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Norfolk Southern (NSC)
NYSE:NSC
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Norfolk Southern
(NYSE:NSC)74Outperform
Positive Factors
Earnings
NSC posted better-than-expected earnings per share as a result of operating ratio improvement.
Operational Efficiency
Norfolk Southern exceeded its full-year productivity target of ~$250M by roughly $50M, showing effective cost control and operational improvements.
Negative Factors
Coal Market
Coal carloads are forecast to decline due to softer demand and elevated stockpiles, impacting the utility business and export shipments.
Norfolk Southern (NSC) vs. S&P 500 (SPY)
Market Cap
$55.65B
Dividend Yield2.2%
Average Volume (3M)1.30M
Price to Earnings (P/E)21.2
Beta (1Y)0.98
Revenue Growth-0.27%
EPS Growth43.87%
CountryUS
Employees19,600
SectorIndustrials
Sector Strength66
IndustryTransportation
Share Statistics
EPS (TTM)11.57
Shares Outstanding226,434,130
10 Day Avg. Volume1,360,969
30 Day Avg. Volume1,302,354
Financial Highlights & Ratios
PEG Ratio0.48
Price to Book (P/B)N/A
Price to Sales (P/S)4.59
Price to Cash Flow (P/CF)14.60
P/FCF Ratio12.60
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$275.44Price Target Upside15.48% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering18
Norfolk Southern Business Overview & Revenue Model
Company DescriptionNorfolk Southern Corporation (NSC) is a major American transportation service provider, primarily operating within the railway sector. The company is one of the largest freight rail networks in North America, offering comprehensive rail transportation solutions. Its core services include the transportation of raw materials, intermediate products, and finished goods across a vast network that spans the eastern United States. Norfolk Southern focuses on key freight categories such as intermodal, automotive, coal, agriculture, chemicals, and metals, serving diverse industries and markets.
How the Company Makes MoneyNorfolk Southern makes money primarily through freight transportation services across its extensive rail network. Its key revenue streams include intermodal transport, which involves moving shipping containers and trailers via rail, and the transportation of bulk commodities such as coal, agriculture products, chemicals, and metals. The company also generates revenue through contracts and partnerships with various industries that rely on its rail services to move goods efficiently. Additionally, Norfolk Southern benefits from its strategic location and connections, which facilitate the efficient transfer of goods to major ports and industrial centers, thereby enhancing its competitive position in the freight transportation market.
Norfolk Southern Financial Statement Overview
Summary
Norfolk Southern demonstrates a solid financial position with strong profitability and cash flow metrics. While revenue growth has been inconsistent, margins remain favorable, and cash flow generation is robust. The balance sheet reflects manageable leverage, though maintaining control over debt levels will be crucial for sustained stability. Overall, the company's financial health is commendable, with key strengths in profitability and cash management.Income Statement
Norfolk Southern's income statement reflects a stable performance with a gross profit margin of 68.55% and a net profit margin of 21.63% for the most recent year. The revenue growth rate has been fluctuating, with a recent decline of 0.27% compared to the previous year, highlighting a potential area for improvement. Despite this, EBIT margin and EBITDA margin remain strong at 33.59% each. Overall, the company demonstrates solid profitability, though revenue growth challenges could pose future risks.78
Positive
Balance Sheet
The balance sheet reveals a debt-to-equity ratio of 1.20, indicating a moderately leveraged position. Return on equity (ROE) stands at 18.33%, reflecting effective use of equity to generate profits. The equity ratio is 32.74%, suggesting a balanced capital structure. While leverage is manageable, continued attention to debt levels is advisable to maintain financial stability.75
Positive
Cash Flow
Norfolk Southern's cash flow statements show a robust free cash flow growth rate of 388.67%, driven by strong operational performance. The operating cash flow to net income ratio is 1.55, underscoring effective cash generation relative to net income. The free cash flow to net income ratio is 1.55 as well, indicating healthy cash flow management. Overall, cash flow metrics are strong, supporting the company's liquidity and operational efficiency.80
Positive
| Breakdown | ||||
| Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|
| Income Statement | Total Revenue | |||
| 12.12B | 12.16B | 12.74B | 11.14B | 9.79B | Gross Profit |
| 4.54B | 5.38B | 5.52B | 4.99B | 4.04B | EBIT |
| 4.07B | 2.85B | 4.81B | 4.45B | 3.00B | EBITDA |
| 4.07B | 4.34B | 6.04B | 5.71B | 4.63B | Net Income Common Stockholders |
| 2.62B | 1.83B | 3.27B | 3.00B | 2.01B |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |||
| 1.64B | 1.57B | 456.00M | 839.00M | 1.11B | Total Assets |
| 43.68B | 41.65B | 38.88B | 38.49B | 37.96B | Total Debt |
| 17.48B | 17.57B | 15.18B | 13.84B | 12.68B | Net Debt |
| 15.84B | 16.00B | 14.73B | 13.00B | 11.57B | Total Liabilities |
| 29.38B | 28.87B | 26.15B | 24.85B | 23.17B | Stockholders Equity |
| 14.31B | 12.78B | 12.73B | 13.64B | 14.79B |
| Cash Flow | Free Cash Flow | |||
| 4.05B | 830.00M | 2.27B | 2.79B | 2.14B | Operating Cash Flow |
| 4.05B | 3.18B | 4.22B | 4.25B | 3.64B | Investing Cash Flow |
| -2.78B | -2.18B | -1.60B | -1.22B | -1.18B | Financing Cash Flow |
| -1.20B | 115.00M | -3.00B | -3.31B | -1.93B |
Norfolk Southern Technical Analysis
Negative
238.51
Price Trends
244.71
Negative
250.66
Negative
241.19
Negative
Market Momentum
-1.82
Positive
37.54
Neutral
19.55
Positive
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For NSC, the sentiment is Negative. The current price of 238.51 is below the 20-day moving average (MA) of 249.32, below the 50-day MA of 244.71, and below the 200-day MA of 241.19, indicating a bearish trend. The MACD of -1.82 indicates Positive momentum. The RSI at 37.54 is Neutral, neither overbought nor oversold. The STOCH value of 19.55 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for NSC.
Norfolk Southern Risk Analysis
Norfolk Southern disclosed 25 risk factors in its most recent earnings report. Norfolk Southern reported the most risks in the “Production” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Norfolk Southern Peers Comparison
Overall Rating
UnderperformOutperform
Sector (62)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
80 Outperform | $147.27B | 21.79 | 39.95% | 2.16% | 0.54% | 6.06% | |
77 Outperform | $105.22B | 28.33 | 7.76% | 0.73% | 15.86% | -5.49% | |
74 Outperform | $55.65B | 21.24 | 18.33% | 2.20% | -0.27% | 43.87% | |
71 Outperform | C$88.52B | 20.13 | 21.13% | 2.51% | 1.30% | -18.15% | |
70 Outperform | $59.11B | 17.47 | 27.74% | 1.53% | -0.80% | ― | |
69 Neutral | $30.35B | 29.41 | 10.46% | 0.47% | 7.34% | 32.91% | |
62 Neutral | $8.11B | 13.34 | 1.17% | 3.02% | 4.16% | -15.14% |
* Industrials Sector Average
Performance Comparison
NSC
Norfolk Southern
238.51
-13.20
-5.24%
CSX
CSX
31.20
-6.50
-17.24%
UNP
Union Pacific
241.52
-6.60
-2.66%
WAB
Westinghouse Air Brake Technologies
177.65
37.02
26.32%
TSE:CP
Canadian Pacific Kansas City
107.49
-9.08
-7.79%
TSE:CNR
Canadian National Railway
141.12
-31.47
-18.23%
Norfolk Southern Earnings Call Summary
Earnings Call Date: Jan 29, 2025 | % Change Since: -4.96% | Next Earnings Date: Apr 23, 2025
Earnings Call Sentiment Positive
The earnings call highlighted Norfolk Southern's strong operational performance with notable improvements in volume, safety metrics, and cost reduction, contributing to revenue and productivity gains. However, challenges such as coal revenue decline, labor productivity, and tariff uncertainties present headwinds. The overall sentiment is slightly positive owing to the company's momentum and strategic initiatives that are poised to drive growth despite these challenges.Highlights
Volume and Revenue Growth
Norfolk Southern's operations enabled a 3% increase in volume for Q4, yielding a 2% increase in revenue excluding fuel. For the full year, volume grew by 5%, with intermodal leading the growth and merchandise achieving record revenue.
Cost Reduction Achievements
The company removed nearly $300 million of costs in 2024, surpassing the initial target of $250 million. Adjusted operating ratio ended at 65.8, with the second half OR at 64.1.
Safety and Productivity Improvements
Improved safety metrics with a 27% reduction in FRA train accident rate. Velocity increased by 10% and fuel efficiencies reached record levels for both the quarter and the full year.
Strong Financial Performance
Generated a 390 basis point improvement in operating ratio year-over-year, despite revenue headwinds. Achieved high single-digit net income and EPS growth.
Lowlights
Coal Revenue Decline
Coal volume decreased by 1% with coal prices driving a 9% revenue decline. There are expectations of continued softness in coal demand due to low natural gas prices and elevated inventory levels.
Labor Productivity Headwinds
Despite improvements, labor productivity remains a focus area for further optimization. There are ongoing efforts to align headcount with GTMs and manage overtime and terminal detention costs.
Tariff and Trade Uncertainty
Potential new tariffs introduce uncertainty in the markets served. There is concern about the impact on volume and revenue growth in 2025.
Company Guidance
During the Norfolk Southern Fourth Quarter 2024 Earnings Conference Call, the company reported a strong performance, achieving or surpassing all prior commitments. Key metrics include a 3% increase in volume, a 2% rise in revenue excluding fuel, and a reduction of nearly $300 million in costs, exceeding the $250 million target. The adjusted operating ratio improved to 65.8, outperforming the guidance range of 100 to 150 basis points, with the second half OR at 64.1. Safety metrics saw a notable improvement, with a 27% reduction in the FRA train accident rate and a 13% enhancement in the FRA reportable injury ratio in Q4 compared to the previous year. The company delivered record fuel efficiencies and achieved a 10% system speed improvement, with intermodal train speed increasing by 3.1% and merchandise and unit train speeds rising by 11% and 17%, respectively. Looking ahead to 2025, Norfolk Southern anticipates modest volume growth and aims for a 150 basis point margin expansion, driven by continued productivity improvements, operational efficiency, and service reliability.Norfolk Southern Corporate Events
Business Operations and StrategyFinancial Disclosures
Norfolk Southern Reports Strong 2024 Financial Performance
Positive
Jan 29, 2025
On January 29, 2025, Norfolk Southern Corporation reported its financial results for the fourth quarter and full year 2024, highlighting significant performance improvements. The company achieved revenues of $3.0 billion for the quarter and $12.1 billion for the year, with notable increases in income from railway operations and improvements in operating ratios compared to 2023. Adjusted figures, excluding specific charges and incidents, also showed growth. The report emphasized productivity initiatives and network efficiencies, positioning the company well for future growth and stakeholder value.
Executive/Board ChangesBusiness Operations and Strategy
Norfolk Southern Strengthens Board with New Appointment
Positive
Jan 27, 2025
On January 27, 2025, Norfolk Southern Corporation elected Lori J. Ryerkerk to its Board of Directors. Ryerkerk, with extensive leadership experience in the energy, manufacturing, and chemical industries, was appointed as part of a Cooperation Agreement with Ancora Catalyst Institutional, LP. Her appointment aligns with Norfolk Southern’s strategic goals of enhancing operational excellence and sustainable growth. This move is expected to strengthen the company’s board with Ryerkerk’s insights on global operations and supply chain management, positioning the company for long-term growth and exceptional customer service.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.