U.S. railroad Norfolk Southern Corp said fourth-quarter net income rose 31 percent from a year ago and forecast stronger growth in 2011.

Winter storms hurt the company's network and boosted costs more than expected in December, but that volume has shifted into January and almost every business segment should grow strongly this year, said the third largest railroad by market capitalization.

Norfolk Southern also said it was chosen as the primary Eastern rail carrier for FedEx as FedEx launches a new service to systematically use rail intermodal service for the first time.

"As a matter of policy, we are not discussing the details of our agreements with the vendors providing these rail movements," said FedEx spokesman Maury Lane. FedEx has previously said it is expanding its rail use to support its Freight Economy service, he added.

"We have every reason to believe that 2011 will be an even stronger year for us" than was 2010, said Norfolk Southern Chief Executive Wick Moorman.

The company expects "strong business growth in almost every segment" this year, particularly coal and intermodal, he said

Fourth-quarter net income rose to $402 million, or $1.09 a share, from $307 million, or 82 cents share, a year ago, the Norfolk, Virginia-based company said on Tuesday. Fourth-quarter 2010 results benefited from a 9-cent-per-share change in estimate affecting deferred income taxes.

Operating revenue for the quarter increased 14 percent from a year ago to $2.39 billion, Norfolk Southern said.

Income from railway operations improved 17 percent to $642 million, the company said.

The company plans to deploy over $2 billion in capital improvements this year, Moorman said on a conference call.

The company's shares were little changed in after-hours trading at $63. The stock closed down 2.1 percent on Tuesday at $62.92 on the New York Stock Exchange. In the year, the shares have jumped about 30 percent as volumes rose, while the economy gradually expanded.

The Dow Jones Transportation Average gained roughly 26 percent in that time.

Norfolk Southern earlier raised its quarterly dividend 11 percent to 40 cents per share on Tuesday. The dividend is payable on March 10, record as of Feb. 4.

The company operates about 21,000 route miles in 22 states and the District of Columbia and serves all major container ports in the eastern United States.

Two other major U.S. railroads have reported fourth-quarter results that beat expectations.

Union Pacific Corp , the largest, reported its most profitable year in its 150-year history.

"As we look ahead to 2011, we are encouraged by signs of a slowly strengthening economy," said Chief Executive Jim Young.

CSX Corp , the second largest, forecast record financial results in 2011 and coal exports that could nearly double from 2009 on growing demand from China and India.

"We're feeling it's not anything dramatic, but it's going to be a continual gradual recovery that we've seen the last six or seven quarters," CSX Chief Executive Michael Ward said. (Reuters)