{"id":8686,"date":"2023-11-08T13:19:18","date_gmt":"2023-11-08T13:19:18","guid":{"rendered":"https:\/\/lendingsensibly.com\/markets\/whats-next-for-norfolk-southern-stock-after-a-21-fall-this-year\/"},"modified":"2023-11-08T13:19:19","modified_gmt":"2023-11-08T13:19:19","slug":"whats-next-for-norfolk-southern-stock-after-a-21-fall-this-year","status":"publish","type":"post","link":"https:\/\/lendingsensibly.com\/?p=8686","title":{"rendered":"What\u2019s Next For Norfolk Southern Stock After A 21% Fall This Year?"},"content":{"rendered":"
\n

Norfolk Southern<\/strong>
\n <\/fbs-ticker>NSC (NYSE: NSC) reported its Q3 results last month, with revenues meeting but earnings missing the street estimates. The company reported revenue of $2.97 billion and adjusted earnings of $2.65 per share, compared to the consensus estimates of $2.94 billion and $2.74, respectively. In this note, we discuss Norfolk Southern\u2019s stock performance, key takeaways from its recent results, and valuation.<\/p>\n

NSC stock has seen a decline of 20% from levels of $240 in early January 2021 to around $195 now, vs. an increase of about 15% for the S&P 500 over this roughly 3-year period. However, the decrease in NSC stock has been far from consistent. Returns for the stock were 25% in 2021, -17% in 2022, and -21% in 2023. In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 14% in 2023 – indicating that NSC underperformed the S&P<\/strong> in 2021 and 2023.<\/p>\n

In fact, consistently beating the S&P 500<\/strong> – in good times and bad – has been difficult over recent years for individual stocks; for heavyweights in the Industrials sector, including UNP, HON, and UPS, and even for the megacap stars GOOG, TSLA, and MSFT.<\/p>\n

In contrast, the Trefis High Quality Portfolio, with a collection of 30 stocks, has outperformed the S&P 500 each year<\/strong> over the same period. Why is that?<\/strong> As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index, less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.<\/p>\n

<\/fbs-ad><\/p>\n

Given the current uncertain macroeconomic environment with high oil prices and elevated interest rates, could NSC face a similar situation as it did in 2021 and 2023 and underperform the S&P<\/strong> over the next 12 months – or will it see a recovery? From a valuation perspective, NSC stock looks like it has room for growth. We estimate Norfolk Southern\u2019s Valuation<\/strong> to be $230 per share, reflecting more than 15% upside from its current levels of $195. This represents a 19x P\/E multiple for NSC based on earnings expectation of $11.85 for the full year 2023. The 19x P\/E ratio is lower than the last four-year average of 22x. We have assigned a slightly lower multiple compared to the historical average, taking into account fears of a potential recession and its impact on the railroad business and higher than anticipated costs associated with the Ohio derailment.<\/p>\n

Norfolk Southern\u2019s revenue of $3.0 billion in Q3 was down 11% y-o-y, primarily due to a 22% fall in intermodal revenue. Total volume was down 2%, while average revenue per unit plunged 9% during the quarter. A decline in fuel surcharge revenue also impacted the overall sales for Norfolk Southern. The company\u2019s adjusted operating ratio stood at 69.1% in Q3 versus 62.0% in the prior-year quarter. Lower revenues and a rise in operating ratio resulted in a 35% decline in adjusted earnings, which stood at $2.65 per share in Q3.<\/p>\n

Looking forward, the company should see increased fuel surcharge revenue in Q4 with a rebound in oil prices in recent weeks. However, volume growth may remain tepid in the near term. Although at current levels of $195, NSC stock is trading at 3.5x revenues versus its last five-year average of 4.8x, higher costs, lower shipment volume, declining ARPU, and the impact of a potential recession on its business are key risk factors that could cap the growth of NSC stock in the near term.<\/p>\n

While NSC stock\u2019s growth may be capped in the near term, in our view, it is helpful to see how Norfolk Southern\u2019s Peers<\/strong> fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons<\/strong>.<\/strong><\/p>\n

Invest with Trefis <\/strong>Market Beating Portfolios<\/strong><\/p>\n

See all Trefis <\/strong>Price Estimates<\/strong><\/p>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Norfolk Southern NSC (NYSE: NSC) reported its Q3 results last month, with revenues meeting but earnings missing the street estimates. The company reported revenue of $2.97 billion and adjusted earnings of $2.65 per share, compared to the consensus estimates of $2.94 billion and $2.74, respectively. In this note, we discuss Norfolk Southern\u2019s stock performance, key takeaways from its recent results, and valuation. NSC stock has seen a decline of 20% from levels of $240 in early January 2021 to around $195 now, vs. an increase of about 15% for the S&P 500 over this roughly 3-year period. However, the decrease<\/p>\n","protected":false},"author":1,"featured_media":8687,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[39],"tags":[],"class_list":["post-8686","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-markets"],"yoast_head":"\nWhat\u2019s Next For Norfolk Southern Stock After A 21% Fall This Year? | LendingSensibly<\/title>\n<meta name=\"description\" content=\"Norfolk Southern NSC (NYSE: NSC) reported its Q3 results last month, with revenues meeting but earnings missing the street estimates. 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