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Why Is Norfolk Southern (NSC) Up 4.1% Since Last Earnings Report?

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It has been about a month since the last earnings report for Norfolk Southern (NSC - Free Report) . Shares have added about 4.1% 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 Q3

Norfolk Southern's third-quarter 2019 earnings (excluding 9 cents from non-recurring items) of $2.58 per share surpassed the Zacks Consensus Estimate by a penny. Moreover, the bottom line improved 2.4% on a year-over-year basis owing to lower costs.

Railway operating revenues in the quarter under review came in at $2,841 million, surpassing the Zacks Consensus Estimate of $2,839.1 million. However, the top line declined approximately 4% year over year due to disappointing revenues at the coal and intermodal units. Overall volumes decreased 6%.

Income from railway operations declined 2% year over year to $996 million. Operating expenses declined 4% on a year-over-year basis to $1,845 million, primarily owing to lower fuel costs as well as expenses related to purchased services and rents. Norfolk Southern’s operating ratio (operating expenses as a percentage of revenues) in the third quarter improved 50 basis points to 64.9% in the reported quarter. Notably, lower the value of the metric the better.

Segmental Performance

On a year-over-year basis, coal revenues totaled $403 million, down 13% year over year. Coal volumes contracted 15%. Revenue per unit inched up 2% in the reported quarter.

Merchandise revenues were flat at $1,731 million. Segmental volumes fell 4%. Revenue per unit improved 3% for the segment.

Intermodal revenues decreased 5% year over year to $707 million. Segmental volumes also declined 5%. Revenue per unit was unaltered on a year-over-year basis.

Liquidity

The company exited the third quarter with cash and cash equivalents of $452 million compared with $358 million at the end of 2018. The company had long-term debt of $11,085 million compared with $10,560 million as of Dec 31, 2018.

How Have Estimates Been Moving Since Then?

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

VGM Scores

At this time, Norfolk Southern has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. 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 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 indicates a downward shift. 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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