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Norfolk Southern Corp - Stock Quote NSC

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Morningstar's Norfolk Southern Corp Stock Analysis

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Labor Constraints Derailing Norfolk Southern's Carloads, but Improvement Likely and Pricing Healthy

Matthew Young, CFA Equity Analyst

Business Strategy and Outlook

| Matthew Young, CFA |

Norfolk Southern is a well-managed enterprise, and from the start of the rail renaissance in 2004 through 2008, it posted the highest margins among U.S. Class I railroads. However, its operating ratio (expenses/revenue) deteriorated to 75.4% in 2009 and remained stuck between 69% and 73% from 2010 to 2015. This pales in comparison to progress made by peers Union Pacific and Canadian Pacific, which lack Norfolk's exposure to Appalachian coal. However, by 2017 the rail was back on track, and it has achieved record ORs in each year since, including an adjusted 60.1% in 2021. In recent years, Norfolk renewed its commitment to pricing discipline and margin gains, particularly via precision railroading initiatives, which have driven more efficient use of locomotive assets, labor, and fuel. We expect incremental gains as the firm continues to refine its PSR playbook. Of note, in late 2019, former Canadian National CEO Claude Mongeau (2010-16) joined Norfolk's board of directors to help bolster the rail's PSR efforts.

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Norfolk Southern Corp's Company Profile

Business Description

Class-I railroad Norfolk Southern operates in the Eastern United States. On roughly 21,000 miles of track, the firm hauls shipments of coal, intermodal traffic, and a diverse mix of automobile, agriculture, metal, chemical, and forest products.

650 West Peachtree Street NW
Norfolk, VA, 30308-1925
T +1 855 667-3655
Sector Industrials
Industry Railroads
Most Recent Earnings Mar 31, 2022
Fiscal Year End Dec 31, 2022
Stock Type Cyclical
Employees 18,100

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