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Why Is Norfolk Southern (NSC) Down 11% Since Last Earnings Report?

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A month has gone by since the last earnings report for Norfolk Southern (NSC - Free Report) . Shares have lost about 11% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Norfolk Southern due for a breakout? 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 catalysts.

Earnings Beat at Norfolk Southern in Q1

Norfolk Southern's  earnings of $2.93 per share surpassed the Zacks Consensus Estimate of $2.91. Moreover, the bottom line improved 10.2% year over year despite network challenges.

Railway operating revenues in the quarter under review came in at $2,915 million, outperforming the Zacks Consensus Estimate of $2,819.3 million. The top line increased 10.5% year over year, with all key segments — merchandise, intermodal and coal — registering improvement in revenues. Revenue per unit rose 16% year over year. Total volumes declined 5% year over year due to network challenges.

Income from railway operations climbed 7% year over year to $1,085 million. Railway operating expenses shot up 13% on a year-over-year basis to $1,830 million, primarily due to higher expenses on fuel and purchased services. Norfolk Southern’s operating ratio (operating expenses as a percentage of revenues) deteriorated to 62.8% in the first quarter from 61.5% in the year-ago quarter, owing to higher revenues. With respect to this metric, lower the value, the better.

Segmental Performance

Coal revenues totaled $389 million, up 25% year over year. Coal volumes dipped 1%. Revenue per unit jumped 25% in the reported quarter.

Merchandise revenues climbed 4% year over year to $1,672 million. Volumes declined 3% while revenue per unit ascended 7% year over year.

Intermodal revenues augmented 19% year over year to $854 million. While segmental volumes decreased 6%, revenue per unit ascended 26%.

Liquidity, Dividends & Share Buyback

Norfolk Southern exited the first quarter with cash and cash equivalents of $1,571 million compared with $839 million at the end of 2021. Norfolk Southern had long-term debt of $13,691 million at the end of the first quarter compared with $13,287 million at December 2021-end.

During the first quarter, Norfolk Southern paid dividends worth $297 million, up 19.3% year over year. NSC repurchased and retired common stock worth $600 million in the first quarter compared with $591 million a year ago.

 

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month.

VGM Scores

Currently, Norfolk Southern has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Following the exact same course, 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 B. 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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