Back to top

Image: Bigstock

Norfolk Southern (NSC) Rewards Investors Via New Buyback Plan

Read MoreHide Full Article

In a shareholder-friendly move, Norfolk Southern Corporation (NSC - Free Report) announced that its board has authorized a new $10-billion stock repurchase plan, starting Apr 1. Thus, its current program will be terminated on Mar 31. Interestingly, the new program has no expiration date. The timing and volume of any share buyback will be guided by management’s assessment of market conditions and other factors.

Under this buyback program, purchases will be made through open market transactions, privately negotiated transactions, accelerated share repurchase programs, or by combinations of such methods.

Norfolk Southern also rewards its shareholders by paying out dividends. Evidently, NSC has hiked its quarterly dividend payout thrice over the past year. The most recent dividend hike was announced in January this year when NSC decided to increase its quarterly dividend by 14% to $1.24 per share. Norfolk Southern's strong free cash flow generating ability supports its shareholder-friendly activities. During 2020, Norfolk Southern generated free cash flow of $2.1 billion, up 14% year over year. In 2021, the company generated free cash flow to the tune of $2,785 million, up 30% year over year. The company expects current-year dividend payout ratio in the 35-40% range.

NSC’s commitment to reward its shareholders, despite the current uncertain scenario, is commendable.

Zacks Rank & Other Stocks to Consider

Norfolk Southern currently carries a Zacks Rank #2 (Buy).

Investors interested in the broader Zacks Transportation sector can also consider other top-ranked stocks like Expeditors International of Washington, Inc. (EXPD - Free Report) , Old Dominion Freight Line, Inc. (ODFL - Free Report) and Triton International Limited .

Expeditors has an earnings surprise of 34.2%, having surpassed the Zacks Consensus Estimate in the past four quarters.  The uptick is aiding Expeditors in airfreight revenues. We are optimistic about the company’s buyout of Fleet Logistics’ Digital Platform. The acquisition has boosted Expeditors’ online LTL shipping platform, Koho. The move is in line with the company's focus on Digital Solutions.

EXPD currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The long-term expected earnings per share (EPS) (three-to-five years) growth rate for Old Dominion is pegged at 16%. Old Dominion is benefiting from the strong performance of the LTL segment owing to improved freight conditions. In 2021, revenues from the LTL services segment increased 30.7% on a year-over-year basis.

Driven by the tailwinds, the stock has risen 34.3% in the past year.  ODFL currently carries a Zacks Rank #2.

The long-term expected EPS (three-to-five years) growth rate for Triton is pegged at 10%. Gradual increases in trade volumes and container demand bode well for the company. With easing coronavirus-led restrictions in the United States and Europe, the company saw a strong rebound in its business in the third and fourth quarter of 2020 as well as in each of the four quarters of 2021.

Driven by the positives, the stock has rallied 27.4% in the past year. TRTN currently carries a Zacks Rank #2.

Published in