Credit Suisse 5 th Annual Industrials Conference November 29, 2017

Transcription

1 Credit Suisse 5 th Annual Industrials Conference November 29, 2017 Cindy C. Earhart Executive Vice President and Chief Financial Officer 1 / Norfolk Southern Corporation

2 Forward-Looking Statements Certain statements in this presentation are forward-looking statements within the meaning of the safe harbor provision of the Private Securities Litigation Reform Act of 1995, as amended. In some cases, forward-looking statements may be identified by the use of words like believe, expect, anticipate, estimate, plan, consider, project, and similar references to the future. Forward-looking statements are made as of the date they were first issued and reflect the good-faith evaluation of Norfolk Southern Corporation s (NYSE: NSC) ( Norfolk Southern or the Company ) management of information currently available. These forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond the Company s control. These and other important factors, including those discussed under Risk Factors in the Company s Form 10-K for the year ended December 31, 2016, as well as the Company s other public filings with the SEC, may cause our actual results, performance or achievement to differ materially from those expressed or implied by these forward-looking statements. Forward-looking statements are not, and should not be relied upon as, a guarantee of future performance or results, nor will they necessarily prove to be accurate indications of the times at or by which any such performance or results will be achieved. As a result, actual outcomes and results may differ materially from those expressed in forward-looking statements. We undertake no obligation to update or revise forward-looking statements, whether as a result of new information, the occurrence of certain events or otherwise, unless otherwise required by applicable securities law. 2 / Norfolk Southern Corporation

3 First Nine Months 2017 Highlights First Nine Months 2017 vs PY Operating Ratio Improvement Railway operating revenues 7% 75% % 2016 Railway operating expenses 4% 65% st Qtr 2nd Qtr 3rd Qtr 4th Qtr Railway operating ratio RECORD RESULTS 130 bp Expense Components ($ in millions) Net increase of $225 / 4% Income from railway operations 11% $5,085 $120 $97 $21 $3 $10 $5,310 EPS 17% RECORD RESULTS 2016 Comp. Fuel Deprec. Purchased Materials & Benefits Svcs & Rents & Other / Norfolk Southern Corporation

4 Extensive Market Reach Supports Growth ~19,500 Route Miles of Track 22 States Served by Network 40+ Ports 250+ Short Lines Norfolk Southern s network, alignment with shipping partners and market approach generates long-term growth: Serves more than 50% of the US population, manufacturing activity, and energy consumption 65% of all freight shipped greater than 500 miles begins or ends in our region Superior Eastern intermodal network Alignment with steamship lines adding capacity in the East Largest metals franchise Most expansive network of automotive plants Industry-leading short line access First-in-class industrial development Diversified customer and market base 4 / Norfolk Southern Corporation

5 Index Value (2012 = 100) Percent Change 07/16 08/16 09/16 10/16 11/16 12/16 01/17 02/17 03/17 04/17 05/17 06/17 07/17 08/17 09/17 10/17 Index Value (1985=100) Current Economic Environment Truckstop.com Market Demand Index (MDI) (available loads vs. available trucks) Consumer Confidence Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Industrial Production Index 12.0% 8.0% 4.0% 0.0% (4.0%) (8.0%) Gross Private Domestic Investment [Nonresidential] (percent change from preceding period in Real GDP) 5 / Norfolk Southern Corporation Source: Truckstop.com, The Conference Board, Federal Reserve Bank of St. Louis, BEA

6 Norfolk Southern Volume Trend Fourth quarter AAR carloads through week 47 (November 25, 2017) 4.8% increase in AAR units 4QTD 2017 vs Total units (000 s) Intermodal 7% 42,737 1, ,197.9 Coal MetCon 5% 7,646 6% 6, % Paper 5% 1,979 Chemicals Automotive (2%) (1,369) 1% 885 Ag (4%) (4,075) / Norfolk Southern Corporation

7 Fourth Quarter Outlook Revenue Outlook Operating Expense Outlook 3Q17 Actual vs. 3Q16 4Q17 Outlook vs. 4Q16 Growth in Industrial Production Increased construction activity Declines due to pipeline activity Tightening truck capacity Alignment with shipping partners Compensation and benefits: Headcount ~ 1,100 ~ 800 Wage and H&W rates $29M ~ $29M Incentive compensation $47M ~ $47M High seaborne pricing Mild weather and low natural gas prices Fuel $17M Price and consumption driven 7 / Norfolk Southern Corporation

8 Strategic Plan Enhancing Shareholder Value NS progressing on financial and operational targets Operating ratio declined y-o-y for seven consecutive quarters Productivity savings of ~ $150 million for 2017 On track for $1 billion in share repurchases Dedicated team focus on delivering long-term shareholder value $650M of annual productivity savings by 2020 Market approach facilitating top line growth Operating ratio below 65% by 2020 or sooner EPS double digit compound annual growth rate by 2020 Returning capital to shareholders 8 8 / Norfolk Southern Corporation

9 Thank You 9 / Norfolk Southern Corporation