OMAHA, Neb. – Norfolk Southern Corp.’s fourth-quarter profit slid 29 per cent as the railroad delivered 6 per cent less freight. It plans to cut 2,000 jobs, or 4 per cent of its workforce, as it fends off a takeover bid from rival Canadian Pacific.
The Norfolk, Virginia, railroad said Wednesday it will cut about 1,200 jobs this year and the rest by 2020. It also plans to reduce overtime costs, eliminate about 1,500 miles of little-used track and improve efficiency by upgrading its locomotive fleet.
“We have the right team and the right plan to address the current headwinds and deliver superior value as we move through 2016 and beyond,” said Jim Squires, who took over as Norfolk Southern’s top executive last summer.
In the fourth quarter, the railroad reported net income of $361 million, or $1.20 per share. That’s down from $511 million, or $1.64 per share, a year earlier.
The analysts surveyed by Zacks Investment Research expected earnings of $1.28 per share.
Fourth quarter revenue fell 12 per cent to $2.52 billion. Analysts expected $2.59 billion.
Norfolk Southern said restructuring costs of $31 million weighed down fourth-quarter profit 10 cents per share.
The additional cuts it plans should save about $130 million in 2016 and create more than $650 million in annual cost savings by 2020, the railroad said.
Norfolk Southern executives have said they believe the railroad and its investors will fare better if it remains independent, so it has rejected Canadian Pacific’s roughly $30 billion offers.
Canadian Pacific officials have said they could create a more efficient railroad by combining with Norfolk Southern and improve performance. They predict roughly $1.8 billion in annual cost savings if the railroads merged with most of the savings coming from Norfolk Southern’s operations.
“Not only would a combined CP-NS result in greater savings, greater efficiency and stronger shareholder returns, but it would also enhance competition and help alleviate congestion in Chicago, which is better for customers, competitors and the broader economy,” Canadian Pacific spokesman Martin Cej said.
Norfolk Southern officials say they think the cuts Canadian Pacific envisions would go too deep and hurt customer service.
“This plan will enable us to achieve significant annual expense savings beginning in 2016 without compromising the company’s ability to capitalize on volume and revenue growth opportunities,” Squires said. “We are making progress despite a challenging operating environment.”
S&P Capital IQ analyst Jim Corridore said even if Norfolk Southern achieves all the goals in its improvement plan, it will still lag behind the performance of other major freight railroads.
For the year, Norfolk Southern reported profit of $1.56 billion, or $5.10 per share. That was down from $2 billion, or $6.39 per share, a year ago.
Revenue fell nearly 10 per cent to $10.51 billion.
Norfolk Southern Corp. shares rose 99 cents, or 1.4 per cent, to $69.89 Wednesday. The stock has declined 33 per cent in the last 12 months.
Elements of this story were generated by Automated Insights (http://automatedinsights.com/ap) using data from Zacks Investment Research. Access a Zacks stock report on NSC at http://www.zacks.com/ap/NSC
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