(Adds details on share repurchases, service issues)
April 25 (Reuters) – Norfolk Southern Corp, one of the largest U.S. railroads by revenue, reported a 27 percent increase in year-over-year quarterly net profit on Wednesday, driven by higher volumes and prices it charges for the freight it carries and a lower effective tax rate.
The Norfolk, Virginia-based railroad, with a network that spans 22 states across the eastern United States, said it was working to fix service issues such as slower train speeds that led to higher costs and persistent customer complaints.
Norfolk Southern and other major railroads such as rival CSX Corp and Union Pacific are facing scrutiny from the top federal rail regulator over delays and crew and rail car shortages.
Its operating ratio, a closely watched measure of operating costs as a percentage of revenue, rose to 69.3 percent from 67.4 percent in January, though it was down from 70.6 percent in the same quarter a year ago. A lower operating ratio shows improvement in profitability.
The railroad struggled to reign in expenses, which increased 4 percent to $1.9 billion from the year-ago period, although higher fuel prices and costs from slower train speeds were partly offset by efficiency gains.
Quarterly revenue increased 6 percent to $2.7 billion from the first quarter of 2017, driven by a 3 percent rise in overall cargo volumes. Consumer goods grew 8 percent, which offset declines in merchandise and coal volumes.
Analysts expected $2.68 billion in revenue.
Norfolk Southern said first-quarter net income rose to $552 million, or $1.93 cents per share, from $443 million, or $1.48 per share a year earlier.
The railroad said it was increasing its expected annual share repurchases to $1.5 billion for 2018. (Reporting by Eric M. Johnson in New York Editing by Jeffrey Benkoe and Bill Trott)
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