Norfolk Southern Corporation · NYSE:NSC
Norfolk Southern — Q4 2023 Earnings Presentation
26 slides from Norfolk Southern's earnings presentation, Jan 26, 2024
Slide 1: Q4 2023 Earnings Call
Q4 2023 Earnings Call January 26, 2024
Slide 2: Forward-Looking Statements / Non-GAAP Measures
Forward-Looking Statements / Non-GAAP Measures This presentation and the related materials contain forward-looking statements within the meaning of the safe harbor provision of the Private Securities Litigation Reform Act of 1995, as amended. These statements relate to future events or future perfor
Slide 3: CEO Remarks
01 CEO Remarks Alan Shaw President & Chief Executive Officer CUSTOMER-CENTRIC, OPERATIONS-DRIVEN 3
Slide 4: Delivering Safety and Service Improvements
Delivering Safety and Service Improvements 0.99 0.92 0.85 Goal ↓42% Improvement 0.53 2020 2021 2022 2023 2022 2023 Mainline Train Accident Rate Intermodal Service Composite FRA Mainline Accident Rate calculates the total number of reportable events occurring on that portion of the track that connect
Slide 5: Investor Day 2022 Vision for Value through Resilience
Investor Day 2022 Vision for Value through Resilience Norfolk Southern Investor Day 2022 presentation is available in the Investors section of www.NorfolkSouthern.com CUSTOMER-CENTRIC, OPERATIONS-DRIVEN 5
Slide 6: Financial Overview
02 Financial Overview Mark George Executive Vice President & Chief Financial Officer CUSTOMER-CENTRIC, OPERATIONS-DRIVEN 6
Slide 7: Estimate of Eastern Ohio derailment-related costs
Expense Paid in 9M Q4 Total 2023 Environmental-related costs $699 $137 $836 $517 • Environmental response efforts and expected remediation and monitoring activity Estimate of • Legal and other costs 292 89 381 236 Eastern Ohio Legal-related activities and community assistance derailment- Insurance r
Slide 8: Key Financial Data
Key Financial Data Q4 2023 and comparison to Q4 2022 favorable / unfavorable $ millions except per share Fourth Quarter Operating Operating Operating Net Earnings Revenue Expense Ratio Income Income per Share Q4 2023 GAAP $3,073 $2,265 73.7% $808 $527 $2.32 Eastern Ohio incident/response - ($150) 4.
Slide 9: Operating Expense Components
Operating Expense Components Adjusted Q4 2023(1) vs. 2022 $ millions favorable / (unfavorable) ↑1% ↑10% ↑6% ↑7% ($68) ($31) ($21) ($3) $2,115 $2,056 $64 ↓17% ($59) ↑3% Pay rates ($37) Purch Svcs. ($19) Road Study ($8) Materials ($23) Price $67 EE Levels ($37) Rents ($12) Other ($8) Claims $28 1 2022
Slide 10: Service Costs and Resiliency Investments
Service Costs and Resiliency Investments Service Mitigation Costs Incremental Expense from Resiliency Investments $50M $48M $46M $40M $41M $35M $20M $15M Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 CUSTOMER-CENTRIC, OPERATIONS-DRIVEN 10
Slide 11: Financial Results
Financial Results Q4 2023 vs. Q4 2022 favorable / unfavorable $ millions except per share GAAP Adjusted Adjusted Variance vs ‘22 2022 2023 2023(1) $ % Income from railway operations $1,181 $808 $958 ($223) (19%) Other income – net 34 38 38 4 12% Interest expense on debt 177 195 195 18 10% Income bef
Slide 12: Full-Year Results
Full-Year Results 2023(1) vs. 2022 favorable / unfavorable $ millions except per share REVENUE OPERATING OPERATING OPERATING EARNINGS EXPENSE RATIO INCOME PER SHARE $589 5% $12,745 $253 3% 510 $12,156 bps $7,936 $8,189 $2.14 67.4% $13.88 15% $842 $4,809 18% $11.74 62.3% $3,967 1 2022 2023 2022 2023
Slide 13: Free Cash Flow & Shareholder Distributions
Free Cash Flow & Shareholder Distributions Twelve Months / $ millions $4,277 $1,847 $3,179 $3,110 $2,349 $830 Share $622 repurchases $1,167 $1,225 Dividends Cash from Property Free cash operations additions flow $1,444M 2022 2023 $1,043M $401M 2023 Free Cash Flow(1) Shareholder Distributions (1) Ple
Slide 14: Operations Overview
03 Operations Overview Paul Duncan Executive Vice President & Chief Operating Officer CUSTOMER-CENTRIC, OPERATIONS-DRIVEN 14
Slide 15: Safety Update
Safety Update FRA Personal Injury Index FRA Accident Rate FRA Mainline Accident Rate 1.50 4.29 0.99 0.92 1.28 0.85 1.09 3.80 3.83 1.02 Better Better Better 3.60 0.53 2020 2021 2022 2023 2020 2021 2022 2023 2020 2021 2022 2023 FRA Personal Injury Index calculates the number of FRA Train Accident Rate
Slide 16: Service Update
Service Update Improving Fluidity Will Drive Down Service Mitigation Costs 21.9 28.1 20.9 27.2 20.7 20.7 26.7 20.4 20.5 26.3 20.0 25.9 Better Better 25.2 24.9 24.8 19.1 18.7 24.0 18.2 23.4 23.2 17.5 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Oct Nov Dec Jan* Q1 Q2 Q3 Q4 Q1 Q2 Q3 Oct Nov Dec Jan* 2022 2022 2022 2022 2023
Slide 17: Productivity Indicators
Productivity Indicators Workforce Locomotives Fuel Efficiency kGTMs per T&E Hour Worked Miles per Day Gallons per kGTM 20.5 203 203 1.12 1.12 20.0 19.8 Better 193 Better Better 191 19.3 19.0 184 Q4 Q1 Q2 Q3 Q4 Q4 Q1 Q2 Q3 Q4 Q4 Q4 2022 2023 2023 2023 2023 2022 2023 2023 2023 2023 2022 2023 Driving W
Slide 18: Increasing Velocity of the Scheduled Network Will Drive Productivity
Increasing Velocity of the Scheduled Network Will TERMINAL DWELL MANIFEST TRAIN SPEED Drive Productivity HOURS 26.3 MPH 25.6 20.3 20.4 • Manifest dwell, velocity, and trip plan 23.9 compliance will mark our progress 17.5 17.0 • We are driving it through: Better 19.2 19.3 16.1 • Strict execution to p
Slide 19: The Flywheel Effect From Velocity Gains Will Drive Down the Cost Structure
Recrew Savings The Flywheel Effect Maintenance From Velocity Gains Benefits Will Drive Down the Cost Structure Increasing velocity and running the plan will drive the cost structure Dividend Capacity down Locomotive Productivity CUSTOMER-CENTRIC, OPERATIONS-DRIVEN 19
Slide 20: Market Overview
04 Market Overview Ed Elkins Executive Vice President & Chief Marketing Officer CUSTOMER-CENTRIC, OPERATIONS-DRIVEN 20
Slide 21: Return to Volume Growth, Revenue Headwinds Persist
Return to Volume Growth, Revenue Headwinds Persist Q4 2023 vs. Q4 2022 / Revenue change $ millions / favorable / unfavorable $3,237 $3,073 ($27) ($119) ($18) Q4 2022 Q4 2023 Q3 2022 Merchandise Merchandise Intermodal Intermodal Coal Coal Q3Total 2023 Revenue Revenue $1,849M (1%) $794M (13%) $430M (4
Slide 22: Weak Freight Market and Non-Core Headwinds Pressure Results
Weak Freight Market and Non-Core Headwinds Pressure Results Core revenue growth offset by lower fuel, storage and equipment charges Revenue Change $ millions 6.7 Million Units 1% $141 ($87) $12,745 Storage $12.2 Billion Revenue 5% Fees ($296) $3 ($383) $1,802 Revenue per Unit 3% $12,156 ($350) $1,62
Slide 23: Market Outlook
Merchandise • Price Gains • Steel Demand • Manufacturing Activity Intermodal Market Outlook • Import/Export Volumes • Truck Rates • Consumer Demand Coal • Export Demand • Commodity Prices • Stockpiles CUSTOMER-CENTRIC, OPERATIONS-DRIVEN 23
Slide 24: A Better Way Forward
A Better Way Forward • Significantly increased FedEx volumes during Peak Season • Located a plastic recycling business in Ironton, OH • $3.1B of total investment along Norfolk Southern lines in 2023
Slide 25: 2024 Outlook / 3 Year Outlook
➢ Picture to be updated 2024 OUTLOOK • 2024 revenue growth: ~3% • Accretive incrementals as productivity builds through the year • CapEx flat with 2023 ~$2.3B plus CSR purchase of $1.65B that flows through CapEx 3 YEAR OUTLOOK • Roadmap to 100-150bps margin improvement annually, narrowing gap with p
Slide 26: Thank You
Thank You www.norfolksouthern.com