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Norfolk Southern (NSC) Down 6% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Norfolk Southern (NSC - Free Report) . Shares have lost about 6% 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 Miss at Norfolk Southern in Q1

Quarterly earnings of $2.49 per share fell short of the Zacks Consensus Estimate of $2.58 and declined 25% year over year. Results were hurt by high costs.

Railway operating revenues were $3,004 million in the quarter under review, lagging the Zacks Consensus Estimate of $3,030.2 million. The top line decreased 4% year over year, with all key segments, including Merchandise, Intermodal and Coal, registering deterioration in revenues.

Overall volumes increased 4%. Total revenue per unit dipped 8% year over year. Income from railway operations decreased 70% to $213 million. Railway operating expenses rose 15% on a year-over-year basis to $2,791 million, primarily due to a double-digit increase in expenses on compensation and benefits.

Norfolk Southern’s operating ratio (operating expenses as a percentage of revenues) increased to 92.9% in the first quarter from 77.3% in the year-ago quarter.

Segmental Performance

Merchandise revenues declined 1% year over year to $1,863 million. Actual segmental revenues were lower than our estimate of $1,864.5 million. Volumes were flat, whereas revenue per unit declined 1% year over year.

Revenues from Intermodal plunged 8% year over year to $745 million. Actual segmental revenues were higher than our projection of $715.9 million. While segmental volumes increased 8%, revenue per unit tumbled 15%.

Coal revenues came in at $396 million, down 10% year over year. Actual segmental revenues fell short of our projection of $423.7 million. Coal volumes fell 4% year over year. Revenue per unit declined 6% in the reported quarter.

Liquidity & Buyback

Norfolk Southern exited the first quarter with cash and cash equivalents of $652 million compared with $1,568 million at the end of the prior quarter. NSC had a long-term debt of $17,179 million at the first-quarter end compared with $17,175 million at the prior-quarter end.

NSC did not repurchase any shares under its stock repurchase program in the first quarter of 2024.

Outlook

Norfolk Southern expects 2024 revenues to increase 3% from 2023 actuals.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month.

VGM Scores

Currently, Norfolk Southern has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions has been net zero. Notably, Norfolk Southern has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Norfolk Southern is part of the Zacks Transportation - Rail industry. Over the past month, Canadian National (CNI - Free Report) , a stock from the same industry, has gained 1.3%. The company reported its results for the quarter ended March 2024 more than a month ago.

CN reported revenues of $3.15 billion in the last reported quarter, representing a year-over-year change of -1.2%. EPS of $1.28 for the same period compares with $1.35 a year ago.

CN is expected to post earnings of $1.43 per share for the current quarter, representing a year-over-year change of +9.2%. Over the last 30 days, the Zacks Consensus Estimate has changed -0.8%.

CN has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of F.


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