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Here's Why Investors Should Give Norfolk Southern (NSC) a Miss
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Norfolk Southern (NSC - Free Report) is currently grappling with a host of intricate challenges, a scenario that we believe has significantly diminished its attractiveness as an investment opportunity.
Let’s delve deeper
Southward Earnings Estimate Revision: The Zacks Consensus Estimate for current-quarter earnings has been revised 11.5% downward over the past 60 days. For the current year, the consensus mark for earnings has moved 6.40% south in the same time frame. The unfavorable estimate revisions indicate brokers’ lack of confidence in the stock.
Weak Zacks Rank and Style Score: NSC currently carries a Zacks Rank #4 (Sell). Moreover, the company’s current Value Score of F shows its unattractiveness.
Unimpressive Price Performance: NSC shares have grown 1% over the past 30 days compared with its sector’s 1.1% appreciation.
Image Source: Zacks Investment Research
Other Headwinds: Norfolk Southern is being hurt by weak freight conditions. Inflation-related woes have brought about a reduction in consumer demand for goods, in turn affecting freight volumes hauled by rail. The top line has been suffering due to the below-par performances of all three key segments, namely, Merchandise, Intermodal and Coal.
Moreover, rising expenses on compensations and benefits, driven by factors like wage inflation, surged by 8% in 2023 compared to 2022. Alongside declining revenues, these elevated costs are exerting pressure on the operating ratio (operating expenses as a percentage of revenues). Additionally, recent labor negotiations are anticipated to further elevate labor expenses.
Bearish Industry Rank: The industry to which NSC belongs currently has a Zacks Industry Rank of 173 (250 plus groups). Such an unfavorable rank places NSC in the bottom 31% of Zacks Industries.Studies show that 50% of a stock price movement is directly related to the performance of the industry group it belongs to.
A mediocre stock within a strong group is likely to outclass a robust stock in a weak industry. Therefore, reckoning the industry’s performance becomes imperative.
GATX has an encouraging track record with respect to earnings surprise, having surpassed the Zacks Consensus Estimate in three of the last four quarters (missing the mark in the remaining one). The average beat is 16.47%.
The Zacks Consensus Estimate for 2024 earnings has been revised 9% upward over the past 90 days. The company has an expected earnings growth rate of 6.5% for 2024. Shares of GATX have rallied 24.6% in the past year.
SkyWest's fleet modernization efforts are commendable. The Zacks Consensus Estimate for SKYW’s 2024 earnings has improved 26% over the past 90 days. Shares of SkyWesthave surged 257.4% in the past year.
SKYW has an expected earnings growth rate of more than 100% for 2024. The company delivered a trailing four-quarter earnings surprise of 128.02%, on average.
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Here's Why Investors Should Give Norfolk Southern (NSC) a Miss
Norfolk Southern (NSC - Free Report) is currently grappling with a host of intricate challenges, a scenario that we believe has significantly diminished its attractiveness as an investment opportunity.
Let’s delve deeper
Southward Earnings Estimate Revision: The Zacks Consensus Estimate for current-quarter earnings has been revised 11.5% downward over the past 60 days. For the current year, the consensus mark for earnings has moved 6.40% south in the same time frame. The unfavorable estimate revisions indicate brokers’ lack of confidence in the stock.
Weak Zacks Rank and Style Score: NSC currently carries a Zacks Rank #4 (Sell). Moreover, the company’s current Value Score of F shows its unattractiveness.
Unimpressive Price Performance: NSC shares have grown 1% over the past 30 days compared with its sector’s 1.1% appreciation.
Image Source: Zacks Investment Research
Other Headwinds: Norfolk Southern is being hurt by weak freight conditions. Inflation-related woes have brought about a reduction in consumer demand for goods, in turn affecting freight volumes hauled by rail. The top line has been suffering due to the below-par performances of all three key segments, namely, Merchandise, Intermodal and Coal.
Moreover, rising expenses on compensations and benefits, driven by factors like wage inflation, surged by 8% in 2023 compared to 2022. Alongside declining revenues, these elevated costs are exerting pressure on the operating ratio (operating expenses as a percentage of revenues). Additionally, recent labor negotiations are anticipated to further elevate labor expenses.
Bearish Industry Rank: The industry to which NSC belongs currently has a Zacks Industry Rank of 173 (250 plus groups). Such an unfavorable rank places NSC in the bottom 31% of Zacks Industries.Studies show that 50% of a stock price movement is directly related to the performance of the industry group it belongs to.
A mediocre stock within a strong group is likely to outclass a robust stock in a weak industry. Therefore, reckoning the industry’s performance becomes imperative.
Stocks to Consider
Investors interested in the broader Transportation sector may consider stocks like GATX Corporations (GATX - Free Report) and Skywest (SKYW - Free Report) . SKYW currently sports a Zacks Rank #1 (Strong Buy), and GATX currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
GATX has an encouraging track record with respect to earnings surprise, having surpassed the Zacks Consensus Estimate in three of the last four quarters (missing the mark in the remaining one). The average beat is 16.47%.
The Zacks Consensus Estimate for 2024 earnings has been revised 9% upward over the past 90 days. The company has an expected earnings growth rate of 6.5% for 2024. Shares of GATX have rallied 24.6% in the past year.
SkyWest's fleet modernization efforts are commendable. The Zacks Consensus Estimate for SKYW’s 2024 earnings has improved 26% over the past 90 days. Shares of SkyWesthave surged 257.4% in the past year.
SKYW has an expected earnings growth rate of more than 100% for 2024. The company delivered a trailing four-quarter earnings surprise of 128.02%, on average.