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Atlanta, Georgia-based Norfolk Southern Corporation (NSC) provides rail transportation services. Valued at $62.5 billion by market cap, the company transports raw materials, intermediate products, and finished goods via interchange with rail carriers. NSC also transports overseas freight through several Atlantic and Gulf Coast ports.
Shares of this leader in the transportation industry have underperformed the broader market over the past year. NSC has gained 30% over this time frame, while the broader S&P 500 Index ($SPX) has rallied nearly 31.8%. In 2024, NSC’s stock rose 16.5%, compared to the SPX’s 25.8% rise on a YTD basis.
Narrowing the focus, NSC’s outperformance is apparent compared to the iShares Transportation Average ETF (IYT).The exchange-traded fund has gained about 23.6% over the past year. Moreover, NSC’s returns on a YTD basis outshine the ETF’s 13.5% gains over the same time frame.
NSC’s underperformance can be attributed to various challenges such as inflation-induced high interest rates, supply chain disruptions, and a slowdown in economic growth. Safety concerns in the industry have also increased following incidents like the Norfolk Southern train derailment in East Palestine, Ohio. Another significant challenge facing the industry is the loss of experienced workers due to job cuts in recent years, leading to a reliance on newer employees who are still learning the risks of the job.
On Oct. 22, NSC shares closed up more than 4% after reporting its Q3 results. Its adjusted EPS of $3.25 beat Wall Street expectations of $3.10. The company’s revenue was $3.05 billion, missing Wall Street forecasts of $3.09 billion.
For the current fiscal year, ending in December, analysts expect NSC’s EPS to grow marginally to $11.82 on a diluted basis. The company’s earnings surprise history is mixed. It beat the consensus estimate in two of the last four quarters while missing the forecast on two other occasions.
Among the 25 analysts covering NSC stock, the consensus is a “Moderate Buy.” That’s based on 14 “Strong Buy” ratings, one “Moderate Buy,” nine “Holds,” and one “Strong Sell.”
This configuration is more bullish than two months ago, with 13 analysts suggesting a “Strong Buy.”
On Nov. 13, Barclays PLC (BCS) analyst Brandon Oglenski kept an “Overweight” rating and raised the price target on NSC to $305, implying a potential upside of 10.8% from current levels.
The mean price target of $278.09 represents a 1% premium to NSC’s current price levels. The Street-high price target of $316 suggests an upside potential of 14.8%.
