October 27, 2010 / 11:12 PM / in 8 years

UPDATE 2-Norfolk Southern Q3 profit tops forecasts

* Q3 EPS $1.19 vs estimate $1.09

* Net income up 47 pct

* Operating revenues up 19 pct

* Coal drives revenues (Adds quotes, background, byline)

By Lynn Adler

NEW YORK, Oct 27 (Reuters) - U.S. railroad Norfolk Southern Corp (NSC.N) reported a higher-than-expected third quarter profit on Wednesday as volumes grew for the fifth straight quarter.

“We continue to see an economy characterized by slow growth, but growth nonetheless,” Chief Executive Wick Moorman said in a statement.

Third-quarter net income rose 47 percent to $445 million, or $1.19 per share, beating analysts’ forecasts of $404.7 million, or $1.09 per share, according to Thomson Reuters I/B/E/S.

A year ago, net income was $303 million, or 81 cents a share.

Railway operating revenue rose 19 percent in the quarter to $2.5 billion, mainly due to a 15 percent increase in traffic volume, the Norfolk, Virginia-based railroad said. Coal was a big driver, with revenues jumping 24 percent to $709 million.

General merchandise revenues rose 16 percent to $1.3 billion and intermodal revenues rose 19 percent to $464 million.

“The rails have gotten very good at managing their assets and being able to leverage their models for current demand,” said John Mims, BB&T Capital Markets analyst.

Norfolk Southern’s shares, which closed before the results were released, were down 85 cents, or about 1.4 percent, at $61.35, So far this year, the shares are up 18.7 percent.

Earlier on Wednesday, Canadian Pacific Railway Ltd (CP.TO) reported a bigger-than-expected 28 percent jump in quarterly operating profit on a big freight revenue gain. Canada’s second-biggest railway has been cautioning analysts not to expect similar growth in the foreseeable future, analysts said.

“They’re not going to keep growing at the pace that they’ve been growing because all of this is being driven by the recovery from the recession and the easy comparison periods are getting behind us,” Canaccord Genuity analyst David Tyerman said, Read more at [ID:nN26150309]

Demand for durable goods excluding transportation unexpectedly fell in September after an August increase, while new home sales rose but stayed soft, confirming a slow path toward economic recovery. [ID:nN27216698]

Still, the railroads widely beat third quarter profit estimates on rising freight volume, as well as cost cutting.

CP’s bigger competitor, Canadian National Railway Co (CNR.TO), reported on Tuesday a surprisingly strong 21 percent profit jump and forecast a robust end to the year if the economy holds up.

Kansas City Southern (KSU.N) beat estimates on Tuesday despite track damage from Hurricane Alex in July that ate into its revenues. [ID:nN26265123]. The company looks for an expanding Mexican economy to drive up its cross-boarder business.

Separately, U.S. trucker Old Dominion Freight Line Inc (ODFL.O) said on Wednesday that quarterly profit more than doubled, surpassing forecasts, on rising demand for hauling services and higher pricing. Its shares gained more than 7 percent and are up more than 29 percent this year. (Additional reporting by Susan Taylor in Ottawa and Scott Malone in Boston; editing by Andre Grenon)

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