Norfolk Southern Results Weaken; CEO Cites Weak U.S. Economy

Railroad company Norfolk Southern reported a lower quarterly profit citing softness in the U.S. economy, in particular the housing and automotive sectors, but beat analysts' forecasts.

First-quarter net income slipped to $285 million, or 71 cents a share, from $305 million, or 72 cents a share, a year earlier. Analysts' average earnings forecast was 70 cents a share, according to Thomson Financial.

"We are encouraged with our performance in the first quarter, especially in light of the softness in the economy," Chief Executive Wick Moorman said in a statement.

First-quarter revenue fell 2% to $2.25 billion. Analysts had expected $2.315 billion.

Norfolk, Virginia-based Norfolk Southern said in a statement that "continued weakness in the automotive and housing industries" contributed to a 4% decline in freight volumes on its network.

The nation's major railroads have posted strong profit gains over the past few years due to improved management plus rising U.S. imports of consumer goods and robust demand for coal from utilities.

The current period of weaker U.S. economic growth is seen by some analysts as a test of the railroads' ability to perform well under adverse conditions.

Moorman told Reuters that economic headwinds and a tough comparison with last year would affect the railroad in the second quarter, but added he was "hopeful" the economy would grow at a faster pace starting in the second half of the year.

Lower production at DaimlerChrysler's Chrysler Group, Ford Motor and General Motors is a concern.

"The Big Three will be a drag through 2007 and into 2008," Moorman said.

He added, however, that the railroad's competitive fuel cost advantage over trucking companies -- it takes up to three times as much to move goods by truck as by rail over long distances -- means Norfolk Southern should see "continued pricing gains" in 2007.