What happened

Shares of Norfolk Southern (NYSE:NSC) gained 33.3% over the first six months of 2019, according to data provided by S&P Global Market Intelligence. The company got rolling early in the year, and kept the momentum going despite the threat of trade wars.

So what

Norfolk Southern stock jumped in January after the company reported fourth-quarter earnings of $2.57 per share, up 52% year over year and well ahead of Wall Street's $2.29 consensus estimate. Some of that beat was due to one-time items like land sales, but operating income of $958 million was still ahead of expectations.

A Norfolk Southern engine rolls through a snow-covered landscape.

Image source: Norfolk Southern.

The company attributed the performance to early success in implementing precision scheduled railroading (PSR), an operating philosophy designed to make railroads more efficient that was pioneered in Canada and is now making its way to U.S. companies. Norfolk Southern calls its initial plan "clean sheeting," a reference to it starting from scratch in local markets to develop new operating plans in collaboration with key customers.

Norfolk Southern gave more details of its plan in February, to investor cheers. The railroad said that since 2015 it has trimmed its operating ratio -- a measure of total expenses relative to its revenue -- by more than 7% since 2015 to 65.4%. It intends to bring that measure below 60% by 2021.

Its first-quarter results in April showed no sign of a slowdown, beating the earnings consensus by $0.33 per share and revenue by $20 million. The momentum carried Norfolk Southern through the rising trade tensions in May or June, which cut into most transports.

Now what

The good news for Norfolk Southern shareholders is that the company is the top-performing major railroad so far in 2019. Unfortunately, a lot of that was playing catch-up. Shares of Norfolk Southern underperformed those of other railroads over a 10-year period leading up to 2019.

NSC Chart

Railroad data by YCharts.

The railroad was late to embrace PSR, but its plan looks solid and should help it to continue to bring down costs and become more efficient. Investors also get to enjoy the second-best dividend yield in the sector, at 1.65%, while they wait.

Norfolk Southern is on track to continue to outperform.

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