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Norfolk Southern (NSC) Up 3.1% Since Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Norfolk Southern Corporation (NSC - Free Report) . Shares have added about 3.1% in that time frame.

Will the recent positive trend continue leading up to its next earnings release, or is NSC due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Recent Earnings

Norfolk Southern reported first-quarter 2018 earnings of $1.93 per share, surpassing the Zacks Consensus Estimate of $1.77. The bottom line also improved 30% on a year-over-year basis.

Railway operating revenues in the quarter under review came in at $2,717 million, above the Zacks Consensus Estimate of $2,681.8 million. The top line also rose 5.5% on a year-over-year basis. Overall, volumes expanded 3% on the back of a solid performance at the intermodal segment.

Income from railway operations climbed 10% year over year to $835 million. Operating expenses increased 4% year over year to $1.9 billion. Railway operating expenses rose due to higher fuel prices as well as costs related to overall lower network velocity.

Norfolk Southern’s operating ratio (operating expenses as a percentage of revenues) in the first quarter of 2018 came in at 69.3% compared with 70% in the first quarter of 2017.

Segmental Revenues

On a year-over-year basis, coal revenues increased 3.3% to $434 million.

Merchandise revenues inched up 1.3% year over year to $1,605 million.

Intermodal revenues rose 18.7% year over year to $678 million.

Liquidity

The company exited the first quarter with cash and cash equivalents of $1,072 million compared with $690 million at the end of 2017. The company had long-term debt of $9,637 million compared with $9,136 million as of Dec 31, 2017.

With the company having delivered a sound financial performance in the first quarter, it keeps its optimism alive on its prospects in 2018. It has also increased its expected annual share repurchases to $1.5 billion.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. There have been six revisions higher for the current quarter compared to one lower.

VGM Scores

At this time, NSC has a subpar Growth Score of D, however its Momentum is doing a lot better with an A. The stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Our style scores indicate that the stock is more suitable for momentum investors than value investors.

Outlook

Estimates have been broadly trending upward for the stock and the magnitude of these revisions looks promising. Notably, NSC has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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