Norfolk Southern faces more Senate grilling - should rails investors be worried?
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Norfolk Southern Corporation (NYSE:NSC) CEO Alan Shaw told Senators at a hearing in Washington D.C. on Wednesday that the railroad company supports parts of two bipartisan rail safety bills that aim to improving rail safety, including new rules for cars carrying hazardous materials.
Shaw told the Senate Committee on Commerce, Science and Transportation that the Railway Safety Act and the RAIL Act include measures with the potential for meaningful improvement. He pointed specifically to the funding for additional training, better advanced notifications, and accelerating the phase-out of older railcars. Notably, Shaw did push back against provisions calling for two-person crews on all railroad locomotives.
On the legal front, the state of Ohio sued Norfolk Southern (NSC) last week seeking damages and civil penalties. The company is also expected to face several class action lawsuits that are
For investors in the rails sector, the bigger question might be how at risk the controversial practice of precision scheduled railroading could be in the future. TD Asset Management analyst Juliana Faircloth noted the railroad industry became quite investable through the implementation of precision scheduled railroading. The concept was pioneered by industry heavyweight Hunter Harrison, who at various times headed Illinois Central Railroad, Canadian National Railway (CNI), Canadian Pacific Railway (CP), and CSX Corporation (CSX). The system emphasizes point-to-point freight car movements on simplified routing networks. The simplified rails operating model leaves trains on a fixed schedule, rather than different days of the week. The system and other cost-cutting measures have led to improved operating ratios in the industry. It is uncertain how deeply regulators and politicians will dig into the complexities of how railroads run their businesses as they eye safety considerations.
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