Norfolk Southern Wins Customers From Rival CSX -- WSJ

By Paul Ziobro Features Dow Jones Newswires

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (July 27, 2017).

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Norfolk Southern Corp. says it is starting to win over customers to its railway amid disruptions at rival CSX Corp., whose network is undergoing an extensive overhaul under a new chief executive.

"We have seen some business move over to us," Norfolk Southern Chief Marketing Officer Alan Shaw said on an earnings call Wednesday. "It's a small amount, I'll tell you that, but it's early."

CSX is the midst of change under new CEO Hunter Harrison, who joined in March promising to quickly cut costs and implement a network with more precisely scheduled trains. Already, he has closed a number of yards that sort railcars and put thousands of railcars and hundred of locomotives in storage.

The changes have disrupted operations for shippers, some who have seen days added to transit times for cars. Mr. Harrison last week told analysts that shippers need to brace for "a little pain and suffering" amid the changes, which he says will ultimately lead to better service and faster trains.

Norfolk Southern appears to be capitalizing to some degree from the changes at its primary Eastern U.S. rival for long-haul rail shipments. Norfolk Southern executives cautioned it was early in the process and that it will only go after the added volume if it makes sense.

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"We'll take the market share, whether it's from truck or competitors, as long as it complements our network and, obviously, falls to the bottom line," Chief Executive James Squires said. Mr. Squires said his railway is conducting focus groups with shippers on how to improve service and "redesign our network around what they want."

Many shippers can't move traffic easily from one railway to another, since mines, production facilities and warehouses may only have one track serving their facility. But as shippers plan long term projects, some are leaning toward the potentially more stable situation.

"If there is uncertainty there, I'd rather go with a more certain future, " said Jay Roman, president of Escalation Consultants Inc., which helps shippers negotiate rail contracts.

In its latest quarter, Norfolk Southern posted a 23% increase in profit to $497 million. Revenue rose 7%, led by a 32% increase in its coal business and a 10% increase in intermodal transportation.

The company said it expects volume to weaken in its merchandise business during the remainder of the year, partially due to declining auto shipments, and overall growth won't be as robust as it has been, echoing comments from other freight railroads.

Shares, up nearly 25% over the last 12 months, fell 3.2% in recent trading to $115.08.

Write to Paul Ziobro at Paul.Ziobro@wsj.com

(END) Dow Jones Newswires

July 27, 2017 02:47 ET (06:47 GMT)