Norfolk Southern’s (NSC - Free Report) third-quarter 2023 earnings (excluding 55 cents from non-recurring items) of $2.65 per share fell short of the Zacks Consensus Estimate of $2.74. The bottom line contracted 35.4% on a year-over-year basis.
Railway operating revenues were $2,971 million in the quarter under review, surpassing the Zacks Consensus Estimate of $2,942.3 million. Yet, the top line decreased 11.1% year over year, with all key segments including Merchandise, Intermodal and Coal registering deterioration in revenues. Inflation-related woes have brought about a reduction in consumer demand for goods, in turn, hurting freight volumes hauled by rail. This has dented NSC’s performance.
Total revenue per unit dipped 9% year over year. Income from railway operations decreased 41% to $756 million including a charge of $163 million associated with the Eastern Ohio incident.
Railway operating expenses shot up 7% on a year-over-year basis to $2,215 million primarily due to a double-digit increase in costs related to materials apart from the expenditure of Ohio derailment.
Norfolk Southern’s operating ratio (operating expenses as a percentage of revenues) reached 74.6% in the third quarter from 62% in the year-ago quarter due to higher costs. A lower value of the metric is preferable. Our estimate for this key metric was 68.5%.
In the first nine months of 2023, NSC paid out dividends worth $920 million and repurchased shares worth $503 million.
Segmental Performance
Merchandise’s revenues declined 7% year over year to $1,800 million, lower than our estimate of $1,899.9 million. Volumes inched down 3% and revenue per unit dipped 4% year over year.
Revenues from Intermodal plunged 22% year over year to $737 million, which lagged our projection of $742.7 million. While segmental volumes decreased 1%, revenue per unit tumbled 21%.
Coal’s revenues totaled $434 million, down 8% year over year. Actual segmental revenues exceeded our expectation of $388.7 million. Coal volumes contracted 9% year over year. Revenue per unit inched up 1% in the reported quarter.
Liquidity
Norfolk Southern exited third-quarter 2023 with cash and cash equivalents of $1,506 million compared with $456 million at the end of 2022. NSC had a long-term debt of $16,179 million at the end of the quarter under review compared with $14,479 million at 2022 end.
Currently, Norfolk Southern carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Outlook
Driven by the weak demand scenario, Norfolk Southern expects 2023 revenues to be down 4% from 2022 actuals. Current-year capex is expected to be $2.2 billion.
Performances of Other Transportation Companies
J.B. Hunt Transport Services' (JBHT - Free Report) third-quarter 2023 EPS of $1.80 missed the Zacks Consensus Estimate of $1.85 and declined 30% year over year.
JBHT’s total operating revenues of $3,163.8 million also lagged the Zacks Consensus Estimate of $3,224 million and fell 18% year over year. Total operating revenues, excluding fuel surcharges, decreased 15% year over year.
Delta Air Lines (DAL - Free Report) reported third-quarter 2023 EPS (excluding 31 cents from non-recurring items) of $2.03, which comfortably beat the Zacks Consensus Estimate of $1.92 and improved 35% on a year-over-year basis.
DAL’s revenues of $15,488 million outpaced the Zacks Consensus Estimate of $15,290.4 million and jumped 11% on a year-over-year basis driven by higher air-travel demand.
Alaska Air Group (ALK - Free Report) reported third-quarter 2023 EPS of $1.83, which missed the Zacks Consensus Estimate of $1.88 and declined 28% year over year.
Operating revenues of $2,839 million fell short of the Zacks Consensus Estimate of $2,876.1 million. The top line inched up 0.4% year over year, with passenger revenues accounting for 92.2% of the top line and increasing 0.1%.
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Norfolk Southern’s (NSC - Free Report) third-quarter 2023 earnings (excluding 55 cents from non-recurring items) of $2.65 per share fell short of the Zacks Consensus Estimate of $2.74. The bottom line contracted 35.4% on a year-over-year basis.
Railway operating revenues were $2,971 million in the quarter under review, surpassing the Zacks Consensus Estimate of $2,942.3 million. Yet, the top line decreased 11.1% year over year, with all key segments including Merchandise, Intermodal and Coal registering deterioration in revenues. Inflation-related woes have brought about a reduction in consumer demand for goods, in turn, hurting freight volumes hauled by rail. This has dented NSC’s performance.
Total revenue per unit dipped 9% year over year. Income from railway operations decreased 41% to $756 million including a charge of $163 million associated with the Eastern Ohio incident.
Railway operating expenses shot up 7% on a year-over-year basis to $2,215 million primarily due to a double-digit increase in costs related to materials apart from the expenditure of Ohio derailment.
Norfolk Southern’s operating ratio (operating expenses as a percentage of revenues) reached 74.6% in the third quarter from 62% in the year-ago quarter due to higher costs. A lower value of the metric is preferable. Our estimate for this key metric was 68.5%.
In the first nine months of 2023, NSC paid out dividends worth $920 million and repurchased shares worth $503 million.
Segmental Performance
Merchandise’s revenues declined 7% year over year to $1,800 million, lower than our estimate of $1,899.9 million. Volumes inched down 3% and revenue per unit dipped 4% year over year.
Revenues from Intermodal plunged 22% year over year to $737 million, which lagged our projection of $742.7 million. While segmental volumes decreased 1%, revenue per unit tumbled 21%.
Coal’s revenues totaled $434 million, down 8% year over year. Actual segmental revenues exceeded our expectation of $388.7 million. Coal volumes contracted 9% year over year. Revenue per unit inched up 1% in the reported quarter.
Liquidity
Norfolk Southern exited third-quarter 2023 with cash and cash equivalents of $1,506 million compared with $456 million at the end of 2022. NSC had a long-term debt of $16,179 million at the end of the quarter under review compared with $14,479 million at 2022 end.
Currently, Norfolk Southern carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Outlook
Driven by the weak demand scenario, Norfolk Southern expects 2023 revenues to be down 4% from 2022 actuals. Current-year capex is expected to be $2.2 billion.
Performances of Other Transportation Companies
J.B. Hunt Transport Services' (JBHT - Free Report) third-quarter 2023 EPS of $1.80 missed the Zacks Consensus Estimate of $1.85 and declined 30% year over year.
JBHT’s total operating revenues of $3,163.8 million also lagged the Zacks Consensus Estimate of $3,224 million and fell 18% year over year. Total operating revenues, excluding fuel surcharges, decreased 15% year over year.
Delta Air Lines (DAL - Free Report) reported third-quarter 2023 EPS (excluding 31 cents from non-recurring items) of $2.03, which comfortably beat the Zacks Consensus Estimate of $1.92 and improved 35% on a year-over-year basis.
DAL’s revenues of $15,488 million outpaced the Zacks Consensus Estimate of $15,290.4 million and jumped 11% on a year-over-year basis driven by higher air-travel demand.
Alaska Air Group (ALK - Free Report) reported third-quarter 2023 EPS of $1.83, which missed the Zacks Consensus Estimate of $1.88 and declined 28% year over year.
Operating revenues of $2,839 million fell short of the Zacks Consensus Estimate of $2,876.1 million. The top line inched up 0.4% year over year, with passenger revenues accounting for 92.2% of the top line and increasing 0.1%.
5 Stocks Set to Double
Each was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2024. While not all picks can be winners, previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
Today, See These 5 Potential Home Runs >>
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