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Norfolk Southern Corp NSC

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Morningstar’s Analysis

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Norfolk Southern’s Q2 Carloads See Strong Rebound; OR Progress Solid and Guidance Favorable.

Matthew Young, CFA Equity Analyst

Analyst Note

| Matthew Young, CFA |

Norfolk Southern’s second-quarter revenue jumped 34% year over year (it was flat last quarter) driven by an easy comparison (initial pandemic headwinds), solid underlying demand recovery across most carload groups, and healthy revenue-per-carload gains. Carload volume expanded 26% (3% last quarter, which faced weather headwinds). Despite unfavorable mix among chemicals and automotive end markets, average revenue per carload rose 7% on solid contract rate gains, higher fuel surcharges, and elevated intermodal accessorial revenue. Core pricing is benefiting from constrained capacity across most transportation modes, which is lifting railroads’ pricing power. Importantly, management now expects full-year revenue growth of 12% (previously 9%), with high-single-digit volume gains. Strength is expected to persist in steel, paper board and plastics, and intermodal. Automotive is up, but OEMs continue to grapple with the chip shortage. Coal should be a near-term positive on recovering industrial activity and higher exports but will remain pressured long term. 

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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 (15% of 2019 revenue), intermodal traffic (25%), and a diverse mix of automobile, agriculture, metal, chemical, and forest products.

Contact
Three Commercial Place
Norfolk, VA, 23510-2191
T +1 757 629-2680
Sector Industrials
Industry Railroads
Most Recent Earnings Jun 30, 2021
Fiscal Year End Dec 31, 2021
Stock Type Cyclical
Employees 20,156

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