Earnings alert sends Norfolk Southern offtrack

Investors soured on Norfolk Southern as the second-largest US railroad operator in the eastern US warned that profits for the first quarter will fall.

The Norfolk, Virginia-based company said it expects first-quarter earnings of $1 per share, shy of the $1.26 a share that Wall Street analysts had forecast. The company made $1.17 a share in the same quarter a year ago.

The operator was squeezed by an ongoing drop in coal shipments, which helped lower revenues to $2.6bn. This was short of Wall Street's forecasts for $2.7bn.

Norfolk Southern said the decline in revenue also reflected lower fuel surcharges, which it levies on customers.

Norfolk Southern's fuel surcharge, which it negotiates with clients, is in part dependent on the price of West Texas Intermediate oil, which fell 10.7 per cent in the first quarter.

"Norfolk Southern's rail network was underperforming from a productivity standpoint heading into the first quarter, and conditions worsened due to challenging weather conditions during the quarter," said Fadi Chamou, an analyst at BMO. "We sense that this is largely a transient issue and should gradually abate over the medium term."

Shares of Norfolk Southern, which have gained nearly 6 per cent in the past year, fell more than 5 per cent to $99.28, making the stock the biggest faller on the S&P 500.

The S&P 500 railroads sub industry index declined 1.8 per cent, as Norfolk Southern's pre-announcement struck a cautious view for the rail sector.

"Norfolk Southern's shares should decline materially on Tuesday and pressure other rail stocks (although we do not believe the earnings downside for other carriers will be as great as NSC's due to differences in fuel programs)," said Jason Seidl, an analyst at Cowen and Co.

JC Penney shares fell nearly 3 per cent to $9.15, after the retailer said a senior official at the company accidentally disclosed first-quarter same-store sales figures, a key industry metric, to an analyst.

The company said the executive indicated in an email that to date same-store sales are up about 6 per cent because of the early timing of the Easter holiday. The Texas-based company expects comparable sales in the range of 3.5 per cent to 4.5 per cent. Wall Street analysts had forecast a 3.1 per cent rise in JC Penney's same-store sales.

A 12 per cent rise in first-quarter profits boosted shares of JPMorgan Chase. The lender said profits rose to $5.9bn, or $1.45 a share, from $5.3bn, or $1.28 a share, in the same period a year ago.

Revenue climbed nearly 4 per cent to $24.8bn, just ahead of Wall Street's forecasts for $24.5bn. JPMorgan shares rose more than 1 per cent to $62.92.

Meanwhile, Wells Fargo shares fell more than 1 per cent to $53.84, after the lender reported a drop in first-quarter profits.

US stocks were little changed, with the S&P 500 flat at 2,087.88. The Dow Jones Industrial Average climbed 0.2 per cent to 18,013.01 and the Nasdaq Composite declined 0.4 per cent to 4,966.79.

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