4Q 2009 Rail Earnings Reports

January 2010



Norfolk Southern: (reported January 27, 2010)

Price: $50.43

Price direction after earnings report: down

      Reported earnings per share of $.82, slightly below consensus of $.84 per share, and helped by $.03 from a lower-than-expected tax rate

      Revenues declined 16% year over year

      Margins were under extreme pressure in the quarter as fuel and labor costs increased

      Increases in labor costs should continue to be a headwind in 2010 as healthcare costs increase and incentive pay is phased back in

      Coal volumes were extremely weak, falling 20%+ over last year.  This profitable segment continues to struggle

      Headcount fell 9% in the quarter

      Core pricing was up 4%, which was a sharp slowdown from price increases in the third quarter of 7%

      Increasing automotive volumes should help in 2010

      Analyst Opinion:

o     Ed Wolfe of Wolfe Research: Rating is Outperform with price target $62

o     Tom Wadewitz of JP Morgan: Rating is Neutral with price target $57

o     Matt Troy of Citigroup: Rating is Buy with price target $53

o     Gary Chase of Barclays: Rating is Hold with price target $55