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Norfolk Southern (NSC) Down 1.4% 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 1.4% in that time frame, outperforming 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 the most recent earnings report in order to get a better handle on the important drivers.

Earnings Beat at Norfolk Southern in Q1

Norfolk Southern delivered first-quarter 2019 earnings of $2.51 per share, surpassing the Zacks Consensus Estimate of $2.17. The bottom line also surged 30.1% on a year-over-year basis. Results were aided by higher revenues and lower costs.

Railway operating revenues in the quarter under review came in at $2,840 million, higher than the Zacks Consensus Estimate of $2,800.9 million. Moreover, the top line rose 4.5% year over year owing to an increase in revenue per unit and higher fuel surcharge revenue.  Revenue per unit in the reported quarter benefited from increased rates.

Income from railway operations increased 16% year over year to $966 million. Operating expenses declined on a year-over-year basis to $1,874 million owing to lower fuel price and expenses related to compensation and benefits. Norfolk Southern’s operating ratio (operating expenses as a percentage of revenues) in the first quarter improved to 66% from 69.3% a year ago. Notably, lower the value of the metric the better.

Segmental Performance

On a year-over-year basis, coal revenues came in at $435 million, flat year over year. Coal volumes declined 5%. Revenue per unit increased 6% in the reported quarter.

Merchandise revenues gained 5% year over year to $1,686 million with most sub-groups performing well. Merchandise volumes decreased 1%. Revenue per unit increased 6% for the segment.

Intermodal revenues rose 6% year over year to $719 million. Segmental volumes inched up 2%. Revenue per unit increased 4% for the segment.

Liquidity

The company exited the first quarter with cash and cash equivalents of $411 million compared with $358 million at the end of 2018. The company had long-term debt of $10,569 million compared with $10,560 million as of Dec 31, 2018.

How Have Estimates Been Moving Since Then?

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

VGM Scores

At this time, Norfolk Southern has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. Charting a somewhat similar path, 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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