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Norfolk Southern (NSC) - Get Free Report posted stronger-than-expected fourth-quarter earnings as lower coal freight volumes were offset by the company's cost-cutting efforts.

The Virginia-based railway operator said earnings for the three months ended in December came in at $1.42 a share, up 18% from the same period last year and firmly ahead of analysts' forecasts of $1.35. Revenue for the period was $2.5 billion, the company said, largely in-line with estimates and a modest decline from the fourth quarter in 2015. 

Norfolk Southern CEO Jim Squires called the last year, in which it began a new strategic overview for the group, "pivotal,"

"We delivered $250 million of productivity savings and recorded our best ever operating ratio, notwithstanding challenging business conditions," Squires said. "With the dedication and support of Norfolk Southern's talented employees, we improved service for customers while positioning the company for further growth in 2017 and beyond."

"We are poised to continue building on our success and deliver an additional $100 million of productivity savings in 2017 on the way to our goal of $650 million of annual savings by 2020," Squires added. "We remain steadfast in our commitment to delivering superior shareholder value through the execution of our Strategic Plan."

Coal freight revenue fell 7% to $403 million, the company said, while volumes fell 4% "with an increase in export coal softening the decline in the utility market." 

The company's operating ratio, a measure of its overall efficiency, improved to 69.4% from 74.5% in the fourth quarter of 2015, but was weaker than the 67.5% figure the company reported in the third quarter of this year.

Norfolk Southern shares rose 1.2% in premarket trading on Wednesday.