Norfolk Southern’s derailment: Insurance payments provide finance boost alongside profits

FILE – A Norfolk Southern freight train passes through Homestead, Pa., Wednesday, March 12, 2025. (AP Photo/Gene J. Puskar, File)

Norfolk Southern’s quarterly profits were again inflated by insurance payments related to its disastrous 2023 derailment in eastern Ohio, but even without that, the railroad’s profits still grew.

The Atlanta-based railroad reported a major rebound in its results Wednesday with $750 million profit, or $3.31 per share, in the first quarter. Last year, the first quarter results of $53 million, or 23 cents per share, were held down by the $600 million class action settlement the railroad agreed to pay residents near the East Palestine derailment.

Since last year’s second quarter, Norfolk Southern has been consistently collecting more in insurance payments than it was spending on the derailment cleanup and response, so its bottom line has received a boost each of the last several quarters. In the first quarter, the insurance payments boosted the railroad’s net income by $141 million. Without that, it would have earned $609 million, or $2.69 per share, compared to $2.49 per share last year.

Wall Street analysts focus on ongoing operations, which strips out the insurance windfall, and by that measure the railroad beat the average estimate reported by FactSet Research by 3 cents per share.

The railroad has received close to $1 billion in insurance payments to date to help cover the roughly $2 billion it has spent since the East Palestine derailment. Chief Financial Officer Jason Zampi said he expects less than $100 million in remaining insurance payments to come in.

FILE – This photo taken with a drone shows portions of a Norfolk Southern freight train that derailed in East Palestine, Ohio, Feb. 4, 2023. (AP Photo/Gene J. Puskar, File)

The railroad’s revenue was essentially flat at just under $3 billion, but it was able to continue cutting expenses as part of its larger effort to get more efficient even as it dealt with roughly $35 million of winter storm related costs.

Norfolk Southern CEO Mark George said the railroad overcame disruptive winter weather during the first three months of the year to improve service and efficiency. The railroad also delivered about 1% more shipments in the quarter because consistent service is helping it win new business. Norfolk Southern’s main competitor in the East, CSX railroad, posted a 1% decline in volume during the quarter as two major construction projects and the storms disrupted its network, so it appears that some shipments shifted between the two railroads.

“Our service performance is increasing our customers’ confidence in Norfolk Southern and allowing us to gain share,” George said in a statement.

He still predicts that Norfolk Southern will generate another $150 million of productivity improvements this year while seeing revenue grow roughly 3% although the overall economy could derail that if it takes a downturn after President Donald Trump’s tariffs all take effect.

George said the railroad is hearing fears about the possibility for a recession later this year so Norfolk Southern is keeping a close eye on volume, but companies haven’t started to cut shipments yet.

“There’s no way to predict where we go right now. We’re in a really uncertain spot,” George said. “But we haven’t seen negative trends yet that really alarm us.”

Edward Jones analyst Jeff Windau said the economic environment and Trump’s trade policy seem to almost be changing daily, so that makes it hard for businesses to plan.

“The rails are going to be impacted by the overall economy. But they’re still seeing some good opportunities. And they’re still able to deliver on their expectations,” Windau said. “So far things seem to be going OK yet this year.”

The Atlanta-based railroad is one of the biggest in the nation with tracks throughout the Eastern United States.

A year ago, Norfolk Southern was also in the midst of a fight with an outside investor that wanted to fire management and overhaul the railroad’s operations. That investor, Ancora Holdings, won three board seats, and Norfolk Southern later changed CEOs after the board learned that former CEO Alan Shaw had an inappropriate relationship with a subordinate.

Shares of the company rose about 3% in early trading before settling back down a bit. The stock was trading up about 1.6% at $223.47 around midday.

Jury decides Norfolk Southern should pay for the $600 million settlement in 2023 Ohio derailment

(AP) — The company that owned the railcar that caused the devastating East Palestine train derailment in 2023 won’t have to help pay for the $600 million settlement Norfolk Southern agreed to with residents.

An Ohio jury decided Wednesday that GATX isn’t liable for the settlement even though the failure of a bearing on its railcar carrying plastic pellets caused the pileup on Feb. 3, 2023. GATX has maintained Norfolk Southern operated and inspected the train and all the cars and was responsible for delivering the cargo safely.

“GATX is pleased with the trial outcome, which affirms what we have known for some time: Norfolk Southern alone is responsible for the derailment and resulting damage in East Palestine,” the company said in a statement.

Norfolk Southern called the verdict disappointing but said it won’t affect the railroad’s commitments to everyone affected by the derailment.

“For more than two years, Norfolk Southern has paid the costs related to the derailment while acknowledging and acting on our own responsibility for the accident. Our belief has always been that GATX shares in that responsibility and should also be held to account,” the railroad said in a statement.

After the train derailed in East Palestine, an assortment of chemicals spilled and caught fire. Then three days later, officials blew open five tank cars filled with vinyl chloride because they feared those cars might explode, generating a massive black plume of smoke that spread over the area and forcing evacuations.

Norfolk Southern lost a similar lawsuit last year when it tried to force GATX and OxyVinyls, which made the vinyl chloride, to help pay for the environmental cleanup after the derailment that has cost the Atlanta-based railroad more than $1 billion. It made similar arguments in this trial.

These lawsuits have no effect on how much money residents or the village of East Palestine will receive from their settlements with the railroad. This cases only affect which company writes the check.

Last week, OxyVinyls agreed to a settlement with Norfolk Southern in this lawsuit over the class-action settlement after the railroad’s lawyers raised questions about the inconsistent information the chemical company provided about whether it was necessary to perform the vent-and-burn operation and release the vinyl chloride. The details of that settlement weren’t released.

The National Transportation Safety Board confirmed in its investigation that the vent-and-burn operation was unnecessary because the tank cars were starting to cool off and the railroad failed to listen to the advice from OxyVinyls’ experts or share their opinions with the officials who made the decision.

The railroad said GATX should have done more to take care of its railcar, particularly after it was surrounded by floodwaters, which could have damaged its bearings.

But GATX said it complied with all the relevant regulations for taking care of its railcars. The company said that even if the car was damaged six years earlier by standing parked in the middle of floodwaters from Hurricane Harvey, the railroad should have spotted the problem and repaired it, sending GATX the bill for the repairs.

The National Transportation Safety Board said the crash was caused by the failure of an overheating bearing on GATX’s railcar. The railroad’s sensors spotted the bearing starting to heat up in the miles before the derailment, but it didn’t reach a critical temperature and trigger an alarm until just before the derailment. That left the crew little time to stop the train.