are in in is unclear, I'll the those a few minutes. macro our and

Our metals automotive the in merchandise markets and markets. upside have potential

we to our in growth fleet improve vehicles, expect shippable through of We cycle backlog automotive and continue work as grow our the times size.

will We NGL are in anticipated that continue sustained the of Offsetting also as our the in as in we quarter year. headwinds expected still the remainder should quarter year-over-year drive the through improving the crude, unmet demand conditions metals fourth which service and pressured third energy in growth. see market, soft should sand realize be to volumes growth markets

many Automotive production our driver for is beyond automotive. of a key merchandise markets

the to merchandise volumes. scope Strike duration the our a risk downside So ongoing and of overall UAW is

deliver carload a operations serve are and pace. customers for future challenges by NS. across solving marketing driver at the and of markets our business Our innovation collaborating This collaboration we wins an incremental accelerating teams of for growth to be portfolio identifying will business that and

Intermodal volume recovery domestic our We're fourth the the sustained is year-over-year we're expected improving service in market quarter conditions. to in from and encouraged market. momentum improve seeing that by

us compliance seeing in are October. which and in customers Our demand, has trending bid positively improvements

muted demand markets temper from IPI. While will demand overall International and a rates season peak driving Coast we will to continue volumes. see import which favorable strong benefit for relatively ocean East

quarter, just the new about short-haul expect our in continue talk develop in fourth that and shift negative we persist the and and to experiment lanes mix We minute. to for from services a customers, back effects I'll to the Intermodal

online. comes should markets stable with new potential quarter upside the in volumes fourth be production as Coal export in

gas continue factor. strong prices to remainder drive of improve to year limiting Domestic India. a constraints the customers to a coal our with prices on continue but headwinds as trends service due persist, supply And out drives Australia continued be we're and collaborate fourth suggest seaborne in and should confident growth that outages, recent while the out to the of low sequentially in continues shipments throughout volume value to future. uncertainty of higher the well and ability from coal natural China in as to fewer our improved quarter incremental will demand in addition, the In prices economy in manner in providing

ways we're I before Alan, like to Now an on it unfavorable how briefly in in turn market. to would back drive I value growth providing expand that

examples this quarter to offerings, the XX Slide both bring aimed service Norfolk for life. to we key making and to marketing operations projects these collaboration freight and transportation at option It's new that modal developed of invested important recognize Southern by and teamwork preferred features conversion. driving

In expand October, CN and CN we partnered on connect to Atlanta in and Canada. in with with service the City customers markets intermodal Kansas

We designed Railway East in Florida their gas also intermodal for with reach Florida. flexibility customers to give our expand ways are partnered of the NS key to our supply emissions. new These and domestic growth to greenhouse more Coast give services and services Network markets Intermodal expand the reduce customers chain both international into

announced investment of and revolutionizing the drive and and Early app in Intermodal. Norfolk U.S. into we with capture a a our most will ability shipments. in through best for an of we drayage final intermodal DrayNow, serve September, our journey And with customers. customers, Southern technology supply increase first also the in extensive chain is customers Intermodal's tracking more transparency on is and real-time operator DrayNow, to network document that together company shipment fragmented the Intermodal the best-in-class Eastern provides mile solutions DrayNow an focused modernizing

cement terminal containerboard expanded new persistent as turned volume a warehouse. paid lastly, transload and both ethanol third the on in a industrial including quarter, and off And development additional our new efforts and industries

to our at As grain on like customers and expanded an market make needs. well to established rail elevator. as for locating serve NS their our network operations We allowing

sustainable the carloads waiting these production. preferred to Together, to come pursuing freight But to generate portfolio future. are network fragile sitting in enhancements for to diverse annually X,XXX a smart environment. project-oriented We're carloads projects growth service for full making proactively and NS enhance will back become new over We're not aggressively growth the our and we a customers service in us. our and provider drive rather to at

on outlook. look lower significantly revenue, revenue XXXX year-over-year. closer concluding which we're on down QX let's lower expecting our XXXX to Slide the Based surcharge, at XX, now be to fuel And included X%

it over back Alan With home. to that, bring I'll to us turn

Alan Shaw

Slide Closing XX. on

has challenges, that improvements. ever stronger year number a of are and more innovative this a we Although than necessary our way strategy confident forward. company response emerging action better decisive a due is our affect our presented to to I'm

plan and resource We seeing from leadership we benefits strategy. drive towards the investments changes, our are refinements already as

our that We customer our am are in drives incorporating future. achieving we are wins extremely operational quarters and productivity enables ahead. consistency enhancements and optimistic with discipline base, the I about

We Operator? open call now will the questions. to

Operator

[Operator Instructions]

Chris our first Citigroup. Wetherbee from comes with And question

Chris Wetherbee

these as I How the actually guess think of on around you and that? much Mark, will as how costs also I able for then to and the that generate more how guess improvement I X. thoughts quarter I XXXX. want to you laid of service we in year, make kind go temporary of to you investments making. away? are I that into want the understand costs cost to really the of quarter? this thanks sticks around? it of then and out start fourth that. you're So to cadence next maybe about Slide And fourth some move out any much resiliency incremental OR I sequential And the look guess sure absorb

Mark George

Thanks, Chris.

that. more, We So the delivering the opposed like eventually, today in to overtime, putting reduction start quarters as right to the And here continue as to band-aids if disruptions slight our We fourth on quarter. on on the bit reduction with the network hoping a the the are little here costs, solid the qualify we do improves fluidity processes build for in service service first you T&E we the that some more start couple third in cetera. to over unwind expect but were we quarter. saw had obviously, we network next as some this delayed et should and locations well, we around of critical of as a

here in next will those couple the start to quarters. of So unwind

The really A right-hand increases. to structural point. and around the cost whole of as of -- think about developing you lot slide, part those ramp-up related related to investments the is T&E as also of that improvements seen that craft announced quality in well we've There with this we've And as building think workforce. the that's are I locomotives. to the that costs our those are life need our those are resiliency,

start And these I'd see sitting costs, we line. of those go ben the But in and like I service we then more increase say that guidance said, offset that, structural you there XX% that of forward comp will And point, but also give be into some into reside that costs. another in to we after going And by when then the come and I of will in 'XX, terms costs 'XX costs think cadence services will as probably down, at QX, probably in you'll materials. purchase in reconvene in we'll be resiliency but moderating January. should

Alan Shaw

December of last what look at investment margins. we And that's and in in in investments competitive also are do the growth is, vision That's future, it's and to service elimination resiliency way were the when in Chris, going year. And our said one we recovery costs. top-tier this in this the for out we of an laid our investments industry to

Mark George

elimination but be more to as service accommodating typically Yes. going volume are costs, Ultimately, pricing well as temporary by also for those get by productivity. paid would of than to the able and these we

because So down we're a in it's exaggerated here cycle.

Chris Wetherbee

quarter does OR this give improve And in you fourth ability the the to still?

Mark George

at trough. think I a Yes, we're

a right at here. I think we're trough

Operator

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

Amit Mehrotra

Maybe And and just can fuel Thanks, just XQ Every can challenge. damages question, headwind. has coal bigger from has picture Everybody trend high a cyclical first right you in a coal question. Alan, now us liquidated a the the rail we levels? Operator. think give where yields

basis SPG, your the with look competitor as the you've are points direct XXX The I margins obviously, still You because, than are and service. improving guys you're are generally fixed XXX, an reporting volumes just worse opportunity at coming. the network, that top industry. that

there there, these progress there opportunity but our dealing to deeper an So just is we're how all but headwinds addressing we're there's listen, very, obviously structure opportunity and what's to of if differences? say, organization you're the you're seemingly looking our -- still at cost are, inside competitors going it about made high the those with cost still very and like structure the all is look

Alan Shaw

about yields. thank question. Why of Ed don't first, for one you to over Amit, it the second address turn to I'll and your part that question then I talk coal

Norfolk the industry competitive a going trough, the economic that we top drive Look we're committed illustrated that at growth to growth, it not over way over margins. the term. long-term through margins tier industry and as right, shareholder Mark and evaluate during long this chart, that Investor an chase is to investing follow Day economic investment. said competitive believe, get-go. long long-term little get We've returns This invest an short-term We showed better had OR also I said from in We're you the the We're cycle. targets. We very for deliver worse to Southern value. a term. our invest as margins would But forward clearly,

Look, service, exactly for our operations now. plan network of our what and doing we that's allows and as discipline happy we we as plan to right degree iterate that right high drive continue our the a refresh now, we're to as us team productivity compliance we're with into cost operational structure not drive

about you do talk to Ed, coal want yields?

Ed Elkins

Sure.

through again, we're China end sideways prepared in of the the continuation really restating forecasting I single that's the And And of I remarks, when are into It's we continue. digits prepared expect look think be and fourth quarter episodic. you the year. demand India quarter for the what out asked said dollars. about off and of predicated and don't LDs these high prices in the export. said millions to I the I quarter. think of strong remarks, We them to the in And terms of out of in

Operator

America. next of Hoexter question Our with of from is Bank Ken line the

Ken Hoexter

there Ed, think solid I have that the that temporary Alan, to like at for on of of that is when little the bring snapback them, have costs that be job resiliency you in a investments. want Or stuff. the more right? you on the seems costs to that sounded interesting already went of some bit Do sick follow-up confused or lot And costs. to to outside restructuring implemented I'm of the it maybe leave? a some network and implemented that want It understand little that It just expenditures? quick PSR you've the right? on need resiliency question least just peers new So side. you allows resiliency on process. Mark a handle lanes, the through on PSR what's agreements thing I expertise paid is of to does, resiliency some more,

Alan Shaw

a going for We've we've the organization. Thank revamped CEO leadership new that's and the you, this right launched kinetic I We've operating refreshed our a outsiders been here. something roles years. implemented done industry, rail to got team been marketing Southern. Operations' brand-new never X.X been strategy Ken. to Look, forward. We brought We've We've the number leadership. in I've plan. outsiders a of industry. believe in We've outsiders Norfolk

strategic We talent to for our improve will look to opportunities continue base.

to schedules. With the costs, that work some resiliency has respect to predictable of with do

rental increase has that last that came labor with industry on to year. agreement the do of the historic Some and to wage

is do result and And what of seeing to better additional hiring that, you're has is quarter year-over-year investing resources. it of service better with sequentially. a third or as in Some

X volumes And Our improved second are last, of that third our last safety levels in figures volume growth say, the right seen haven't in last our quarter at in year. we the quarter. weeks the now,

making is a what said Southern going we're to So We're way we This for to we progress. doing Norfolk do. long-term are exactly drive better value. forward shareholder

Mark George

able And is a point sick Ken, just paid cost of quality to well are accommodate locomotive life on third that has to as about but a And around some put T&E, of accelerate the primarily the head in resiliency related which to the rest be benefits, leave, cost count X/X to mechanical is investments essentially for fine expense, quarter staff. that the it. the and network. And the the really additions also is then rest to

Operator

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

Scott Group

fuel wasn't Mark, I on QX to ex in say you trying overall were versus sure QX. cost what

want if we to picture been to I want starting to So long-term We're is, big narrow right? guess in and your we then, message. margin. next you question, margin improvement getting term, short-term what look go color year pretty going Like consistent to wide question gap this is to to view? Are that margin committed industry we competitive any does because back it You've with short-term I to now. that Alan, clear have but just like year? there? And not long have OR next my committed versus are XXXX right chase

industry when see start I to know we to it do want competitive So get just to again.

Alan Shaw

Mark, do to one? first want address you the

Mark George

nice you cost uptick sorry. fuel, your Yes, Scott, volumes. answer I at and look, you we've think sprinkle the largely look question, should way in be the then in to seen sideways ex specific it

volume here we're QX, think and you our probably rate see to traditional assign quarter and out that improvement should we incremental to margin volumes. the going we pretty troughed be we've we And what much margin is sequential that. can I report you as think navigate model -- through definitely in

should So and I from here we troughed in think there. QX, it improve

Alan Shaw

we organization long We'll service the continues to standardize We'll eliminate is it committed industry have And operating are have Scott, And We're to term. the with to competitive margins, throughout our drive committed over as opportunity to that as improve. it. recovery greater see cost. practices. our we we'll respect service to what greater to productivity opportunity

price, all opportunity greater we the year. we're volume. our have product improvement of value sell. in those that that will to to generate margins contribute the generate opportunity more think reflecting have more improvements And We And things to and of We'll margins. industry see greater competitive I to next going in

Operator

of next is question Tom with UBS. from the Our line Wadewitz

Thomas Wadewitz

intermodal know tightening we some going Intermodal that look revenue there's how truck to strengthening? of more is a was think Do is a quarter. I I'm revenue story some volume market? that. I me So that quarters? you the pretty to need that correct about the so you that And Is a improve drive that wrong lot car and do revenue story story, mix. mix think at your it's get if the in improvement. revenue I we much much question I fairly it what couple weak necessary see margin business you it's really per think a really, But over improving? seems to truckload think think But of on do clear not you really to is need but that cost you the in know competitive. --

is something rates truck key. So that are that

some really on thoughts you what Just debt per maybe Intermodal thoughts revenue be to we broader guess, I stronger? that drive on potentially but revenue could that car, if story for should looking offer 'XX,

Alan Shaw

is a about approach. Tom, It's just balanced to not this revenue clear, growth. be

We our to that. will organization. productivity drive into committed to I'm continue

us service productivity. improved Our help going product with is to

volume. is improved Our us attract to going help service more product

service improved the to products. to Our of going is help price us product value our

in why a is network there resiliency value don't lot the about [indiscernible]. you're itself? as talk invest market there seeing you And So to of we in what in continue

Ed Elkins

question And and asking sure it's appreciate to a here understands. onion I the really sort make important and want you that unpeel Sure. that of we everybody

pricing in single let all, in our say, every positive okay? of we we me serve, year-to-date, are market First core

folks very forms. in in that over And in largest storage a to to negative think said the mix was had for X/X impact And then going accounts let's we quarter. substantial a storage dig of out saw the other that Now important intermodal comes that for figure Intermodal. I RPU the things into we prepared strip knew our understand. We had in We of decline in that that, once decline couple quarter, were happen. and X I remarks, that we as was The the fuel revenue.

The is the market. given there of domestic first out international truckload the anemic pressure that's shipments grew were while very in shipments amount

yield Our domestic higher have shipments international. than a

X substantial business. So within saw our headwind. international And we also ways mix different this a in a negative was

quarter short-haul then growth really And are much and lanes. shifted XX% pandemic those we're in intra-state all, of to lanes. of those the rolling in higher the rolled now are to from international seeing in back growth during us, highway First -- came third lanes the short-haul that and those the are lanes

it's So important very to that. understand

growth of moved amount That RPUs. is we we frankly, faster on empties another pressure pace than the that decremental the Lastly, saw. lows is that much

going downward So down year. a that there. March a positioned will be always on confident cash of. the but the lot in opportunity index There's highway the I be of It been to back straight growth. to contract freight Southern highway think lot going last what I'm The the does. in market for positioned on The here's XX also truck to does. one, general market will pressure, take of it but confident continues rates peaked months I'm Number not well And Norfolk only really has the advantage of is evacuate, the always well that's rotate exceptionally capacity reprice. excess to to volume on increases, loose

Operator

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

Brian Ossenbeck

$XXX little secondly, coal half time still mentioned access tracking to the or million inflation. sort just expectations? I line think of relative Maybe about you a pricing, the a just you your and headwind more with Can that for year oils Ed. last you for on then And that that to update? us in fees. color an is of give can back core point in X-parter storage Is the Intermodal where give

pricing of industry in which have in terms than of a realization was we higher that seen in for -- think terms inflation, for the trended versus disconnect expected. how some the I decent Norfolk just of core

with do service? structural sort keeping forward? do of matter catch contracts, lower Or than and a when would expect that that? with have it So repricing you How what rolling to expect more up we been is this something that's Is anticipated? you there really of timing

Ed Elkins

both let try me of those. to Well, answer

First and one, most quarter it's and levels, that is to really of pre-pandemic lap had that's say, doing. On probably We that coming what the they're some I know known consistent expect were throughout next headwinds the of if and revenue second of And I in fuel think the storage half seen would that about the we year. asking you the yes. year. normalize intact. we We've storage all persisted piece, second very been

a until where headwind Coal And then. that's goes here. the going surprised to and so upside, has from it we'll to see be pricing

this. sort pieces that's of the So known of

customers spot business, On recipe pricing rail know the inflation reviewing recognize quarters okay? the now. future, very mid-single-digit will or price in. book. it positive recognized time, And to by always That strategy we're can the long-term by above year-to-date probably particular, is. think what generated a competitive in many, in our we But not define on marketplace merchandise But for We market it's unusual compelled value has pricing that. a the our for across And that truck pricing price going quarter. deliver in many right core contract this what's the that worth that's, our pricing I We're we're over in on confident side, we It's markets. high one, number that in now. -- again,

Operator

Long line Justin is of next Our from Stephens. with question the

Justin Long

million quantify of can be disruptions revenue the million And that could morning. on updated this that's curious East thoughts from volumes. something the X on good quarter, from lost those $XXX I'm be recovered? tech impact the to timing Palestine. and operational then improvement if some the when talked about in with of you've associated $XXX any driving the seen Last Thanks, thus you revenue outages, can way of you far? Any

Alan Shaw

Ed, revenue you about the talk why and outlook cadence? don't

Ed Elkins

Sure.

sequentially As improves, it service is improving and year-over-year. both

And are managers to on improvement that, back Norfolk chain service very freight they sophisticated are encouraged customers to supply Southern. running. they're to that bring -- our is their and that plan, Our We make know factories other in not and going to when we're purchasers. keep very by have customers talents plans

faster, immediately be that to they're customers to Southern. see Norfolk revenue our on going load able value equipment going the to of are we Some as cycle faster. And more

though in in metals, strike market market. even I think construction right markets the of that automotive, think I like a there in now, aggregates like the is

that sure the making aware some service customers the of period to freight we our are form demonstrate longer value of sustainable more our we're time. But reliable, over And have of progress. flexible a of markets, persistent well in

Alan Shaw

of it does it the service the with can us our cost of to respect issue a in at the It was for issue anything that largely revenue in really, we network Really, and resiliency and reaffirms inconsequential. comes investing the a associated slower With is network tech impact recruits. more so weather what the importance outages, the was us.

Operator

next of Our the ISI. with line is Evercore question Jonathan Chappell from

Jonathan Chappell

that levels that you in acceleration your volumes Ed, out have out, a a catch-up the traffic be the can 'XX back with Alan a or that favor? it have can yellow the some service seems see on traffic of But category lights you still like turn pointed you, those traffic it if the had today? slides. that you of had of behind your red to weeks This levels. run you've much that How in of seems laid they get last to service and rate macro lights kind weeks at the to what those is But now operating in lights tailwind X we X you've levels are been XQ freight of -- related. go lot

Ed Elkins

this Number one, year, we're see to we're with happen by really that. this be tight to a peak very encouraged and glad try season answer. We

we're handling handle to Our their value confident That's now. way lives on those something headlines every they service fact have that the than our see right are is very this think keep of are that. The freight to and I'll in it's right as we some we're I why uncertainty to be customers, high going recognize and and to are that. in customers able network to for a allowing deliver freight. economic is the us And more in colored last able now. to a This are more built deliver is And that lot that probably thing lot it, is, now. I'm mind. geopolitical single the just day. we right say uncertainty And

Operator

from Our of the is Wells Fargo. Allison next question line Poliniak with

Allison Poliniak-Cusic

despite regain that, to you know would to start that. service, hear next market? that say now about talked sort see to few customers talked where in recapture want back now I the and for from confidence. set in could opportunities on there. Just macro you any thoughts the sort see or what's there starting your share Intermodal going you're of of Is accelerate something go we the Just months overall I to the time your about on to that -- Intermodal it

Ed Elkins

you're right. Well,

value quality are They in of the able on out to customers. say We're They about they We customers. street every it's volume Norfolk that the Southern, best-in-class. are to seeing because can are that we're converting the lucky offer come back. can't we have to day our enough customers the freight I demonstrate And and portfolio. from have highway our to those certainly very

we the that. the of deliver yes, for network have built have particularly we volume, more really market, So that shareholders form to opportunity a that's I more revenue, from think in here to additional intermodal the value our

Operator

of line the Oglenski from Barclays. with comes question next Brandon Our

Brandon Oglenski

rules, about Alan, in But you look I across what question thought makeup next I Maybe us? can as but in for standardizing the the had into guess set, the practices to wearing operating plan changes from there's train more op I earlier, you you year. the that maybe had you said. network talked think put I'm you context mischaracterizing to guys come? a response been

Alan Shaw

drive to further his We terminals. team further effort and standardize improvements. improvements by that's operating the to -- and And PSR Which that's of our ongoing just an and us within the Paul principles. been practices part service further capacity allows productivity

Operator

question from the line Sachs. of next Jordan Our Alliger Goldman is with

Jordan Alliger

of Just count better way how that changes roughly? we to to made And with do the you've to count from so dwell a get velocity flatlining well here the from it head think assess the head where late. of there Is operations, there closer much need recovering a comes be? of on you follow-up versus to adding and about sort out

Alan Shaw

are us, a new do cross-training that service see Those can We've and and you leadership resources. a of conductors plan, for with the in volumetrics function a plan want in of talk engineers employees, issues. headcount? you that overall we're We've said with all service operations. clients or see resources, can within always of to we're we've leadership you as become that and driving high the our degree results investing that's And invested refreshed the life the additional plant. to quality well. Mark, implemented generating Jordan, and about metrics, is to whether

Mark George

Yes. the there. improve the I mean mean a head in augmented I our helps. critical locations, staffing to of count lot fluidity order certainly our in we've

about why for well. big driver. a and in the invested we're which available in changes railroad. we sticky don't the talk really Paul, terminals, a frankly, have are locomotives, you locomotives money making that's as process bit little so We've a that more fundamental So scheduled running And drivers

Paul Duncan

executing the Well, results from dwell. to of as on a both are speed is a leadership, scheduled that high driving that the you're running focus premise plan I railroad. seeing and on. in scheduled day volume, our right we of railroad. our And accountability. mean match Again, plan. and running spot fundamental terminal Operating plan, car, compliance It's It's train right a resourcing Alan a a train, to right refreshing of enforcing the running highlighted, up degree as tenant

going velocity on improve. to that's going of see peak quarter the productivity Train's be continue as as continue to layer to consistency to talked, and to or further we And we're dwell us certainly productivity. in on year focus progresses. metrics, seen improve. see service running have reliable to expect expect and a we as layering improve, initiatives I XXXX, We these

Mark George

about count asked where you head is going. Sure,

the Let me that our and pipeline that. quarter, just down to starts do probably point taper here training I'd think expect that fine year just conductor XXX. fourth end a really the under on I put in we'd

lot we but locations. But want of in T&E we're levels to fourth on And adequately amongst locations. some the remaining supervision. just And qualified making the in is that investments probably pickup really T&E, probably, the now T&E, productivity we're in to here. that's our the also of the a those are area I we're that, more we'll quarter think add it's balancing capturing enough volume where resilience meaningful more supervisors about other and say we're handle resilient in take terms here in now driving need you some cresting be you'll in critical probably of to fourth I really those start the another of hiring to so horizon. step-up growth see But be And make at have going T&E absorption. the able to that might around We quarter overall as not area more sure staffed, field headcount, would start volume we're

kind So road map T&E. that's of the on

Operator

line Our TD Jason next of is question with from Seidl the Cowen.

Jason Seidl

bit on little a the side. follow-up to Wanted team. and Alan automotive

You industrial numbers any Strike of move. that case can then vehicles you potentially for have would think finished many give of made that sort from you good a that looking would comment longer guys Can guys, you a the drags just and road. you how can is look your do you sort projects is that a great. weeks the people of UAW there's for that you mentioned And us want. backlog of Do most that be in sense prior near-shoring you in really compare years, the about on development than how you down backlog

Ed Elkins

This is And thanks for Ed. the question.

place shippable be granular it -- have want a longer side, move the from. places of which place. On from high The to can't dwindle that to those right strike there really strike, automotive more I goes. counts with duration is over be originate time, of at to of yes, be we because now, honest see where nature we'll ground are probably the are there I And you. than ground been than going counts shippable and the to tends to that lot

remarks just which the during On the highlighted right it. in is Most that, just number I now. shippers was new originated and non-res really that's seen receiving customers. of that higher in September, and our had focused I about construction than manufacturing the or very mostly lumber more the the or would big most XXXXs is Mystic and we our network for the that what there's Southeast strength and of to the month. And industrial it tremendous those investment a either anecdotal during projects focused highlighting, one, call, XXX U.S. which for of started In of few X prepared in Midwest be the is the that the now entire again traffic the River, pipeline economy, We've of Midwest, east development side, for is and over that beneficial Southeast. a

think Alan So cycle up for really teed has the as super coming positioned manufacturing what we're we think I in well to really well a decade. referred

Jason Seidl

I Well, certainly hope so.

How that does say, projects. XXX mentioned compare pre-pandemic? to You

Ed Elkins

lot to Still our previous out level. be. The elevated the on compelling reliable of Act, Infrastructure EV chain geopolitical very the Act, XX% energy compelling the the from think with U.S. CHIPS and instability supply a billion Inflation one place invested a to it's is that $XX there our Reduction affordable is lines. pre-pandemic that, that's into make frontier along Whether been really reasons Act, and are of over a that I of about there. I in new and calls, mentioned And there

Operator

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

Ravi Shanker

the given not moves? prefer is rail comes evolutions moves interesting. empty will when the faster, truck you chains? could Do pretty confident the move a of follow-up, shippers choose on kind to And supply be sense Just shorter is moves haul up structural that short-haul that of have you this are for cycle this and customer preference to comments over the cyclical? Or

Ed Elkins

for the question. Thanks

where Southeast, most reverted then back like naturally Hinterland it of from Southeast, to it's back lanes into side, the strongly in markets and would from from markets. has is the Charleston allowing international some basically of capability up pandemic, reverted into the saw the there. even most naturally lines port On part say New the from steamship into Midwest during port suffer have because we to those That Nordic into like the I we York Savannah most the were moving port the the customers of that like pick and that those the the and

the miles of to domestic portfolio over That and I'll And compelling morning that really the we Intermodal succeed Intermodal up strength a a us wake Americans to have million on our services. We is every is both XXX of allow one that good of think international going terminals. XX remind within side. you

Alan Shaw

us, product. lanes the that our the value East, our where add faces and into on very a focus has we're Yes. rail In do focus this confident, U.S. we've a productivity. positive because that market been can even the value do our right, of that we is that the that's shows traditionally not because service of why Look, right? for We fastest-growing on short-haul This segments can competitive. that can of got of economy. franchise We the

Operator

the from of line is question Majors next The Bascome Susquehanna. with

Bascome Majors

this from recoveries the Can any your without a about, flow but and in on you where into response talk a tapers necessarily major forward. that charges -- all us you are that still shift a ongoing a the little still the in, for insurance ahead visibility are of in to have spending point of burden coming thanks the you? flow detail but bit And any your quantifying, Mark, off, the Eastern is cash or to gave Ohio time tailwind. of incident plan there outflows line legal cash spending you

Mark George

to through much these question. cash has I with it's do fees, to to particular, that We're up Okay, we chart fines, legal very the regard and amount in lead now, be actually have first at could same we there we're that in the issues you've to costs the down But time, got We week the right and that or insurance could I working recoveries site the the penalties, we recovery, that a for that. matters, be cited, and Bascome. timing been pleased for come. litigation end additional material. But really impossible impact have seen for started. more we've that got and Thank being lot million which our work, cash last do certainly $XX that recorded to my actually developments quarter, predict you going Bascome, quarters the several winding think the got And costly, obviously there. remediation we're as

But So meaningful see insurance expect near significant you that recoveries good. I should cash to think from term. that's the in don't

of I the what think potential line hard those But these protracted. to going things are even it's inflows become time with to be. really match -- so future might outflows

general, to forward an of it be to reasonable regard I think would significant as expect I mind, with this premium in size. insurance, result in bear just increases think going a incident of

So Hopefully, helpful, that's Bascome.

Operator

next of is Ben Nolan with The question line from Stifel. the

Benjamin Nolan

any function projects or ambiguity higher whether that lights ahead? sounds steam to interest are not is full from to in go some maybe customers? of any all of but any those that $XXX like back if of some of the shifted rates you've of or little moving sort book it's as a -- up seen It a your the that green. here. I are on there's make specifically, your lot the wanted -- those reason of aren't you're was any curious think a mixed seeing of the those all market that forward, And there development Or Have then I of bit I to And people to a right? signal. guess

Ed Elkins

to so everybody, Well, the manufacturing seeing some what associated seen. by tail in an speak, projects lives I probably we've let me in And those deceleration with here's acceleration projects start just warehousing. with near-term seen outlook, coming of associated reminding whether fourth of off We've for But are or about sites. out some building steel, that's aggregates, whether there. it's think there is a structural out these you the that's interest product rates whether direct from to pent-up of lumber, it's into it's move pressure lot think a function there demand quarter,

connect and great reliable, affordable any in about but Eastern predictable, place to its to the stable, rest with compelling you ecologically U.S. is The you very U.S. be want around to is think world. that of world, not those. and infrastructure compelling energy is exceptionally if the The to the is compelling. customer Southeast base energy-intensive You a industry responsible, has only the

Operator

Bernstein. line Our David from final question with is the Vernon of

David Vernon

turns? Mark, of volumes being short-haul new intermodal, So thinking go more as trying I headwinds costs I one network mix some with volume back that of some part to the that wanted how to is higher figure of empties margins? the incrementals of day in the get both Ed more out incrementals, comments structurally of when cycle and middle that I'm terms they comfortable of when your about the be sort when to that, think into average to can turn. of bringing expecting the about do Or these earlier about Is is thinking one should Intermodal sort we that international and services. average seasoning pointing incremental about just the back

Mark George

mix we've think of consuming a pricing the in pricing that headwind it been related going the temporary costs we're past have had his to I lot At have some -- quarters Look, of but point, should that couple reverse here a be the usually mix QX, going that capturing. into the think challenging does. Yes. been environment structural will But service. team core Ed and positive by sure, sequentially the for to we some that as of offset headwinds have

there. And think of not neutral have in I the we then quarter. kind that going to we're headwinds fuel type So third we're of the had same

maybe neutral, don't -- think I In flat it be slightly, fact, slightly think probably positive. could I

about So really, volume through. we're dropping talking

a should and plus. normal sequentially XX% those or of incrementals nice have through volume, drop We in with call seen it, uptick that

And way quarter, about the that's any been into it's think obviously, it's longer couple way. out things playing mean, few a these quarters. play past XXXX, the that in here So hopefully, term, way then mix going given I adverse role. should of not in I QX. is And

Operator

This now closing turn for question-and-answer to Shaw concludes call Alan I'll the comments. session. back Mr. the over

Alan Shaw

for questions your and participation your Thanks appreciate joining. this morning. certainly We

Operator

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

day. a and now wonderful lines, may You your have disconnect

Norfolk Southern (NSC) 25 Oct 232023 Q3 Earnings call transcript