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Norfolk Southern (NSC) Up 21.9% Since Last Earnings Report: Can It Continue?
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It has been about a month since the last earnings report for Norfolk Southern (NSC - Free Report) . Shares have added about 21.9% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Norfolk Southern due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Earnings Beat at Norfolk Southern in Q3
Norfolk Southern's earnings (excluding 29 cents from non-recurring items) of $2.51 per share surpassed the Zacks Consensus Estimate of $2.36. However, the bottom line decreased 2.7% on a year-over-year basis.
Railway operating revenues in the quarter under review came in at $2,506 million, falling short of the Zacks Consensus Estimate of $2,525.8 million. Moreover, the top line declined 11.8% year over year due to 7% drop in total volumes and 5% decline in revenue per unit as a result of the economic slowdown caused by coronavirus.
Income from railway operations (adjusted) dropped 6% year over year to $939 million. Adjusted operating expenses declined 15% on a year-over-year basis to $1,567 million, thanks to low fuel, compensation and benefits, and purchased-services expenses. Norfolk Southern’s adjusted operating ratio (operating expenses as a percentage of revenues) in the third quarter improved to 62.5% from 64.9% in the year-ago period. With respect to this metric, lower the value, the better.
Segmental Performance
On a year-over-year basis, coal revenues totaled $250 million, down 38% year over year. Coal volumes contracted 32%. Revenue per unit also declined 8% in the reported quarter.
Merchandise revenues declined 10% to $1,556 million and volumes fell 11%. Revenue per unit improved 1% for the segment.
Intermodal revenues dipped 1% year over year to $700 million. While segmental volumes inched up 1%, revenue per unit slipped 2% on a year-over-year basis.
Liquidity & Share Buyback
The company exited the third quarter with cash and cash equivalents of $1,359 million compared with $580 million at the end of 2019. The company had long-term debt of $12,634 million at the end of the reported quarter compared with $11,880 million at 2019-end.
During the first nine months of 2020, Norfolk Southern repurchased 1.4 million shares at a cost of $300 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
VGM Scores
Currently, Norfolk Southern has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. Charting a somewhat similar path, 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.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Norfolk Southern has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Norfolk Southern (NSC) Up 21.9% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Norfolk Southern (NSC - Free Report) . Shares have added about 21.9% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Norfolk Southern due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Earnings Beat at Norfolk Southern in Q3
Norfolk Southern's earnings (excluding 29 cents from non-recurring items) of $2.51 per share surpassed the Zacks Consensus Estimate of $2.36. However, the bottom line decreased 2.7% on a year-over-year basis.
Railway operating revenues in the quarter under review came in at $2,506 million, falling short of the Zacks Consensus Estimate of $2,525.8 million. Moreover, the top line declined 11.8% year over year due to 7% drop in total volumes and 5% decline in revenue per unit as a result of the economic slowdown caused by coronavirus.
Income from railway operations (adjusted) dropped 6% year over year to $939 million. Adjusted operating expenses declined 15% on a year-over-year basis to $1,567 million, thanks to low fuel, compensation and benefits, and purchased-services expenses. Norfolk Southern’s adjusted operating ratio (operating expenses as a percentage of revenues) in the third quarter improved to 62.5% from 64.9% in the year-ago period. With respect to this metric, lower the value, the better.
Segmental Performance
On a year-over-year basis, coal revenues totaled $250 million, down 38% year over year. Coal volumes contracted 32%. Revenue per unit also declined 8% in the reported quarter.
Merchandise revenues declined 10% to $1,556 million and volumes fell 11%. Revenue per unit improved 1% for the segment.
Intermodal revenues dipped 1% year over year to $700 million. While segmental volumes inched up 1%, revenue per unit slipped 2% on a year-over-year basis.
Liquidity & Share Buyback
The company exited the third quarter with cash and cash equivalents of $1,359 million compared with $580 million at the end of 2019. The company had long-term debt of $12,634 million at the end of the reported quarter compared with $11,880 million at 2019-end.
During the first nine months of 2020, Norfolk Southern repurchased 1.4 million shares at a cost of $300 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
VGM Scores
Currently, Norfolk Southern has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. Charting a somewhat similar path, 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.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Norfolk Southern has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.