Norfolk Southern Faces Challenges in Metals and Automotive Shipments Amid Stronger Intermodal Growth

Norfolk Southern

Norfolk Southern (NS), a Class I railroad in the eastern U.S., anticipates headwinds in the metals and automotive sectors in Q4 2024, potentially offsetting growth in other areas like grain and chemicals. This comes as the company reported a 3% rise in Q3 revenue, reaching $3.05 billion, alongside a substantial profit increase to $1.09 billion, primarily due to one-off costs in the same period last year.

Metals and Automotive Sectors Under Pressure

NS highlighted concerns about declining demand for steel and automotive shipments, aligning with similar warnings from CSX in October. Automotive volume decreased by 4% year-on-year to 87,900 carloads, while revenue per railcar helped stabilize total automotive revenue at $274 million. Meanwhile, metals and construction volumes dropped 2%, though revenue increased slightly by 1% to $420 million.

Coal Markets: A Mixed Outlook

The coal market presented a "mixed bag" for NS. Metallurgical coal shipments to East Coast export terminals were affected by declining global coal prices, which are partially linked to geopolitical uncertainty and China’s demand. Despite this, thermal coal export markets showed signs of resilience. Overall, coal volume rose by 11% to 185,300 carloads in Q3, although revenue fell by 2% due to lower benchmark prices.

Intermodal Growth and Recovery

Intermodal operations remain a bright spot for NS. Intermodal volume climbed 9% to 1.05 million carloads, generating $763 million in revenue—up 4% from Q3 2023. However, domestic intermodal rates continue to face pressure from stagnant truck pricing. International intermodal shipments are rebounding after delays caused by the International Longshoremen's Association strike in early October.

Merchandise Segment Performance

NS’s merchandise segment, which includes agriculture, forest, and consumer products, posted a 6% increase in volume to 186,300 carloads. Revenue grew modestly by 2% to $624 million. Chemicals shipments were another strong performer, with a 4% increase in volume to 128,900 carloads and a 9% rise in revenue to $543 million.

Outlook for 2025 and Beyond

NS expects "continued but sedate growth" in Q4 2024, supported by easing interest rates and infrastructure projects. However, concerns remain regarding the stability of commodity markets and the geopolitical factors influencing demand for key materials like steel and coal.

Chief Marketing Officer Ed Elkins expressed optimism for 2025, forecasting that the company would "outpace inflation in all major markets."