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Why Is Norfolk Southern (NSC) Up 10.5% Since Last Earnings Report?

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A month has gone by since the last earnings report for Norfolk Southern (NSC - Free Report) . Shares have added about 10.5% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Norfolk Southern due for a pullback? 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 Beat at Norfolk Southern in Q4

Norfolk Southern's fourth-quarter 2018 earnings of $2.57 per share, surpassed the Zacks Consensus Estimate of $2.30. The bottom line also soared 52.1% on a year-over-year basis.

Railway operating revenues in the quarter under review grossed $2,896 million, higher than the Zacks Consensus Estimate of $2,845.1 million. Moreover, the top line rose 8.5% year over year owing to higher fuel-surcharge revenues and impressive volumes among other factors. Overall, volumes expanded 3% on the back of growth in intermodal and coal segments.

Income from railway operations augmented 8% year over year to $1.1 billion. Operating expenses increased 9% year over year to $1.8 billion. Norfolk Southern’s operating ratio (operating expenses as a percentage of revenues) in the reported quarter came in at 62.8% compared with 68.3% in the fourth quarter of 2017.

Segmental Revenues

On a year-over-year basis, coal revenues climbed 7.3% to $457 million. Coal volumes inched up 1%.

Merchandise revenues gained 6.8% year over year to $1,684 million. Merchandise volumes are flat year over year.

Intermodal revenues rose 13.2% year over year to $755 million. Intermodal volumes also improved year over year.

Liquidity

The company exited the fourth quarter with cash and cash equivalents of $358 million compared with $690 million at the end of 2017. The company had long-term debt of $10,560 million compared with $9,136 million as of Dec 31, 2017.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

Currently, Norfolk Southern has a great Growth Score of A, a grade with the same score on the momentum front. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

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

Outlook

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


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