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Norfolk Southern (NSC) Q4 Earnings: What Lies in Store?
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Virginia-based, Norfolk Southern Corporation (NSC - Free Report) is scheduled to report fourth-quarter 2016 results on Jan 25, before the market opens.
Last quarter, the company posted a positive earnings surprise of 6.9%. Moreover, the company’s bottom line surpassed the Zacks Consensus Estimate in three of the last four quarters, with an average beat of 8.78%. Let’s see how things are shaping up for this announcement.
Factors at Play this Quarter
We expect Norfolk Southern’s top line to benefit from the inauguration of the expanded Panama Canal last year, as East Coast ports are anticipated to witness a rise in container traffic. Additionally, the company’s prudent cost management efforts should boost its bottom line in the fourth quarter. We are also impressed with the company’s focus on rewarding shareholders through share repurchases and dividends.
However, the company’s revenues are likely to be adversely impacted by low coal volumes in the fourth quarter as has been the case in the previous few quarters. Coal-related headwinds are not unique to Norfolk Southern. Other railroad players like Union Pacific Corp. (UNP - Free Report) and Kansas City Southern are also being hurt by dwindling coal shipments.
We are also concerned about the company’s high debt levels. The company had exited the third quarter of 2016 with long-term debt of more than $9 billion. Apart from a rise in immediate finance costs, the high debt level will also require significant cash flows for repayments. Therefore, the company’s debt- to capitalization ratio at the end of the third quarter was more than 43%.
Our proven model does not conclusively show that Norfolk Southern is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold) for this to happen. Unfortunately, this is not the case here as elaborated below.
Zacks ESP: Both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at $1.37 per share. Thus, the Earnings ESP for the company is 0.00%.You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: The company carries a Zacks Rank #3, which increases the predictive power of ESP. However, the company’s 0.00% ESP makes surprise prediction difficult.
Conversely, we caution against stocks with a Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
A Stock to Consider
Investors interested in the transportation space may consider the following stock as our model shows it possesses the right combination of elements to post an earnings beat this quarter.
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2017?
Who wouldn't? As of early December, the 2016 Top 10 produced 5 double-digit winners including oil and natural gas giant Pioneer Natural Resources which racked up a stellar +50% gain. The new list is painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. Be among the very first to see it>>
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Norfolk Southern (NSC) Q4 Earnings: What Lies in Store?
Virginia-based, Norfolk Southern Corporation (NSC - Free Report) is scheduled to report fourth-quarter 2016 results on Jan 25, before the market opens.
Last quarter, the company posted a positive earnings surprise of 6.9%. Moreover, the company’s bottom line surpassed the Zacks Consensus Estimate in three of the last four quarters, with an average beat of 8.78%. Let’s see how things are shaping up for this announcement.
Factors at Play this Quarter
We expect Norfolk Southern’s top line to benefit from the inauguration of the expanded Panama Canal last year, as East Coast ports are anticipated to witness a rise in container traffic. Additionally, the company’s prudent cost management efforts should boost its bottom line in the fourth quarter. We are also impressed with the company’s focus on rewarding shareholders through share repurchases and dividends.
However, the company’s revenues are likely to be adversely impacted by low coal volumes in the fourth quarter as has been the case in the previous few quarters. Coal-related headwinds are not unique to Norfolk Southern. Other railroad players like Union Pacific Corp. (UNP - Free Report) and Kansas City Southern are also being hurt by dwindling coal shipments.
We are also concerned about the company’s high debt levels. The company had exited the third quarter of 2016 with long-term debt of more than $9 billion. Apart from a rise in immediate finance costs, the high debt level will also require significant cash flows for repayments. Therefore, the company’s debt- to capitalization ratio at the end of the third quarter was more than 43%.
Norfolk Southern Corp. Price and EPS Surprise
Norfolk Southern Corp. Price and EPS Surprise | Norfolk Southern Corp. Quote
Earnings Whispers
Our proven model does not conclusively show that Norfolk Southern is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold) for this to happen. Unfortunately, this is not the case here as elaborated below.
Zacks ESP: Both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at $1.37 per share. Thus, the Earnings ESP for the company is 0.00%.You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: The company carries a Zacks Rank #3, which increases the predictive power of ESP. However, the company’s 0.00% ESP makes surprise prediction difficult.
Conversely, we caution against stocks with a Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
A Stock to Consider
Investors interested in the transportation space may consider the following stock as our model shows it possesses the right combination of elements to post an earnings beat this quarter.
JetBlue Airways Corp. (JBLU - Free Report) has a Zacks Rank #3 and an Earnings ESP of +4.17%. The company is scheduled to report fourth-quarter results on Jan 26. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2017?
Who wouldn't? As of early December, the 2016 Top 10 produced 5 double-digit winners including oil and natural gas giant Pioneer Natural Resources which racked up a stellar +50% gain. The new list is painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. Be among the very first to see it>>