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Why Is Norfolk Southern (NSC) Up 15.4% 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 15.4% 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 drivers.
Earnings Miss at Norfolk Southern in Q3
Norfolk Southern’s hird-quarter 2023 earnings (excluding 55 cents from non-recurring items) of $2.65 per share fell short of the Zacks Consensus Estimate of $2.74. The bottom line contracted 35.4% on a year-over-year basis.
Railway operating revenues were $2,971 million in the quarter under review, surpassing the Zacks Consensus Estimate of $2,942.3 million. Yet, the top line decreased 11.1% year over year, with all key segments including Merchandise, Intermodal and Coal registering deterioration in revenues. Inflation-related woes have brought about a reduction in consumer demand for goods, in turn, hurting freight volumes hauled by rail. This has dented NSC’s performance.
Total revenue per unit dipped 9% year over year. Income from railway operations decreased 41% to $756 million including a charge of $163 million associated with the Eastern Ohio incident.
Railway operating expenses shot up 7% on a year-over-year basis to $2,215 million primarily due to a double-digit increase in costs related to materials apart from the expenditure of Ohio derailment.
Norfolk Southern’s operating ratio (operating expenses as a percentage of revenues) reached 74.6% in the third quarter from 62% in the year-ago quarter due to higher costs. A lower value of the metric is preferable. Our estimate for this key metric was 68.5%.
In the first nine months of 2023, NSC paid out dividends worth $920 million and repurchased shares worth $503 million.
Segmental Performance
Merchandise’s revenues declined 7% year over year to $1,800 million, lower than our estimate of $1,899.9 million. Volumes inched down 3% and revenue per unit dipped 4% year over year.
Revenues from Intermodal plunged 22% year over year to $737 million, which lagged our projection of $742.7 million. While segmental volumes decreased 1%, revenue per unit tumbled 21%.
Coal’s revenues totaled $434 million, down 8% year over year. Actual segmental revenues exceeded our expectation of $388.7 million. Coal volumes contracted 9% year over year. Revenue per unit inched up 1% in the reported quarter.
Liquidity
Norfolk Southern exited third-quarter 2023 with cash and cash equivalents of $1,506 million compared with $456 million at the end of 2022. NSC had a long-term debt of $16,179 million at the end of the quarter under review compared with $14,479 million at 2022 end.
Outlook
Driven by the weak demand scenario, Norfolk Southern expects 2023 revenues to be down 4% from 2022 actuals. Current-year capex is expected to be $2.2 billion.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
VGM Scores
At this time, Norfolk Southern has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. Charting a somewhat similar path, 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 F. 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. It's no surprise Norfolk Southern has a Zacks Rank #4 (Sell). We expect a below average 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, CSX (CSX - Free Report) , a stock from the same industry, has gained 10%. The company reported its results for the quarter ended September 2023 more than a month ago.
CSX reported revenues of $3.57 billion in the last reported quarter, representing a year-over-year change of -8.3%. EPS of $0.42 for the same period compares with $0.52 a year ago.
For the current quarter, CSX is expected to post earnings of $0.45 per share, indicating a change of -8.2% from the year-ago quarter. The Zacks Consensus Estimate has changed -0.3% over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for CSX. Also, the stock has a VGM Score of D.
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Why Is Norfolk Southern (NSC) Up 15.4% Since Last Earnings Report?
It has been about a month since the last earnings report for Norfolk Southern (NSC - Free Report) . Shares have added about 15.4% 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 drivers.
Earnings Miss at Norfolk Southern in Q3
Norfolk Southern’s hird-quarter 2023 earnings (excluding 55 cents from non-recurring items) of $2.65 per share fell short of the Zacks Consensus Estimate of $2.74. The bottom line contracted 35.4% on a year-over-year basis.
Railway operating revenues were $2,971 million in the quarter under review, surpassing the Zacks Consensus Estimate of $2,942.3 million. Yet, the top line decreased 11.1% year over year, with all key segments including Merchandise, Intermodal and Coal registering deterioration in revenues. Inflation-related woes have brought about a reduction in consumer demand for goods, in turn, hurting freight volumes hauled by rail. This has dented NSC’s performance.
Total revenue per unit dipped 9% year over year. Income from railway operations decreased 41% to $756 million including a charge of $163 million associated with the Eastern Ohio incident.
Railway operating expenses shot up 7% on a year-over-year basis to $2,215 million primarily due to a double-digit increase in costs related to materials apart from the expenditure of Ohio derailment.
Norfolk Southern’s operating ratio (operating expenses as a percentage of revenues) reached 74.6% in the third quarter from 62% in the year-ago quarter due to higher costs. A lower value of the metric is preferable. Our estimate for this key metric was 68.5%.
In the first nine months of 2023, NSC paid out dividends worth $920 million and repurchased shares worth $503 million.
Segmental Performance
Merchandise’s revenues declined 7% year over year to $1,800 million, lower than our estimate of $1,899.9 million. Volumes inched down 3% and revenue per unit dipped 4% year over year.
Revenues from Intermodal plunged 22% year over year to $737 million, which lagged our projection of $742.7 million. While segmental volumes decreased 1%, revenue per unit tumbled 21%.
Coal’s revenues totaled $434 million, down 8% year over year. Actual segmental revenues exceeded our expectation of $388.7 million. Coal volumes contracted 9% year over year. Revenue per unit inched up 1% in the reported quarter.
Liquidity
Norfolk Southern exited third-quarter 2023 with cash and cash equivalents of $1,506 million compared with $456 million at the end of 2022. NSC had a long-term debt of $16,179 million at the end of the quarter under review compared with $14,479 million at 2022 end.
Outlook
Driven by the weak demand scenario, Norfolk Southern expects 2023 revenues to be down 4% from 2022 actuals. Current-year capex is expected to be $2.2 billion.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
VGM Scores
At this time, Norfolk Southern has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. Charting a somewhat similar path, 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 F. 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. It's no surprise Norfolk Southern has a Zacks Rank #4 (Sell). We expect a below average 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, CSX (CSX - Free Report) , a stock from the same industry, has gained 10%. The company reported its results for the quarter ended September 2023 more than a month ago.
CSX reported revenues of $3.57 billion in the last reported quarter, representing a year-over-year change of -8.3%. EPS of $0.42 for the same period compares with $0.52 a year ago.
For the current quarter, CSX is expected to post earnings of $0.45 per share, indicating a change of -8.2% from the year-ago quarter. The Zacks Consensus Estimate has changed -0.3% over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for CSX. Also, the stock has a VGM Score of D.