Despite what we saw with Norfolk Southern (NS) for Q4/19, do you think we will see higher numbers in the future? What will be the catalyst?

Tony Hatch (4)

There were some questions, and as much as have followed, often with delight, Norfolk’s historic leadership role in the “Railroad Renaissance”, there are some things revealed in the Quarter that….I can’t explain….some are perhaps just my level of concentration (for example, NS having 45-G – the short line ITC – tax credits?); others may be of philosophy. Such as:

  • KPIs and metric goals – why in the world., having brought that SDI up so much, and already to the 2021 Goal level, would they
    • Maintain their 2021 goal (for rails chasing service improvement is like dogs chasing cars – it is always just ahead of them and in this brave new Amazon-inspired world, always will be); and
    • Why in the world would they defend that decision?  At the very (very) least give some kind of double-talk rail speak….Is it too expensive and a poor ROI to take that SDI to 2.0?
    • The 2021 goal in cars on line was also already achieved but that may be more of an operating plan (after all they have to provide capacity) than anything else – at least I hope so….
  • Transparency
    • The all-time unbroken winner of the Harriman (safety) Award didn’t disclose it’s safety numbers (which I thought was a cardinal sin for railroads)….It is important not only in terms of costs, stakeholder relationships, service consistency, etc. but also in this PSR process.
    • One way to discuss margins, especially when one has the highest OR and there are questions, valid or not, on incremental margins, and especially if one is the intermodal “ax” in the east, is to discuss returns (ROIC).  NSC did not….
  • Questions abounded on why purchased services weren’t responding to PSR/Top 21 – can it truly not be wither volume or consistency variable?
  • Although NS’ plan to bring on PSR/T21 in a “collaborative” manner (a response to the “CSX Hangover” and the STB reaction, etc) makes great long term sense, it is nonetheless notable that they seem to bring less of their dramatic operating improvement to the bottom line….

I have faith that by a year from now intermodal will lead NS higher and higher….But I would like some numbers, perhaps by mid-year, that will bolster that conviction….