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Will Volume Woes Mar Norfolk Southern's (NSC) Q2 Earnings?

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Norfolk Southern Corporation (NSC - Free Report) is scheduled to report second-quarter 2022 results on Jul 27, before market open.

The Zacks Consensus Estimate for NSC’s second-quarter earnings has been revised 0.9% downward in the past 30 days. However, NSC has an impressive surprise history, with its earnings having outperformed the Zacks Consensus Estimate in each of the preceding four quarters, the average being 5.2%.

Against this backdrop, let’s examine the factors that are likely to have impacted Norfolk Southern’s second-quarter 2022 performance.

Escalating fuel costs due to the Russia-Ukraine war are expected to have dented Norfolk Southern’s bottom line in the June quarter.

Supply-chain disruptions and slower network velocity are expected to have weighed on volumes in the second quarter. The Zacks Consensus Estimate for carloads (volumes) for the first quarter indicates a 2% decline from the year-ago period’s reported number.

Despite supply-chain woes, strong freight market conditions are expected to have boosted revenues in the to-be-reported quarter. The Zacks Consensus Estimate for coal revenues hints at a 20.1% rise from the year-ago period’s reported quarter. The same for intermodal revenues suggests a 12.9% increase from the first-quarter 2021 reported number. The consensus mark for merchandise revenues suggests an 8% climb from the year-ago quarter’s reported figure.

Owing to an expected increase in revenues, the operating ratio (operating expenses as a percentage of revenues), a key measure of efficiency, is likely to have improved in the quarter. The Zacks Consensus Estimate for June quarter's operating ratio stands at 60%, better than 63% reported in the sequential quarter. Lower the value of the metric, the better.

What Does the Zacks Model Say?

The proven Zacks model does not conclusively predict an earnings beat for Norfolk Southern this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. However, this is not the case here, as elaborated below. You can see the complete list of today’s Zacks #1 Rank stocks here.

Earnings ESP: Norfolk Southern has an earnings ESP of -1.24% as the Most Accurate Estimate is currently pegged at $3.40, 4 cents lower than the Zacks Consensus Estimate. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Norfolk Southern presently carries a Zacks Rank #3.

Highlights of Q1 Earnings

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.

Stocks to Consider

Here are a few stocks worth considering from the broader Zacks Transportation sector, as our model shows that these have the right combination of elements to beat on second-quarter 2022 earnings:

 

C.H. Robinson Worldwide (CHRW - Free Report) has an Earnings ESP of +5.24% and a Zacks Rank #2. CHRW will release results on Jul 27.

C.H. Robinson has an expected earnings growth rate of 16.6% for the current year. CHRW delivered a trailing four-quarter earnings surprise of 17.1%, on average.

CHRW has a long-term earnings growth rate of 9%.

Kirby (KEX - Free Report) has an Earnings ESP of +0.70% and a Zacks Rank of 2. KEX will release results on Jul 28.

Kirby has an expected earnings growth rate of 282.14% for the current year. KEX delivered a trailing four-quarter earnings surprise of 7.7%, on average.

KEX has a long-term earnings growth rate of 12%. 

Southwest Airlines (LUV - Free Report) has an Earnings ESP of +5.31% and a Zacks Rank of 3. Improved air-travel demand is likely to aid LUV’s results. LUV will release results on Jul 28.

Southwest has an expected earnings growth rate of 226.05% for the current year. LUV delivered a trailing four-quarter earnings surprise of 33.5%, on average. Southwest has a long-term earnings growth rate of 6%.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.