Norfolk Southern Wins Customers From Rival CSX -- WSJ
July 27 2017 - 3:02AM
Dow Jones News
By Paul Ziobro
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (July 27, 2017).
Norfolk Southern Corp. says it is starting to win over customers
to its railway amid disruptions at rival CSX Corp., whose network
is undergoing an extensive overhaul under a new chief
executive.
"We have seen some business move over to us," Norfolk Southern
Chief Marketing Officer Alan Shaw said on an earnings call
Wednesday. "It's a small amount, I'll tell you that, but it's
early."
CSX is the midst of change under new CEO Hunter Harrison, who
joined in March promising to quickly cut costs and implement a
network with more precisely scheduled trains. Already, he has
closed a number of yards that sort railcars and put thousands of
railcars and hundred of locomotives in storage.
The changes have disrupted operations for shippers, some who
have seen days added to transit times for cars. Mr. Harrison last
week told analysts that shippers need to brace for "a little pain
and suffering" amid the changes, which he says will ultimately lead
to better service and faster trains.
Norfolk Southern appears to be capitalizing to some degree from
the changes at its primary Eastern U.S. rival for long-haul rail
shipments. Norfolk Southern executives cautioned it was early in
the process and that it will only go after the added volume if it
makes sense.
"We'll take the market share, whether it's from truck or
competitors, as long as it complements our network and, obviously,
falls to the bottom line," Chief Executive James Squires said. Mr.
Squires said his railway is conducting focus groups with shippers
on how to improve service and "redesign our network around what
they want."
Many shippers can't move traffic easily from one railway to
another, since mines, production facilities and warehouses may only
have one track serving their facility. But as shippers plan long
term projects, some are leaning toward the potentially more stable
situation.
"If there is uncertainty there, I'd rather go with a more
certain future, " said Jay Roman, president of Escalation
Consultants Inc., which helps shippers negotiate rail
contracts.
In its latest quarter, Norfolk Southern posted a 23% increase in
profit to $497 million. Revenue rose 7%, led by a 32% increase in
its coal business and a 10% increase in intermodal
transportation.
The company said it expects volume to weaken in its merchandise
business during the remainder of the year, partially due to
declining auto shipments, and overall growth won't be as robust as
it has been, echoing comments from other freight railroads.
Shares, up nearly 25% over the last 12 months, fell 3.2% in
recent trading to $115.08.
Write to Paul Ziobro at Paul.Ziobro@wsj.com
(END) Dow Jones Newswires
July 27, 2017 02:47 ET (06:47 GMT)
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