Norfolk Southern Corp Stock Analysis

2024 22 vasario Nauris Treigys

Norfolk Southern Corp specializes in transporting raw materials, intermediate products, and finished goods by rail in the southeastern, eastern, and midwestern regions of the United States. They also exchange freight with other rail carriers to and from various regions within the USA. Additionally, they transport goods internationally through multiple ports along the Atlantic and Gulf coasts. The company operates the most extensive intermodal transportation network in the eastern United States.

The company faces strong competition in the market from seven other railway companies, not including river transport. Price is the sole factor determining customer choice. Therefore, when choosing railway companies, a savvy investor must carefully assess risks and potential profitability.

Income distribution by sectors:

Norfolk Southern Corp Finance

The financial results for the year 2023 worsened due to a railway accident in February 2023 in East Ohio, where 38 railway cars carrying hazardous materials derailed during transportation. The cleanup of the technical and environmental consequences of the accident cost the company 1.1 billion dollars.

The company’s average annual income growth over the 10-year period, similar to the previous financial year, was only 0.05%, despite a significant decrease in annual income by -4.62%. Therefore, the income reduction is not yet dramatic. Unfortunately, this will affect further calculations.

What is most interesting is that the company’s overall revenue increased significantly, reaching as much as 88.70%, while the net profit margin decreased to 15%, but still remains positively high. This only confirms that we are dealing with a very strong company and its management.

The profit growth dynamics of the company are cyclical but show an upward trend. The cyclical nature is influenced by the global economic situation and commodity prices in the market. The average annual growth rate of earnings per share (EPS) over the past 10 years has been only 2.88%, while the average annual growth rate over the past 5 years has been -3.88%. This resulted in a significant decrease of -42.22% in the EPS for the latest financial year.

The average return on assets has decreased to 4.54%, and the 10-year average return on equity (ROE) has slightly decreased to 16.48%. These are good indicators for a giant corporation like Norfolk Southern, considering the challenging economic conditions. The working capital remained positive.

Interest paid as a percentage of Operating profit increased to about 23%. Long-term debts and interest increased, while operating profit decreased. The railroad business requires continuous large capital investments. For every $1 invested in long-term tangible assets, an average of $1.22 in EPS is earned.

The 10-year average annual growth of Retained profits decreased to 1.37%, despite decreasing for several consecutive years. The average return on Retained profits for the same period dropped to 3.19%.

Recently added to our analysis, the F_Score indicator is 7. This is a fairly good indicator, but it still did not improve our investment assessment.

If shareholders of the company want to sell shares and invest today in a 10-year U.S. Treasury bond to achieve the same return as the company provided in 2023, they would need to sell shares at $192.79 USD (the stock price at the time of writing is $254).

Investment scoreboard:

Income Forecast:

Forecast	2024	2025
EPS	10.04	10.88
Net Profit	2 283 000 000	2 474 000 000
Revenue	11 413 000 000	12 370 000 000

By Aipt.lt

Norfolk Southern Corp stock

Norfolk Southern Corp. shares have been listed on the NYSE since July 23, 1980. The symbol is NSC.

The company has a stable Share Buyback and Dividend Payment program. The size of the paid dividends consistently increases. The 10-year period Dividend CAGR is a remarkable 10.22%, and the dividend payment profitability at the time of writing reached 2.14%. These are very attractive figures and encourage investment.

Investors view the company favorably, and in the market, it paid about $65 USD per 1 Free Cash Flow dollar at the end of 2023. The stock price’s Standard Deviation is 23.73%, and the beta is 1.31. Unfortunately, due to poorer performance, the PEG has dropped to -7.55, and the Equity Risk Premium for the stock is -0.21%. Despite these declines, they are evaluated with some reservation.

According to the GRAPES method, the prospective annual growth in price may be around 2-3%. However, our method calculates a much more optimistic price perspective. The average annual price growth could reach 12% and more. This indicator has not diminished over the past year. The historical CAGR of prices is 9.80%.

Stock Price

Conclusions

We have held the shares since September 2012 and have already achieved a return of 352.26%, averaging 13.96% annually. The return significantly outpaces inflation, and we intend to continue holding the shares. As of the time of writing, we observe that investors in the market have overlooked the company’s concerns regarding the accident and are very positive about its prospects. Investors particularly appreciate the increasing dividends. If we calculate the dividend yield of our position based on the purchase price, it reaches 8.41%. Compared to the current yield, this is extremely good.

If you are considering buying these shares, do so boldly, hold for the long term, and use corrections to make purchases to increase the yield on your investment.