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Here's Why Investors Should Avoid Norfolk Southern (NSC) Now
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Norfolk Southern (NSC - Free Report) is currently mired in multiple headwinds, which, we believe, have made it an unimpressive investment option.
Let’s delve deeper.
Southward Earnings Estimate Revisions: The Zacks Consensus Estimate for current-quarter earnings has been revised 5.6% downward over the past 60 days. For the current year, the consensus mark for earnings has moved 4.6% south in the same time frame. The unfavorable estimate revisions indicate brokers’ lack of confidence in the stock.
Weak Zacks Rank and Style Score: NSC currently carries a Zacks Rank #4 (Sell). Moreover, the company’s current VGM Score of D shows its unattractiveness.
Unimpressive Price Performance: NSC has lost 12.7% of its value on a year-to-date basis, whereas its industry’s price performance has remained unchanged.
Image Source: Zacks Investment Research
Other Headwinds: Norfolk Southern is being hurt by weak freight conditions. Inflation-related woes have brought about a reduction in consumer demand for goods, in turn, affecting freight volumes hauled by rail. The top line has been suffering due to below-par performances of all three key segments, namely, Merchandise, Intermodal and Coal.
Revenues are likely to be weak throughout 2023. Management expects 2023 revenues to decline at least 4% from 2022 actuals. Supply-chain disruptions and slower network velocity are further challenges confronting the company. Due to these headwinds, overall volumes have been lower. Moreover, costs have been high primarily due to expenses associated with the Eastern Ohio incident.
Bearish Industry Rank: The industry, to which NSC belongs, currently has a Zacks Industry Rank of 198 (of 250 plus groups). Such an unfavorable rank places it in the bottom 21% of the Zacks industries. Studies show that 50% of a stock price movement is directly related to the performance of the industry group it belongs to.
A mediocre stock within a strong group is likely to outclass a robust stock in a weak industry. Therefore, reckoning the industry’s performance becomes imperative.
Air Canada currently sports a Zacks Rank #1 (Strong Buy). An uptick in passenger traffic is aiding ACDVF. Recently, management announced plans to launch a year-round route between Montreal and Madrid. You can see the complete list of today’s Zacks #1 Rank stocks here.
The service will commence in May of the following year as part of its expanded international summer 2024 flying schedule to cater to increased demand. The Zacks Consensus Estimate for current-year earnings has jumped 32.6% in the past 60 days.
SkyWest currently carries a Zacks Rank #2 (Buy). SKYW's fleet-modernization efforts are commendable. Initiatives to reward its shareholders also bode well. The Zacks Consensus Estimate for current-quarter earnings has surged 83.3% in the past 60 days.
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Here's Why Investors Should Avoid Norfolk Southern (NSC) Now
Norfolk Southern (NSC - Free Report) is currently mired in multiple headwinds, which, we believe, have made it an unimpressive investment option.
Let’s delve deeper.
Southward Earnings Estimate Revisions: The Zacks Consensus Estimate for current-quarter earnings has been revised 5.6% downward over the past 60 days. For the current year, the consensus mark for earnings has moved 4.6% south in the same time frame. The unfavorable estimate revisions indicate brokers’ lack of confidence in the stock.
Weak Zacks Rank and Style Score: NSC currently carries a Zacks Rank #4 (Sell). Moreover, the company’s current VGM Score of D shows its unattractiveness.
Unimpressive Price Performance: NSC has lost 12.7% of its value on a year-to-date basis, whereas its industry’s price performance has remained unchanged.
Image Source: Zacks Investment Research
Other Headwinds: Norfolk Southern is being hurt by weak freight conditions. Inflation-related woes have brought about a reduction in consumer demand for goods, in turn, affecting freight volumes hauled by rail. The top line has been suffering due to below-par performances of all three key segments, namely, Merchandise, Intermodal and Coal.
Revenues are likely to be weak throughout 2023. Management expects 2023 revenues to decline at least 4% from 2022 actuals. Supply-chain disruptions and slower network velocity are further challenges confronting the company. Due to these headwinds, overall volumes have been lower. Moreover, costs have been high primarily due to expenses associated with the Eastern Ohio incident.
Bearish Industry Rank: The industry, to which NSC belongs, currently has a Zacks Industry Rank of 198 (of 250 plus groups). Such an unfavorable rank places it in the bottom 21% of the Zacks industries. Studies show that 50% of a stock price movement is directly related to the performance of the industry group it belongs to.
A mediocre stock within a strong group is likely to outclass a robust stock in a weak industry. Therefore, reckoning the industry’s performance becomes imperative.
Stocks to Consider
Investors interested in the broader Transportation sector may consider some better-ranked stocks like Air Canada (ACDVF - Free Report) and SkyWest (SKYW - Free Report) .
Air Canada currently sports a Zacks Rank #1 (Strong Buy). An uptick in passenger traffic is aiding ACDVF. Recently, management announced plans to launch a year-round route between Montreal and Madrid. You can see the complete list of today’s Zacks #1 Rank stocks here.
The service will commence in May of the following year as part of its expanded international summer 2024 flying schedule to cater to increased demand. The Zacks Consensus Estimate for current-year earnings has jumped 32.6% in the past 60 days.
SkyWest currently carries a Zacks Rank #2 (Buy). SKYW's fleet-modernization efforts are commendable. Initiatives to reward its shareholders also bode well. The Zacks Consensus Estimate for current-quarter earnings has surged 83.3% in the past 60 days.