Why Is Norfolk Southern (NSC) Up 1.4% Since Last Earnings Report?

It has been about a month since the last earnings report for Norfolk Southern (NSC). Shares have added about 1.4% 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 the most recent earnings report in order to get a better handle on the important drivers.

Earnings Beat at Norfolk Southern in Q2

Norfolk Southern's earnings of $3.28 per share surpassed the Zacks Consensus Estimate of $2.94. Moreover, the bottom line skyrocketed more than 100% year over year on higher revenues.

Railway operating revenues in the quarter under review came in at $2,799 million, outperforming the Zacks Consensus Estimate of $2,751.3 million. The top line increased 34% year over year owing to 25% rise in volumes and a 7% increase in revenue per unit. Second-quarter results reflect significant recovery from the year-ago period when coronavirus-led woes dented volumes.

Income from railway operations surged 91% year over year to $1,167 million. Railway operating expenses increased 11% on a year-over-year basis to $1,632 million, mainly due to significant rise in fuel costs. Norfolk Southern’s operating ratio (operating expenses as a percentage of revenues), on a reported basis, improved to 58.3% in the second quarter from 70.7% in the year-ago quarter. With respect to this metric, lower the value, the better.

Segmental Performance

Coal revenues totaled $318 million, up 52% year over year. Coal volumes rose 55%. However, revenue per unit dipped 1% in the reported quarter.

Merchandise revenues jumped 29% year over year to $1,680 million. Volumes also increased 29% while revenue per unit was flat year over year.

Intermodal revenues augmented 41% year over year to $801 million. While segmental volumes rose 20%, revenue per unit ascended 17%.

Liquidity & Share Buyback

The company exited the second quarter with cash and cash equivalents of $1,670 million compared with $1,115 million at the end of 2020. The company had long-term debt of $12,669 million at the end of the reported quarter compared with $12,102 million at December 2020-end.

During the first half of 2021, the company repurchased and retired 5.7 million and 3.9 million shares for $1.5 billion and $669 million, respectively.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates revision.

VGM Scores

Currently, Norfolk Southern has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. However, 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 trending upward for the stock, and the magnitude of these revisions looks promising. 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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