Norfolk Southern Corp.

Norfolk Southern Corp. (NSC - Analyst Report) has been able to leverage its strong pricing power in order to grow its profits, as seen by the company's recently reported strong second-quarter results. Analyst estimates continue to advance, and this stock is once again pressuring its 52-week high.

Norfolk Southern Corp., through its subsidiaries, operates as a rail shipper specializing in raw materials and finished goods primarily in the United States. The company was founded in 1830, has a market cap. of $27 billion and is headquartered in Norfolk, Virginia.

Strong Second-Quarter Results

Rail shippers continue to be in favor as many companies have struggled with the higher costs associated with traditional trucking. This dynamic was evident when Norfolk reported strong second-quarter results on July 22.

Revenue was up 16% from last year to $2.77 billion. Income totaled $453 million, a 15% increase from last year, producing earnings of $1.18 per share, ahead of analyst expectations of $1.05 per share.

Pricing Power Driving Profits

Norfolk noted that its costs were up 16% in the quarter due to higher energy prices. But the company's strong pricing power enabled it to pass these expenses on to its customers.

Shipping volumes were down marginally, by about 2%, but Norfolk did experience strong demand from a number of sectors, including the coal, agriculture and metals markets.

A History of Surprising

This is the fourth time in the last four quarters that the company has surprised and beaten analyst estimates, having done so by an average of 7 cents, or 6.64%. In this economic environment it is a testament to the company's ability to drive its growth and produce gains.

Estimates Continue to Rise

Analyst estimates have been creeping higher for the last 3 months. The current-year estimate now stands at $4.31 per share, up from $4.04 per share 30 days ago and $4.28 per share just 7 days ago. The next-year estimate is projecting 14% earnings growth, with the consensus estimate pegged at $4.91 per share.

Based upon the current-year earnings estimate, this stock carries a forward P/E multiple of 16.4X, a slight premium to the overall market.

The Chart

This stock has been up trending for most of the year, recently hitting a new 52-week and all-time high above $75. Since then, shares have retreated slightly, but are still within striking range of the new high. Some short-term resistance has developed between $73 and $74. Take a look at the chart below.

Read the full analyst report on NSC