Norfolk Southern Corp. reported third-quarter net income more than doubled, as the railroad operator took advantage of one of the strongest markets for freight in years. Railroads are an important economic indicator, moving more than 40% of all U.S. freight on a ton-mile basis, ranging from heavy commodities such as coal and grain to consumer goods. Norfolk Southern, which is based in Norfolk, Va., and operates in the Eastern U.S., is also a major hauler of paper, chemicals and automobiles. Profit at Norfolk Southern increased to $288 million, or 72 cents a share, from $137 million, or 35 cents a share, a year earlier. Results in the latest third quarter were boosted by a gain of $53 million, or 13 cents a share, from a corporate reorganization of the routes and assets of the former Conrail that Norfolk Southern now owns. Revenue soared 16% to a record $1.86 billion from $1.60 billion. The strong performance by Norfolk Southern, the first big railroad to report third-quarter results, comes as railroads and trucking companies are enjoying some of the strongest conditions for freight in decades. Helped by the improving economy, demand for freight transport is soaring. Meanwhile, rail and truck capacity is tight, leading to unusual pricing strength for transportation providers. "This is one of the best freight environments for transportation companies in many years," says Ken Hoexter, an analyst at Merrill Lynch, and "Norfolk Southern is clearly the premier U.S. railroad operator at this point." Norfolk Southern said its revenue gains were led by intermodal, which was up 28%, and coal, which increased 20%. Intermodal shipments refer to freight moved long distances by a combination of trains and trucks. Norfolk Southern was able to handle the surge in business without suffering the congestion and freight slowdowns that have characterized operations at some railroads in recent months. That's largely because Norfolk Southern has invested aggressively in past years to remove bottlenecks and hire enough crews to handle higher freight volumes. David Goode, chairman and chief executive officer of Norfolk Southern, said that some of the company's freight gains are the result of tight capacity among truck companies because of a shortage of truck drivers and equipment. He said that high fuel prices are driving some freight to railroads, which are more fuel efficient than trucks. But he said, "we worry about the overall effects" of high oil prices on the economy.
