Sept 15 (Reuters) – Norfolk Southern expects higher fuel prices to creating a significant headwind in the third quarter, even as the railroad operator continues to gain freight share from trucks, executives told investors at a Morgan Stanley conference in California on Tuesday.
CFO Jason Zampi said fuel prices had been expected to peak around May, but continued increases now represent roughly a 250-basis-point headwind to Norfolk Southern’s operating ratio compared with expectations two months ago.
He added third-quarter performance is projected to be slightly worse than normal seasonal trends.
Despite the fuel-related pressure, executives see continued incremental freight market share gains in the current environment and said Norfolk Southern sees its next major opportunity to shift freight from highways to rail during next year’s intermodal contract bidding season.
Zampi said customers are “mostly past” tariff uncertainty, describing tariffs as a largely one-time event that no longer appears to have a significant ongoing influence on markets such as automotive. He said the conflict in the Middle East remains a bigger concern because of its impact on fuel prices and global shipping routes.
On the proposed merger with Union Pacific, the executives noted that the regulatory review is moving broadly in line with expectations and that the current schedule provides greater visibility into the process.
(Reporting by Aatreyee Dasgupta in Bengaluru; Editing by Tasim Zahid)
