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Here's Why You Should Retain Norfolk Southern (NSC) Stock Now
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Norfolk Southern Corporation (NSC - Free Report) is benefiting from its shareholder-friendly measures and impressive rise in operating revenues. However, escalating fuel expenses are a concern.
Factors Favoring NSC
Despite COVID-19-related woes, Norfolk Southern is committed to rewarding its shareholders. In 2021, the company rewarded its shareholders to the tune of $4,418 million, through dividends ($1,028 million) and share buybacks (3,390 million). During 2022, Norfolk Southern paid dividends worth $1,167 million, up 13.5% year over year. It repurchased and retired common stock worth $3,110 million in 2022. In January 2023, NSC's board announced a 9% increase in its quarterly dividend payout. This marked the fourth dividend hike announced by the company in a year. In the first three months of 2023, NSC paid out dividends worth $307 million and repurchased shares worth $163 million. NSC's strong free cash flow generating ability supports its shareholder-friendly activities. In 2022, free cash flow was $2,274 million. In the first three months of 2023, free cash flow increased to $745 million from $605 million a year ago.
In first-quarter 2023, railway operating revenues increased 7.5% year over year to $3,132 million. Key segments like Merchandise and Coal registered improvements in revenues. Total revenue per unit rose 8% year over year, driven by higher fuel surcharges and pricing. Income from railway operations climbed 1% year over year to $1,098 million. Such impressive top-line performance, despite the challenging backdrop, is indeed commendable.
Key Risks
An increase in fuel costs due to an uptick in oil prices is limiting bottom-line growth. In 2021, expenses on fuel increased 49% year over year to $799 million at Norfolk Southern. Moreover, the oil price has increased substantially following Russia's invasion of Ukraine. At NSC, expenses on fuel surged 82.6% year over year in 2022, leading to an 18.5% rise in operating costs. Fuel costs increased 5% in first-quarter 2023. High capex is also likely to play spoilsport. Management expects Capex for 2023 to be roughly $2.1 billion.
Zacks Rank
NSC currently carries a Zacks Rank #3 (Hold).
Stocks to Consider
Some better-ranked stocks for investors interested in the Zacks Transportation sector are Copa Holdings, S.A. (CPA - Free Report) and Triton International Limited .
Copa Holdings, which presently flaunts a Zacks Rank #1 (Strong Buy), is aided by improved air-travel demand. We are encouraged by the company’s initiatives to modernize its fleet. CPA's focus on its cargo segment is also impressive. You can see the complete list of today’s Zacks #1 Rank stocks here.
For second-quarter and full-year 2023, CPA’s earnings are expected to register 862.5% and 84.14% growth, respectively, on a year-over-year basis.
Triton, which currently carries a Zacks Rank #2 (Buy), is benefiting from its consistent efforts to reward shareholders through dividends and share repurchases.
Triton has an impressive liquidity position. TRTN’s current ratio (a measure of liquidity) was 3.97 at the end of first-quarter 2023. A current ratio of more than 1 often indicates that the company will be easily paying off its short-term obligations.
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Here's Why You Should Retain Norfolk Southern (NSC) Stock Now
Norfolk Southern Corporation (NSC - Free Report) is benefiting from its shareholder-friendly measures and impressive rise in operating revenues. However, escalating fuel expenses are a concern.
Factors Favoring NSC
Despite COVID-19-related woes, Norfolk Southern is committed to rewarding its shareholders. In 2021, the company rewarded its shareholders to the tune of $4,418 million, through dividends ($1,028 million) and share buybacks (3,390 million). During 2022, Norfolk Southern paid dividends worth $1,167 million, up 13.5% year over year. It repurchased and retired common stock worth $3,110 million in 2022. In January 2023, NSC's board announced a 9% increase in its quarterly dividend payout. This marked the fourth dividend hike announced by the company in a year. In the first three months of 2023, NSC paid out dividends worth $307 million and repurchased shares worth $163 million. NSC's strong free cash flow generating ability supports its shareholder-friendly activities. In 2022, free cash flow was $2,274 million. In the first three months of 2023, free cash flow increased to $745 million from $605 million a year ago.
In first-quarter 2023, railway operating revenues increased 7.5% year over year to $3,132 million. Key segments like Merchandise and Coal registered improvements in revenues. Total revenue per unit rose 8% year over year, driven by higher fuel surcharges and pricing. Income from railway operations climbed 1% year over year to $1,098 million. Such impressive top-line performance, despite the challenging backdrop, is indeed commendable.
Key Risks
An increase in fuel costs due to an uptick in oil prices is limiting bottom-line growth. In 2021, expenses on fuel increased 49% year over year to $799 million at Norfolk Southern. Moreover, the oil price has increased substantially following Russia's invasion of Ukraine. At NSC, expenses on fuel surged 82.6% year over year in 2022, leading to an 18.5% rise in operating costs. Fuel costs increased 5% in first-quarter 2023. High capex is also likely to play spoilsport. Management expects Capex for 2023 to be roughly $2.1 billion.
Zacks Rank
NSC currently carries a Zacks Rank #3 (Hold).
Stocks to Consider
Some better-ranked stocks for investors interested in the Zacks Transportation sector are Copa Holdings, S.A. (CPA - Free Report) and Triton International Limited .
Copa Holdings, which presently flaunts a Zacks Rank #1 (Strong Buy), is aided by improved air-travel demand. We are encouraged by the company’s initiatives to modernize its fleet. CPA's focus on its cargo segment is also impressive. You can see the complete list of today’s Zacks #1 Rank stocks here.
For second-quarter and full-year 2023, CPA’s earnings are expected to register 862.5% and 84.14% growth, respectively, on a year-over-year basis.
Triton, which currently carries a Zacks Rank #2 (Buy), is benefiting from its consistent efforts to reward shareholders through dividends and share repurchases.
Triton has an impressive liquidity position. TRTN’s current ratio (a measure of liquidity) was 3.97 at the end of first-quarter 2023. A current ratio of more than 1 often indicates that the company will be easily paying off its short-term obligations.