Norfolk Southern (NSC) reported stronger-than-expected Q2 results, topping both earnings and revenue estimates. However, shares of the railway transportation company were down 2.3% on July 28 to close at $256.92.
The company reported adjusted earnings of $3.28 per share, beating analysts’ expectations of $2.94 per share, and rising 114% compared to the prior-year period. Railway operating revenues of $2.8 billion grew 34% and exceeded the consensus estimate of $2.74 billion, driven by a 25% surge in volume and a 7% jump in revenue per unit. (See NSC stock charts on TipRanks)
During the quarter, the operating ratio improved to an all-time record of 58.3%. However, railway operating expenses increased to $1.6 billion, up 11% year-over-year.
Norfolk Southern CEO James A. Squires commented, “Leveraging the strong and diverse book of business we have developed, we will build upon our success in the creation of long-term, sustainable value for our customers and shareholders.”
Following the upbeat Q2 results, Cowen & Co. analyst Jason Seidl increased the price target from $297 to $301 (17.2% upside potential) and reiterated a Buy rating.
Seidl said, “NSC posted a second quarter beat that was above our expectations, as strong revenues, higher asset sales and a lower tax rate drove the beat.”
He added, “As we look ahead, we expect tight capacity to continue with some manageable expenses in the back half of the year, slightly better than our previous expectations.”
Consensus among analysts is a Moderate Buy based on 8 Buys, 6 Holds, and 2 Sells. The average Norfolk Southern price target of $290.20 implies 13% upside potential to current levels.
NSC scores a 9 out of 10 on TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations.
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