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Here's Why Investors Should Avoid Norfolk Southern Stock for Now

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Key Takeaways

  • Norfolk Southern's earnings estimates were cut sharply, losing confidence in near and long -term prospects
  • NSC shares lag peers, slipping over 90 days while the broader rail industry posted gains.
  • Rising labor and fuel costs, plus weak liquidity, continue to pressure margins amid economic uncertainty.

Norfolk Southern (NSC - Free Report) is mired in significant challenges stemming from increased expenses and weak liquidity. Tariff-related woes are also hurting the company’s prospects, making it an unattractive choice for investors’ portfolios.

Let’s delve deeper.

NSC: Key Risks to Watch

Southward Earnings Estimate Revision: The Zacks Consensus Estimate for current quarter earnings has been revised 9.4% downward over the past 60 days. Meanwhile, for 2025 and 2026, the consensus mark for earnings has been revised 2.1% and 5.7% downward, respectively, at the same time.

The unfavorable estimate revision indicates brokers’ lack of confidence in the stock.

Dim Price Performance: Norfolk Southern’s price trend reveals that its shares have fallen 0.2% over the past 90-day period compared with the Transportation - Rail industry’s 3.1% growth.

Zacks Investment Research
Image Source: Zacks Investment Research

Weak Zacks Rank: NSC currently has a Zacks Rank #4 (Sell).

Bearish Industry Rank: The industry to which Norfolk Southern belongs currently has a Zacks Industry Rank of 179 (out of 243). Such an unfavorable rank places it in the bottom 26% of Zacks Industries. Studies show that 50% of a stock’s 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. Reckoning the industry’s performance, therefore, becomes imperative.

Headwinds: NSC faces mounting challenges that continue to weigh on its outlook. Rising costs and weak liquidity are pressuring profitability, with total operating expenses jumping 37.8% year over year in the third quarter of 2025. Labor costs, which account for 36.8% of total operating expenses, rose 6.5% year over year, while fuel expenses climbed 9.7% to $237 million, further straining margins.

Liquidity remains a key concern, as reflected in NSC’s persistently weak and volatile current ratio. The ratio declined from 0.86 in 2021 to 0.76 in 2022, rebounded to 1.24 in 2023, and then fell again to 0.90 in 2024 and 0.79 in the second half of 2025. Although it improved slightly to 0.86 in the third quarter of 2025, the metric still signals ongoing pressure on the company’s ability to meet short-term obligations.

Moreover, NSC operates in a challenging macroeconomic environment. Economic uncertainty, evolving tariff policies and heightened geopolitical tensions are increasing operational and compliance risks. These conditions are prompting companies to delay investments, reassess forecasts and remain highly agile, adding another layer of uncertainty to NSC’s near-term prospects.

Stocks to Consider

Investors interested in the Zacks Transportation sector should consider Expeditors International of Washington (EXPD - Free Report) and Global Ship Lease (GSL - Free Report) .

EXPD currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

EXPD has an expected earnings growth rate of 3.50% for the current year. The company has an encouraging earnings surprise history. Its earnings outpaced the Zacks Consensus Estimate in each of the trailing four quarters, delivering an average beat of 13.9%.

Global Ship Lease currently carries a Zacks Rank #2 (Buy).

GSL has an expected earnings growth rate of 2.60% for the current year. The company has an encouraging earnings surprise history. Its earnings topped the Zacks Consensus Estimate in each of the trailing four quarters, delivering an average beat of 16.8%.

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