Norfolk Southern (NSC) 25 Jan 232022 Q4 Earnings call transcript

Greetings, and welcome to the Norfolk Southern Corporation Fourth Quarter Fiscal Year 2022 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce Luke Nichols, Senior Director of Investor Relations. Thank you. Mr. begin. may you Nichols,

Securities good performance will Please actual may within make safe subject future and the of and These risks of today's relate to Norfolk statements the that materially Southern, call, differ results. the to Private of provision we certain or harbor and Reform morning, you, from Act note XXXX. future everyone. events during meaning Litigation of Thank uncertainties forward-looking are statements which

and annual a our to reports those filed and for refer Please view SEC the quarterly important. full risks with of disclosure as uncertainties we most

Our presentation today are at used measures. to reconciliation our Investors nscorp.com in GAAP slides along with section measures available any the non-GAAP of comparable the

introduce Turning to Norfolk Alan Executive and Slide Shaw. Officer, Chief X. President It's to pleasure Southern's now my

Welcome everyone. Earnings Southern's Fourth Norfolk to Quarter Call. morning, XXXX Good

into with Marketing today Duncan, Officer. also Chief pleased Here to Chief Operating X. Officer; and moved role Ed our Paul Financial are George, our Officer on I'm the me welcome January of Chief Elkins, Mark who

their growth. Day month, productivity shareholder compete a chain. that of the service into that logistics we of long-term is strategy $XXX allows strategy create balanced to a in and through value and us billion our last smart sustainable and resilient heart and service, reliable our supply At product improvement build customers Southern to shared continuous Norfolk our to gives that market in truck Investor the At approach confidence

positive. Association strategy. the talking customers new with was of and shippers week, last extremely were about at Rail I the winter Midwest meeting reactions our

and encouraged to With performance, close by it our Now our the made we consistently. job great is progress. prove strides are year to

more to provide Service X product and than refine market in years, best the a We values. service it's customers and noticing. to been continue are will is at to evolve

our overcoming seasonality work to headwinds collaboratively business to outperforming and with at Southern, December as highs, first Norfolk attract slower in X a typical in network Volumes customers that our were the Ed capacity. constricted associated XX-week with Paul's teams quarters

persevered strong adapted in Our a and results team achieved challenging year.

and revenue, fourth double-digit quarter and year established the for morning. metrics growth detail records that income, full revenue this team other we new and both will EPS. were For to operating year We full in achieve the able both later XXXX,

this quarter, Also recognize national agreements the and and craft the dedication in These health unparalleled with package. we of increases hard work finalized railroaders frontline representing unions welfare contracts our historic benefits colleagues. wage an with our

bargaining to quality local national I discussions during of entire incredible important quarter would all of effort fourth With team XXXX. Norfolk for issues. now level the we complete, their to at the life throughout address like started thank and the Southern

improvement of have team our momentum the I'm has and proud the we created. delivered

XXXX. continues focus Our in service relentless on

is Paul from enhancements. allowing target momentarily more us across-the-board our hear You'll and to productivity opportunities specific improvement now how about for service

We macroeconomic environment you'll operate hear in about is uncertain, Mark. impact the recognize the and that of more we from Ed that which and

strategy. into we are course, in new And of charted on we term, Longer we've momentum carry our building the XXXX.

to at margins Day, deployment. capital balanced shareholder Norfolk top-tier and believe earnings heard positioned Investor our and long-term is competitive you industry uniquely As revenue we growth, through deliver Southern value

we look We organization, will progress customer-centric by service sharing there a get operations-driven our you. being and to with forward

Now

are for Paul it providing the Paul? our detail to more we over turn I'll on customers. to improved service

organization. out the strategy be to the since into am our customer-centric and team Operating our service and a getting new leading marketing implement to morning. to be good quarter. X My network; our areas: increased Officer the has role forth in as I focus vision to assuming set Alan, excited been Chief of collaborating this about field last we customers you, on with with operations-driven and the improved talk leaders convert volume Thank operating

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with begin discussion Slide on X. I'll safety a

that is Our will great an improved rate This safely injury have XX%. made where serious the frequency with safety XXXX the is strides, Operating even conversation is one and area too Every in begin many. we beyond. incident serve. communities but we

will in closest achieved safety delivering ballast the line those and gains the the in to in all we for to you XXXX. we safely Thank make for efforts XXXX and

spoke Moving X. best it more Day, the than been in has our last our years. Investor at we Since to Slide service is X

operating implementation continued the more executable our our improvements have leadership, in SPG for resource plan all contributed of our to of and simpler, service top customers. significant adds Our

reduced largest premium our for is safely times consistent, with For been we improved a performance largest intermodal, customer. creating peak is our by has our the and between hours expectations. is delivered segment now transit XX where parcel season Chicago have this improved. Northeast, and consistency another corridor, meeting also intermodal performance Average capacity. container perfect Merchandise Domestic velocity

cycling best transit turn at historic times, commodities. are maximizing utilization across trains our Both asset

year growth. capacity train continued our note speed with to You'll for terminal that climb creating low has dwell last from point also

our the on forward. resiliency moving into expect turned has network building our product we corner, focused customers and further are reliability that and service Our

our productivity on to Moving X. Slide update

approach We service, are productivity growth. committed to our and to balanced

Let's locomotives. start with

progress our on We fleet. use productive more solid out getting of made have

increasing can day. of You our in per terms that locomotive miles see here

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our our has a service grown have we to Next, improvement. workforce, that been critical element and

are to in and service forward. Our we with the GTMs our above pressuring reliable story has building we is the versus flat we news while state have gains year as levels, need This that were workforce pipeline good resilient remained steady training made. last capacity productivity. a looking be

will build workforce upon foundation productivity drive the We bring on greater this we railroad. volume as to back

fuel for record quarterly another set efficiency. have we Lastly,

a role fluidity driving certainly is efficiency alongside and our are our idling to fleet productivity efficiency gains to and Improving increasing for continue including has modernizations Our going of and our portfolio provide we initiatives fuel shareholders key our balanced compliance our initiatives. sustainable played plan, to value customers.

We our industry-leading in ramped talk record the X, Slide the the year and will priming On very the time, see recap in in early easy entered which was I XXXX stages made on what have up pipeline into that increased hiring progress ahead. and reaching about we a started of training conductor drove we referral with efforts no labor process efficiencies more. the campaign Jump our the training network These wages, approach. have our We determined staffing onboarding levels in tightness the much given data-driven task grassroots leveraging minimum off by and market. paid of incentives

that shoring now up to crew bases are in remaining so do the short, are are focused we We on determined and XXXX.

As we effectively more training Day the make out at by laid deploying progress, efforts. are cross-qualifying vision teams and Investor are go resiliency crews we executing and expanding

to as the working cover Moving on a items year. are that we few I new we enter will Slide X.

the about building. continuous culture talk let's are First, improvement we of

to long-term service we greatly and improved have keep vision resilience to getting our service have We reality. better. bring We of to know

to Intermodal, and high-frequency with Investor operating our across provide capacity season Day, me the plan examples. franchise. our our we rollout along With from few are discussed peak perfect improve using intermodal a learnings at Let reliability initial and

and those merchandise consistently. move resource and the to are On continuous will implementing productivity improvement we more identifying principles side, even faster cars that applying drive and levers next greater resiliency

to building a are our We transformation tools more part empowered timely more workforce. provide as to and of information digital actionable

a are improvement These examples driving just are DNA. how of few we into continuous our

additional to technology These from giving rebuilds equivalent a and Next, modernize converting to traction full XXX slated this we year, fewer reduce AC XXX assets. will are to hauling XXX capacity for locomotives rejuvenation. with locomotives, another DC growth locomotive them capability them providing DC

to to DC will provide to further. AC Our power pulling fuel and even efficiency greater conversions train productivity added increase continue

increased DC Investor size further productivity, strategy provide which conversion grow we opportunities will to train to at AC Day. Our discussed and train

And greater this export and in long-term progress our this XX% month, marked chain. highest increased supply provide customer on X which our of capacity we We volume have resiliency X size train initiative. made cholines will in just

talk investments. capital about our let's up, Next

miles installed servicing level in XX% We Our safely productive with than track in year XXX decades. the more XX% XXXX. ties a of replaced, rail our most than X more than best-in-class of delivered the engineering more teams in team same and worked track teams in done with XXXX has NS XXXX production

of building productivity productively. primed We're network. are train execute and in efforts highlight which -- between our for on capital plan year growth to and customers Cincinnati safety, safely siding of this progresses. incorporate committed maintaining will into one include infrastructure and the is resiliency, a resilient reliable our We additional to we will resilience and support our Wayne, Fort the just will as longer This a

Lastly, we execution that on over top into railroad in the are have our converting the focused the capacity volume disciplined XXXX. intensely made of additional we moving and SPG with plan gains

consistently at high merchandise Our are levels all service our performing across intermodal, and service bulk now of network.

talk to will we this the Ed can about I capacity work. now put market hand how to outlook you. to Thank expand and it on

good It's to have Paul. you everyone. you, great to and Thank us, with morning

decline fuel year-over-year The offsetting fuel $X.X quarter, in revenue our XX. of price on strong to merchandise. review year-over-year fourth less the we consecutive more pricing in RPU capitalize XX revenue in higher than results of our and volume. intermodal environment delivering Slide growth and XXth a X% by surcharge from Overall, improvements starting XXth remains XX% out quarter quarters Let's for grew with our and billion,

merchandise, enhancing to the to our in levels quarter, our as year Speaking customers. Volumes for improved drive of ability recovered value service prior fourth

and demand. by sand driven saw and in steel where for declines largest by particularly was gains automotive exceptionally markets and availability proppants in We production natural equipment corn support were high to surge gas demand our followed in Our recent challenged. market soybeans the the also

we to XX% revenue earlier, record velocity are to increased revenue positive $X.X unit, Paul mix. our velocity on in a see started from progress we the of of quarter. and that reached making increased and fleets, highlighted fuel, results excluding the per year-over-year billion and As the gains improving merchandise end toward meaningful price car Merchandise level

volume year-over-year of market impacted in was domestic to within Total surcharge season where Intermodal. lines a business The of price demand. decline XX% international fuel concentrated higher a the revenue our into headwinds as fourth the improved gains our in and lines business decline grew volume. Conversely, than truck heading X% higher loosening more inventories offset quarter. revenue and Shifting holiday negatively from from

to intermodal chain supply easing services congestion. Our year-over-year of back X% inland international intermodal our rates amid as several and customers ocean rose volume Point shifted lower

gains. and up revenue year-over-year were intermodal higher Total revenue unit price fuel, per excluding unit, revenue and on fuel per

coal, reflect to through turn our as in capturing from for our potential upside results we quarter market for our If revenue create service. as ability the to the growth success dynamics both well improved capacity

pricing capture which more utility volatile availability leverage for markets. revenue volume our excluding the these unit, revenue fuel, volume from utility coal quarter equipment of able X% record increased price and prior cycle higher quarter. by gains, per approach revenue damages energy unit from growth, coal the revenue fourth were business, to from to the and increased liquidated driven XX%, reflecting per to fuel market-based shortfalls. improved led Both value reached gain in in in levels, Coal We volume surcharge times

volume in geopolitical the to X% closures. from markets year-over-year offset Our volumes by declines coke was grew facility quarter, coal growth resulting by coal in demand higher shipments driven export conflict. also this increased due and Overall, partially

total supply revenue X% revenue revenue franchise, in excluding and higher Let's for XX% record fuel full a from fuel, surcharge strongest to were declines volume weakening from market billion, truck in year offset and unit, revenue and reached annual gains, the unit where despite in XXXX increase of revenue year volume. volume. the chain Total Volume revenue move fuel, We partially congestion and a delivered $XX.X per Slide XX by to for by our level declines. headwinds total intermodal less driven price per decline XXXX. led

in a increased for energy strong market and global saw We business as for a strong our export coal growth on NS. market coal volumes

to Our marketplace in into working are progressed to performance customers of to XXXX be momentum our enhance business. our the commercial we We're recovering delivering our the providing as our internally side the to evidence need provides together that and ensure value service year offerings that the is successful. product

me join outlook amid the slowdown XXXX will on for if cautiously some Lastly, signals XX, environment our optimistic macroeconomic in you uncertainty of Slide and in is a activity.

the our and headwind increase At truck levels near demand. to revenue temper in accessorial term, revenues service modal drive will same be lower address improving for while a At Our unmet and time, fuel economic unit. will prices our capacity conversion the could least volume. opportunities per to from conditions

a we rightsize Within many weakness in forecast of of businesses in merchandise, that in. industrial demand. with that drives variety shows recent markets macroeconomic as to inventories manufacturing manufacturing, of participate will pressure the mindful the production, U.S. our anticipate to XXXX for conditions respect that and Current markets. in particularly contraction We're we

interest fluidity. will overall industrial weak businesses many availability headwind Additionally, network market weakness in housing as be our will Volumes increased be the a expect to also by rates. adjusts market and to we the persist of and to higher this XXXX supported housing equipment

and will revenue surcharges supply although pressured Looking improving will at for intermodal, reduced volume macroeconomic service throughout lower despite savings the environment, growth by remains available balance during pandemic by credit year. our will as dependent capacity and chains normalize fuel create more Total on the expensive. sheets levels growth. are be for the many be to accumulated supported Household revenue storage continue excess becoming

market And the long year. expect a will would along the start demand headwind this year, remains of we U.S. the Weakness to market with truck as demand at supply anticipate be so but the rebalance for housing and supportive truck resilient, we intermodal. later in the consumer

benefit a fluidity ocean rates return points, improving Inland Intermodal. Our to supply to Point our prompting international customers will chain lower from at of business continue and inland

year-over-year supports The coal. improvement. export outlook markets modest to to for and flat Turning volume the current utility coal a

remain is to will that productivity demand and improvements our with demand on handle likely capacity our to flat, efficiency utility network. of overall more While increase

will For benefit Southern coming Norfolk coal seaborne despite export, from supply softening additional prices. online

restricted to factors to We coal. expect which the global by coal met supply continue be support of should U.S.-sourced demand geopolitical for

basis. experience which ARPUs pricing of the the comps on first met year, tough We year-over-year pressure coal in export half will will a

present, for energized the into our on certainly grow momentum to are for we Uncertainty focus our our things to and going strategic that and by recent we're our successfully business. and drive momentum our our we results Overall, and but plan continue to for we are heading control value are customers leveraging shareholders. on that still 'XX, focused risks downside execute and to can customers

of their support I'd in partnership to delivering lastly, toward XXXX product them that recognize our the appreciate We they need And XXXX customers momentum we sustained once their as thank business. like succeed. for for forward to throughout all service again and their move with

financial will I for now to results. over turn Mark it an update on our

good Thank you, morning, and Slide everyone. on I'm XX.

Ed, outsized Operating accrual prices from which million strong an quarter adjustments the were heard $XXX up will adverse you As driven XX% performance, XX%. I some primarily another elevated had quarter shortly and year-on-year, up significant operating had revenue the or fuel by impact describe in on of ratio. that we expenses

up double set billion $X.XX was at $X.XX, EPS income quarter Operating digits a fourth record. year-over-year.

XX. to Moving Slide

Talking first earnings favorable related $XX of the year. the to was bottom getting Let's the for to improvement by saving aided employees retroactive not distributed to operating to commitment reconcile for but before end wages as the the do, acceleration well the the was in and row specifically income, a our thing the our taxes changes section, company. created right in share. It true-up million per added the only drivers as wage the accrual operating employees payroll of benefit the ratio of to income, operating

of $XX items buckets. a numerous that see basis second adjustment at category the million to in I'll there the was a OR $XX headwind bottom from the expense the to equates put boost you provided to But claims That will in which nickel unexpected that a adverse XX EPS. reconciliation and savings, in tailwind the point X million expense row

in derailments of Accrual which related basis to on fourth the personal to XXX results based items activity $XX adjustments with equates and QX EPS. that adverse costs based injury the adjustments reserves in occurred OR positive points a on studies, environmental quarter, reserves during $X.XX Combined, and million of these quarter. headwind actuarial smaller last drag to versus year-over-year adjustment associated

million, core operating XXX actually service-related incrementals well points that The by at costs. Absent was those translates lower of as reconciling $X.XX. OR $XX basis detailed, growth income EPS driven to contraction growth the net inflation as just I items X impact and reflects

was up as So for new the again employment driven operating X%, wages was claims heavily quarter, benefits the let's increase Fuel $XX or quarter contracts XX. drill Slide XX% million items Other labor a on in $XX or expenses elevated expense million prices. we into $XX which the the due driver higher by the well elevated were & from that this $XXX to by just impacted million now Compensation levels. discussed. was up primary Materials fuel million, included as and up

were in services inflationary as driven well transformation. service primarily our Purchased the pressures, costs continued we progress from quarter, related costs as our XX% or $XX up to million digital technology-related environment as

of are inflation Some savings intermodal from associated the volumes. with intermodal offset that lower than more operations impacts

year-over-year, that up roadway But consistent of in XXXX depreciation and was out periodic are our findings $XX study result our with prior expense. depreciation me the completion will quarters. a million step-up in quarterly point Depreciation let nearing we

be a $XX the expect year double will see around here, impact the million what full XXXX growth quarterly step-up can meaning range. be the You million in to year-over-year that that you in will $XX

Shifting to XX. Slide

activity. X%. share up over million as exceeded more income the $XX strong Let's expense, much normal look million was growth net net spending of the or due growth XX% income a of the in an increase last $XX and back at $XX income a to million, repurchase quarter year. EPS profile Net below other amounted at flipped After to the results the year to line.

of EPS XX% looking relative year record was the driven and full at to results. by revenues $X.XX XXXX. of increase to $XX.XX, which XX% an now or Turning XXXX billion, $XX.X and was Slide up compared to XX

year, ratio adverse at look impact you year headwinds prior operating and the of the full Recall the versus As settlement. OpEx wage

Board at Moving over with had up to to Property We a first billion another XX. will $X.XX shareholder this returned $X.X repurchased. guiding. to dividend and for X% our distributions in quarterly strong ended return you with our XX.X we in shares the here shareholders. additions were the just our All quarter. $X to read demonstrates have distributions been exactly Slide again over increase million had XXXX, or about as Dividend capital year XX%, commitment approving year billion

turn I'll that, to now back it with Alan. And over

Mark. Thanks,

turn Let's to Slide XX.

XXXX in for landscape see uncertainty outlook of environment with are of Our challenging XXXX reflects the demand macro inflation the At full level year a the which this time, and path performance. revenue unclear. we

We of ARPU improving with volume down will we recapture. eventual and from flat product. revenue our unwinding expect to able to as unlock. chains to with supply deal lower accessorial pressure the absorb coal revenues share as surcharge service softening be pressure to Thanks be fuel pricing,

of in income But difficult revenue in will to pricing in uncertain are another in be grow from a environment. this it year strong operating environment, hard that ARPU are There XXXX. to core gains. flat will benefit variables predict a lot

With by the headwinds ARPU cost benefits product as as from neutralized an described. improving just the than more well being service inflation I

look for entered consistent December. front at Despite and detailed challenges in we XXXX with $X.X of to and the we're When you Investor that Mark we from with be we in economic ahead, see great heard is expecting the CapEx uncertainty, than balanced confidence more billion disciplined and As in momentum. of Mark cyclical Day, supportive XXXX. plan us. spending This roughly

growth Southern. long-term opportunities franchise for see create a Norfolk macro trends built that for like We

the and service, growth. We productivity strategy, have right balancing

still product. a strong improving We service have and

talented, railroads, are getting We have of dedicated and just the we right started. team

to call the questions. open now will We

Operator?

from Wadewitz Instructions] Our with Tom UBS. of the line comes first [Operator question

guess potentially if you whether you Yes. that? car if per see I intermodal domestic market just or contracts constructive, sound protect know, perspective but some pretty offer Wanted get you pricing the paid could and flow-through some you you yields, think on don't more to lower intermodal, I also some of -- wondering into you intermodal, what additional your on coal. Great. on see detail some more, revenue in in on

a on how given And we takes. puts then and more coal, detail to guess kind little I things model of of ought on just the some the

it address turn on and to I'm your going yield Ed him Tom, our RPU. let to and over questions

customers listen contracts. truck out the it's their to positive into in get We right also not loose total on the a calls, in But of seen I'm used market, We've market in think going heard of to call, increase. it's their would bottoming our You last spot weeks. last export the very individual the the think terms you've of continuing we some, to sustained what any months. is now. earnings shoots no of of and I outlook, perhaps and we some licensed sustained see a that there green for number a for bottom reached what motor U.S. that's decrease carriers trucks few is are in the X doubt development

RPU we reached think and feel and going about a of as in our that for rebalance, is space -- forward, So RPU point truck. into okay for to going into the we opportunities going market 'XX the stability go market we I

that the side, had fourth liquidated we in damage On claim, up a RPU which fourth coal the quarter. beefed quarter,

have more a curves we're met of utility tough second do, going can still But export road we're a ahead, going there last in in to did forward coal for and the support coal and we handle forward, you there's quarter, as well to as comp than out year. Looking in comparisons. see we the tough just market, the terms particularly

it in bit LD frame Can you little ballpark for impact us. a the XQ? Just

sequentially. a the would RPU have downward slight I seen think without LD, you

Sequentially, Great. Downward. okay.

next Our comes line of with Alliger Sachs. question Goldman the from Jordan

that as of might big curious, the we through second year? growth Do about year a tough half, from EBIT backdrop, EBIT grow a Is you some point to differential your full think expect there first picture move you perspective outlook. to end the I be half? as I'm sort at be possible dollars. at think the macro you on call mentioned the it just

but going and we've we're uncertainties a for you Mark rate some as tailwinds of also cadence number on bit about I'm seeing of to of just revenue are, let headwinds of There lot a couple the pressures. There's cuts. there a cross articulated Ed a us, talk little through and got year the what and out some those noted, expense.

really depend as line -- a the with Yes, we if, lot that evolves. in that on demand we fuel to top about think core year, a recession way And including the got deal the fact, is tailwinds destruction. strong we've really, in We to some of year. efficiency. going there have a it's with, had But pricing efficiency lot anticipate this as well as fuel X% we

the expect costs another wind we'll next do We our year good has service have that of of And I product that a down some improved. now year. expect service-related

I However, half. that in have the absence the of third expect big claims this And And the that we more to back of nature related to expect booked quarter to course, was the wage anomalous, wouldn't quarter of the that in had would adjustment manifest probably start and years. then, some fourth I we all. we'll at repeating that impact it in would truly quarter, prior of be

of some tailwinds the look are into as those So the year. we

we heavy headwinds. pretty some swimming But against are

And the then throughout the spaced and call, diminishing will be that level including on we year. we've inflation the wage mentioned, we depreciation of more some back step-up half. which go revenues again, we in the evenly As RPU coal the year, the do to I talked as increases. through meaningful have about And absorb, accessorial mainly got

what -- got going really to but -- lot So good good and The laid but biggest of be the We've core pricing a I kind again, headwinds are volumes. is variable of tailwinds. out.

win. we how get So much

Citigroup. from the Wetherbee next Our line of comes with question Chris

last can that I Maybe up pick comment. on

the for of in. year? close that more particularly share terms volume you have out to volume, in a terms I ultimately OR yield guess, the you positive expectations, laying know helpful bit I some And Mark get in the be able of little a to been here. outcome So Do expect recapture think

sort sort think love your holding to OR understand we of takes trending sort So things the certainly, how improvement first if you would But view just are just outlined. in of quarter, on or the I do puts out, for the how half XXXX. of first not, potential and of line maybe some given about

is to at take seeing This service I'll a place where a that take Ed. improved benefits swing back finally we're And right able of to on now. the our We additional we it. have service were volume.

So very a poised months manufacturing describe claw guarded, We've are we're doing start the I to what I at claw The it. housing, we're we look all markets, way question of we a business. yes, inflect our the think X would I flavor market is seen give or uncertainty. for what that negative to as lot -- volume that go in our is, demand for in able that's the I but is be to you for might present be past with which position some of to we including think important is present we inflation, going back have there's back opportunity. overcome certain enough 'XX. to you to instruction a The are I you many answer effect to interest know in can I'm rates but don't to, just to and trying

We fluidity improvement, the leads about manifests recovery deliver. grow. which there's network to we our itself, capacity there the and of customers, to ready. to talk right landing. we'll look for they the right customer want that at And soft starts I have when us, lot growth. right building to they're for the and poised be There's going the chance that people might service could a as there, factors, those able soon investing capacity some as we're be going And are a to for to and We're what growth, that The service all positives, we're tailwinds now. opportunity be think be. there They're think

Right Yes. now year. pretty tailwinds to to don't just compare can guidance given where you lot here quarter, I we of there And probably a we're the in quarterly get Chris, into first But are volumes last really have going the of. we were point variables. want good back because talk a to

So our we're looking we probably better that be level get will and I quarter. to projecting of don't second into in think quarters, really that's -- -- that third but at year-over-year represent granularity. will the one very that now And uncertain want at of right outlook here a

line the Our Mehrotra next question comes from Bank. Amit with Deutsche of

quick Mark, me. a just follow-ups -- just couple for

eke some So EPS suppose income given that operating scenario still I income to back. translates year. share one, coming maybe this other can repurchase out the the and then flat you some of growth growth under kind earnings

could that? you about talk just If

one And it's the you But get uncertain you the OpEx wanted that control, what ex most then ever seen. to fuel. I ask uncertainty base of which I've the the can totally is and about

the of So agreement. the in you some step last you past, labor that on like visibility a the also per said inefficiencies or up, you there's the PEB have mentioned depreciation endured quarter I $XX million think year. you

can I of So that assume unwind. some that

So

did moves trying base ex do think So to XXXX. fuel OpEx to that $X.X I'm billion the in relative you how understand just you that

then growth expectations 'XX? EPS relative So OpEx ex-fuel to EBIT and base growth for

Thanks, Amit.

we for to back go growth exceed have flattish positive, that that be expect that if kind should framework, earnings financial think I if EPS we of and would our sure. you

about Investor we've start now, So that minimum will Day. sorry, fits $XX of money the compensate talked right fact much staffing the into locations The million at right service-related ex are -- of for mean, we that below many just service, are we $XX I got to here. million framework December the our levels. although costs to in still back improved unwind spending

head the of $XX to working in do the per is got other the P&L as recrews back the of half. these I and significantly mitigate back to incentives of there locations, in a half, control. said, stringent I starts we're there. million lower, But we've So costs more quarter to count increase but like more expect from lot a items, of the amount those especially out toward line And then many will costs those fair lot core start still inflation overtime, that through into unwind a

And cost higher is growth had network significant a on where as should area one due on inflation speed, that's area even example, to impacts. the help lid an that purchase try escalation as we've the as rents. equipment rents, equipment us service think of where an to a I services well keep

do I as will come that believe control moderates, inflation As under that, well.

question next with from Wells the Poliniak line Our Fargo. Allison of comes

to to to want this targeting you stopping the go were minimum growth of respect levels less incremental inflection with labor staffing need go it as and And bases staffed, fully we the potentially at Any then at Just back than capture to forward the that to that guess way at are at to the of sort basis. quantify you staff those is level. given look XX% you those I I a comment to you are know on starting said that, any point go? maybe building there opportunities? crew

right roughly number now. Yes. was demand. of Allison, we overall we X/X had it's move a levels. dependent highly we talked fourth And upon be about in going neighbourhood minimum where quarter crew is in see the that below forward, headed in It's to as about markets frankly, staffing that our base

leadership Paul, craft little service with the specificity and X talk why hire our the continuing plan, certainly, we been now as very our And respect colleagues. over me, conductor resources you've doing both or we've product service environment training a in improvements Pardon into you don't to our years. bit what we're into seen environment. it's and addressed are robust. best So on more remains pipeline our to is our that in

Yes, absolutely, Alan.

you And alluded to that As our hit towards Ed to pace as going continue targets. continue as and to the forecast to, match stated, we go. remain we on we're hiring

the negotiations, what are the out matter predictive now redeployment, on taking As it's looks conductive focusing those of speak. far as as work as like quality come contract of well we and of future a life discussions as place we've schedules as

Justin question next comes from Inc. Stephens the Our of with Long line

And I'm compare see Mark, from year. the the impact I out additional to maybe that the the timing if timing of balance figure assessorial of that be you over in give talked wind the about? what this wanted this down any service-related just of moderation on the costs net fees to could trying from you year. color could to winding potential the impact down that

congestion good most be that look level or customers at But stakeholders. for inland XXXX like coasts that is We is of at plateaued question. has and look it's we plateaued the the true side. along our where also our intermodal in has This Thanks ramps essentially the at you should ports XXXX. itself. on really the spending consumer, the globally, When look both which at U.S., in for the with carefully a at this Ed. but And very that see alleviated we that's we

into So a number was being a there's trying goods fit arguably country, for through designed tremendous still that pipeline XXXX. to the brought of

to still on so Inland the in think And that it's congestion warehousing the really and some locations. unwind. Hinterland around going We exists places,

of unwinding 'XX think watching of the we're will that terms it at point. happen very carefully. In We in timing some

like of well. way service-related won't But back with it's relief we're the par it necessarily Yes, half, Justin, the more thinking say assuming. as on would about the and costs be roughly kind I the probably precipitous we're on timing

That's on perspective. helpful. And dollar net color any from a the impact

no. No, OR out start is far, for you that big. don't margin the getting too Why

lose move I business. customer revenue chains fluid, in more able because we'll and more supply be be mean revenue we'll our asset to will freight will [soil] gain

That's right.

Wolfe comes next from Our the Research. with line Scott of question Group

I guidance to the understanding make want just I'm right. sure

So it operating really sounds a revenue, growing declining flattish like not but lot. income, not

little the want what flattish you bit, minus say this ultimately just no in a revenue, you just guys that. at want Is goes levels of income, plus that do to thing trying to from but think then where growth OR, head flattish just I to sort declines. you just gave sure or make So or big I count the X point? flattish slides? us January operating are clarify, And I understand

Scott, this is revenue. Alan. Thanks for the the ballpark for question. is Yes. Flattish in

bit expense a We you I break up the with think have, Yes, currents had middle. that question? your on the associated on some cross second a quite and the about top a we of category. Can repeat Mark the both talked line little headcount. little bit in

Yes.

the the go January do we slides. where have Just you from levels in

you why about that? Paul, don't talk

now north be the right target stated X,XXX-plus adjust for to Yes. this range. the May of T&E. And morning, as earlier, that in target -- X,XXX is continue Scott, as see our to we'll out. markets as play we're And we XX-plus of

the comes line question Barclays. of next from Brandon with Our Oglenski

kind or So mean, the Mark, But just here about a we environment for I I ago is beyond? into to you think faulting and a potential guess, the Alan piggybacking want in look add this in had maybe macro. your where Day view don't that guys to for I 'XX resiliency, and really talked you the in you this week on anyone's resiliency month of Investor and build set network, Is off where where you headcount. capacity growth up

the environment contemplating. exactly is This Yes. were what we

we are, about, need We're hiring hire. talked cruise. locations, we're aggressively. some continuing as Here we because We to were short to in of

about includes continue we're grow designed our And service out, a we're also as going Resiliency and years. investing to technology, we there. continue improvement includes can best is the product plan compete which it assets, terminals. looking truck. how position locomotives, improve. we're of and a to processes -- evolve freight also it's We're do compete stopping grow not customers our track, with lift we well. over us that to includes people But is so to It ourselves And to includes with compete going our as and years them. in It and our our X continuous been includes couple our it in can includes consistently it intermodal cars we and yes, help

Our next with comes Morgan the question of Shankar Stanley. from line Ravi

please. may, I if Two-parter,

of question improves? offset as that You contract train chatter is or signed be some of deterioration. obviously, said second versus scrutiny on for kind the might the And volume part natural have on your service "in your peers. Can prospective help that SPG of some there much you you a you how kind of of us expect been big of length real about wins time? is gains some top of talk that how kind to new Can share has over is, also macro regulatory and contracts understand bag" risk with

Thank Ravi. you,

the us it allowing service over them come but share selection volume, a And that's Southern. includes them. that of to back the confident can producing should place we their so For decisions. And It's are that past going environment. Norfolk value the top are And that's of lots earn down seeing for take -- focused. from to headwinds, value years, that most the we how of add be can even to is our couple on going for to And we we're really have be we freight our now, can back to that where customers customers make highway. Norfolk are where in difficult helping and macro a there's we some sure we we're add we're back Southern.

Yes. X. a environment, we a on if little us seen X met seeing the metrics they're the We've them as And committed Ravi, just of -- service. they our spoke second. engaged to Investor it hear with regulatory me with to fully X in What about we're we last let for STB. since they're December members They the and start our grow as encouraged. Day with restoring the talk we were that. They've just told we you is What will, And customers year them now, well. fully from really see bit. it

we're and aligned customers them, so service and promises and for promises our to And our delivering we're with our help on grow. compete

from Our with next Walter Capital line comes question Spracklin of RBC the Markets.

how slippery a capacity to and all significant back that strategy? persist? that price [indiscernible] with I dynamic. that challenge by trucking truck your with provide a consider? something buying and should just and pertains trucking you H&R least Does service to that now know curious gaining that to and converting challenge Is of of regards and Just -- but against rail? to coming whether acquiring company the at curious Just right approach the Is capacity, that it you'd as that given the by competitors quality. higher long-term you a your market that share and with seeing would some then as your OR companies, And TSX way cap started offset TransX, CN environment your then on gaining have you're trucking that envision pricing Home, market, share to that through X something doing Coaster to

turn we are for then about And Walter, I'll question we to markets franchise got let and me strengths the there we serve with aligned. growth. unique truck. Norfolk we on over second the a how built a whom lot it Ed address first, of compete customers franchise, are with Southern's the Look,

laid out don't And so And with talk we're ability to thesis about truck. confident compete you investment organic that growth. grow deliver and to why we going we Day. extremely are how Investor and our our And in

all, and of includes time, our trucking trucks. space. are first that partnership against And customers. highway. place in the that's great against our I with We're key our we customers. key be. customers fantastic that to are all the Well, a competing have Sure. not competing Truckers a we say

think talk right and Sure, XX% very time I into reducing the put by way to We've you it. carbon look specifically time The now. is Norfolk -- to is to all there on 'XX, Norfolk to before. seen going Southern again. the about the be on the Southern. a footprint play compelling it XX%, your innovation current environment challenging, if the is We on customers. we've place clear but that's been for rebalancing a going intermodal, all But for that time out cycles out do these it's train internally when And rail footprint transportation easiest market you the just want It's be reduce about to past carbon

the compete to short are the compelling. And customers. So prop long think our think term in positioned we well very we even value we term, with is

line ISI. Chappell Evercore of Jon Our next from comes the with question

unwinds mean accessory Norfolk's to which bread the that, has headwinds like been really a I little are identifiable lot back bit. circling for can of still and clear. you fuel yield think butter a sounds core very of It the and last the loosening Thank weaker where are think to several in any under to little bit coming market as power it's in loosening especially that we your a there's customers' unwillingness truckload market, But pricing backdrop, the years. finding economic this intermodal. you pressure due truckload areas offset

is that makes allows that a now, that for providing. customers and me have move to we our that the railroad. optimistic valuable of what ability capacity think continue price about to the service same to increasing them years very the back I way the the freight Right years we're value highway supplying that we're is we're our from service producing to in to

X-, really have them. so going looking results the to what, what for horizon we our that stopping know value our X-, to going on in how and that. far, We're produce the sort value will enhance we're like And customers, to that's at X-year understanding develop talked not continue continue we're We're of provide how you terms need value can Alan to of about. to and like just and just confident we service that customers deliver we're what in

since in economically more that potential a bit is little maybe merchandise? little stickier intermodal So than as mean does sensitive core there to opposed there's conversion

up hair. that? you repeat Can You're a breaking just

so merchandise? does more potential is that opposed intermodal, the in mean as sensitive bit economically Yes, maybe for to stickier core a share that given gain

I don't know.

to to I great We're leaving that. the record. produce continue potential when we coal I that look serve, time headwind out of because think we've year-over-year do for the think across going I track we've got to this -- markets a got to the -- being of continue

with Ossenbeck JPMorgan. from comes of question next Brian Our the line

us got employee you a comp One for little accrual, this forward. comp Mark. bit going Can the the of the you average incentive quarter, on per tailwind. just Obviously, color give

there. You of new mix probably hires got in still some

see can look maybe helpful. the I rest take in obviously, Paul, on be to event, big it's something it we'll we that's I bit starting the progress you past could meaningful one headlines, to that And at does extent of and level grounded conductors this a know new of pilot in for this just to lot in set think the at time really can offer you you But might the be this line side a would think, provide about that time get for a and and then least is quite more field? a implementation the we So talking like throughout thing any seem but the can the when because XXXX OpEx color that program live we're industry. you

unwinding I'll normally that tax third in per resets, we get a the take bit. like again QX, we'd had change payroll step adjustment the you'll wage we in per these pretty degree to in service-related we Brian, the to And I increases that of that XX signaled a on be the start about the would ben talked be 'XX, would there number while employee. excluding due accrual the in and costs. QX by it range. basis, see offset some comp with employee it wage where or in That much ended will little to deflated up and large the probably effect step that up and quarter. a it there of due will probably expect

throughout and So year. I would the expect kind of in flat that XX,XXX change territory

just And Yes. that. on question to the second adding

stated, we think already a there's We've challenges As the of standpoint. on from balance certainly that about addressed negotiations we of conductor been our unions here a level and years in benefits long-term December. through begun in are the bargaining life the of we have we as of get future of labor where conductor discussions work-life number some negotiations, of a a and But be, there There quality the piece want for work have regulatory we the this. with From but complete national from to redeployment. are standpoint predictive feel certainly industry that was fact we're benefits in line time redeployment.

compelling forward conductor certainly So a the move of support there's for regulations redeployment. we the think reason and to industry in

what about. to was certainly, Ed talking And back

We our and on volume drive bring those have and for through customers service to find greater continue railroad. balanced growth opportunities next to productivity to approach that of our value our

So value a we the part term. proposition in long our of all that's think

initiatives for think And those see a could is you that you starting of do too one a this to Or program pilot soon year? little expect?

when to say it cross bridge to and discussions first those we're comes. point. want ongoing have that at soon this negotiations. too It's We

from of with comes Cherilyn Securities. Radbourne line question the TD next Our

anticipate automotive that a further, you converts could the to could kind little in of have how visibility out also goes? vehicles? in cetera, comment you changes that the industry routing, et far was think as to I as at And hoping you that any looking as franchise you for perhaps you far speak on XXXX? that And electric

a North out demand and off. automobiles really to unmet America. trying the work Sure. there clearly There's And is that for industry wave in bow focused on delivering of

We cars are, too. We've invested and fluidity for in improved new that fleet, our has significantly.

help We our automotive are of to that demand. opportunity continuing refine some going offer unmet the that. customers to to meet us That's

Going to while this off. work it it that think I a know forward, year. takes don't ends I that

question. the to Turning

sure working whether think new to some and of amount battery tremendous EVs construction, supply investment are make can there's and there I forward of tremendous question whether was EVs, out we battery for we your We've investment it's chains. whether future about in interest recycling, seen support. it's capability that going a amount that it's construction, a

Our next question comes Ariel line the Rosa Credit of from Suisse. with

benefits past that's kind hiring, you little those see this where or bit you anything in maybe head labor aggressive negotiations wanted the So employees? about more perspective what in given given the do you an to moved you're that moving you wanted but I'm than or gone bit weaker what improved what excess you leaves benefits -- do volumes environment think to do and and effect little a then of with seeing, do Or the sort then? count as And than or bit needed you might the have wondering come if to a little flywheel concessions thing? hear those yourself around And a your PEB? that do extent you're describing do the what sick of you for since year, see with have extent improvements of expected to service employees? what's state do if around on on has I To since had further make it the ask then relations improved it. it contentious, Obviously, has

to address of and it then that part turn over I'll Paul.

national to it of we our are which factored growth. to our a And In service, provide employees about benefits on and collaborating into Now in field of can life, quality employee into future enter a about and we're what what for agreements enhanced flexibility we training with as predictable get that Southern, local with happen is to certainly the provides we're done we benefits bit Paul, to downturn, field? to and enhanced our the we negotiations, approach talk opportunity little that do colleagues And would labor improve flexibility engagement. schedules. in operational and our that balanced into benefits respect That thinking. turn craft their our an Norfolk seeing employees. work our were productivity seeing you craft to to a for you're out more modernize enhance that want us, and negotiations talk colleagues out the

has we've lever what to we expensive downturn, workforce, a seen where our certainly of if volume want investing any just I We have the long for and industry position to mean, as is But very consolidations, in are a in lever taken as want back do it back. the not and qualification, extended handle Alan, cetera, first ensure, very that attrition. with And very also board one, cross would again, term, training if you handle It's come there we on that to have that we in it comes Yes, lever not well. volume see those we level be et the place we there. in have pull. the seen opportunities we touched well the certainly furloughs,

are downturn So a is volume. that to going approach in potential we how

Our line Bascome next question comes of Susquehanna. Majors the with from

very made and to you're If At the returns for working redo with ago, other changes talk weeks they've and that looking operating tied for was management Adam doing guys with Andy the you the long said in a being much look incentives, strategy tied Investor senior really employees in incentives that management and been capital laid weeks new a for the the term OR the Can the senior a she on income the encourage really for really that term with strategy? Board to TSR Day the the recently short multiplier. to align compensation to subject few us to at you're some both about back. to you are you structure the out level at with little incentive program this few behavior what more the long-term

the for thanks Bascome, question.

We we're revenue as Andy We've noted, that, always And our deliver with growth a deployment. to goals. Day, capital right? at make plan Investor earnings done to goal that our in through balanced strategic are, is discussions and as margins competitive industry compensation our with noted strategic Board our is sure top-tier and we aligned

a think I bit end 'XX up reflect the seeing in that the to And alignment you'll has with amended our structure been strategy.

talk Can more those changes? specifically a you little about

we Not can't. right with now, No. still [indiscernible]. in discussion the

from the with of comes Jeff Partners. question line Research next Vertical Kauffman Our

hit customers dock Is And accessorials West our liquidated and with see damages. my East. in West to maybe do this little for of we're that get situation some Is still Coast with that to labor your is that you to tends West containers a year, than settles? you it big occurred dealing west and you in a Coast this customers year, the shipments of Coast from at U.S. cheaper and odd overhang. business of handed we in this to now point over be better a it Chicago? Eastern them the return some East the understanding in when these with shift if were How of saw dock kind think the curious, terms of terms lot and There I issues think in affected inventory do I'm

you shift that's curious impacted Just that your little business? a more thought that, probably kind transient how of

of This to is you from Japan all-water Vietnam been the When you it and more the towards attractive. to is and look China manufacturing Korea which for et as the cetera. East I Ed. evolution the occurred has the of those And sailings East south economics ongoing over Myanmar, Coast Coast West for Thank because The about and better part makes has from now center talking XX of shift Mississippi. that shifted west to question. time population love U.S., at business. has of years.

is economics the of Suez now Panama the of compelling reason expansion a and The why to also Canal those work more. tend use

is that Coast is be the effectively, position Our that we're Coast, with doubt the that to volume of to positioned able associated they West our in [indiscernible] comes population on pretty compelling. simple. We centers it whether that will to quite Coast. want a deliver in a to help come through whether inland to infrastructure or customers And transloading the handle few there no the those lot the shipments There's makes East West perfectly through east.

lot are of compelling a time, a sure we've value for steamship as that through they At lines make a we're the our of all to ports partner allow shipments. of Charles for same whether We've that from it's invested or that cetera, add to emanate our largest Coast. Savanna, money and invested lanes of shorter lot come East Norfolk New the from us lengths et York, some those to our money or those in

What telling that. where more may customers see And their follow of you shipment normalized up just to in reduction terms on you inventory are your plans levels? to

that that in our outlook is the work from inventory down recently think I a been there's customers run-up. after

much really their down given are in inventories it not better comes right any type. product, getting product, think now I to their customers And many number of necessarily of right having the shape. the right but the

recent And by we're encouraged work downs. so those

'XX, soon we they into move as as terms And but in economic for again, of outlook, manifest poised opportunity as themselves. guarded

from Vernon of Bernstein. the Our comes question line next David with

Ed, and question detailed question I So sort a you, had for share. rail of sort one on then of

And And the is for flattish or and CSX. you particularly on So is a have get little accruals? just of strategy a the as adjusting just from guidance, noticed bit of has to the starting of growth off sort rail historically the in bigger EBIT understand perspective couple to us that the been point outperforming start think you ag, carload how about guys off, forward. about your going share if think then important basis CSX you let traffic, quarters, love to carload for you I'd some help footprint. you chemicals us can had GAAP last have

guys decade. been that think I last lot investing you've over intermodal the had have a as you in

do them the think of marketplace? specific situation winning thoughts that that out, advantages? right? really How playing be on them network helpful. you about you Are guys Are because outgrowing in some sheer you Any would

basis quick, mean Ed. David. Yes, -- go real on a I and GAAP talking ahead, we're

is -- that we how of to in is some customer $XXX -- by convert do we are The where ways, trillion-ton focused by defined Yes. we're to business There's study moving are, Norfolk our miles I'm and that And We business market market. defined geography, truck that's that those base, we logistics X focused billion that North Railroads adverse that's in but of on. railroads. majority and move more Southern. what America. really Sure.

of Bank Ken our America. gentlemen, and Hoexter question last with the line Ladies you. from Thank today comes of

Great.

-- employees, follow couple a of staffing, on are XX,XXX, and know, can So On thoughts I costs the is? then where where you total T&E then now. the is goal just just given your clarifications. about about out up And about a year -- gains maybe And versus what that up talk XXX guess, level your give inflation? embedded off you in to from ended a with are there, Mark, service there? don't ago. from I you're still X,XXX a your I'm opportunity you year only figure the that's Maybe trying target, saying service

still going X,XXX And forward, target to about economic we've obviously, talked Ken, for we're locations there. of continue to out lot of had as outlook there's exists. hire the that. a that into in going we tight based here uncertainty on look where We're now, XXXX, you

the state. now, ahead feel don't but And to that remain and will right conductor I too pipeline so target hiring get you tell until we're of recruiting, will training steady and elevated, to like at so we ourselves. get is want it a training I far

And headcount recrews, I'd a where half and sit regard expenses, on your ben that, as as overtime, between training. said. to costs fair materials And the there. in of Specific number locomotives. The services. sits well amount constantly also reside, to A recruiting Ken, growth is as well question disruption there's little moving. roughly I'd it will is volume in that profile target lot moving. There's purchased say, those bit mean with And That's comp constantly the and in of service say half certainly, number really also cost sitting a where, incentive of

in it's of component. So it of rest half sits battered throughout but P&L, the the

total dollar to inflation? you're offset that the pointing amount a you're to that there is And looking with

$XX was indicated I the that, the back that we number a way would And all get time down the it's the to expect you million but what of that closer dealing to year. roughly X, Well, with. quarter end come to not we're to, by

So that's it.

there, Great. the where targets Can I you given follow-up And noted me, about end think we miles talk Paul, improvements year day. then locomotive a XXX you the can. if per just you for service with?

the We the to the past couple be now are if back past within to just wanted not weeks months. several and where it get to of service here beginning we

have that to flywheel group fully expect the up and resource is at the going place, continue to throughout So Investor we we we effect as that year. made to Day to that going continue gains improve piece we're that the to we see service that described the take spoke to

session. Thank for Shaw back question-and-answer I'll any Mr. concludes gentlemen, Alan our that comments. you. to turn floor and the Ladies final

thank Thanks. to everyone for interest for like us Southern I'd their and in Norfolk today. joining

concludes you. today's conference. This Thank

at lines you disconnect time. You your Thank this your for participation. may