Railroad operator Norfolk Southern reported weaker-than-expected results, blaming lower freight volumes in some segments on a "softer economy." Norfolk Southern shares fell as much as 6%.
The company said that so far in the first quarter slowing economic growth continued to pressure the amount of freight being transported, but Chief Executive Wick Moorman said the company was "confident" volumes would rise in 2007.
The Norfolk, Virginia-based company posted fourth-quarter net income of $385 million, or 95 cents a share, compared with $362 million, or 87 cents a share, a year earlier.
On average, Wall Street analysts had forecast earnings per share of 96 cents, according to Thomson Financial.
Norfolk Southern said quarterly revenue inched up to $2.32 billion compared with $2.26 billion a year earlier. Analysts had expected $2.39 billion on average, according to Thomson Financial.
General merchandise volume was down, compared to the year ago period, as was intermodal volume. Intermodal services use standardized containers that can be hauled by truck, ship or
Coal volume was a bright spot, increasing due to demand from utilities.
Slowing Economic Growth
At an analyst meeting in New York that was also broadcast as a conference call, CEO Moorman said that slowing economic growth had continued to affect the railroad in January.
"(O)verall carloadings are experiencing downward pressure, especially in automotives and metals," he said.
Norfolk Southern also warned at the analyst meeting that coal volume may suffer as a result of this year's relatively warm winter, plus large coal stockpiles at utilities on the U.S. East Coast.
But in a telephone interview with Reuters, Moorman said the company expected the U.S. economy to "perk up" in the second half of the year.
"We are confident that our volumes will be up year over year," he said, adding that volume growth would likely be lower than in 2006.
Moorman also said the company aimed to maintain prices despite the lower volumes.
"I think we will be able to do that providing we are right about the economy," he said.
He added that the company's planned 2007 capital expenditures of $1.34 billion, up from $1.2 billion in 2006, remain unchanged, saying Norfolk Southern is "confident and comfortable" with its investment plan.