Norfolk Southern Corporation (NSC): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report

Summary:
Norfolk Southern will likely benefit from favorable pricing revisions, continuous investments in infrastructure and abundant opportunities within the transportation business sector. The growing market share of its Intermodal segment and an improving Merchandize segment also bode well. Strong demand from the automotive sector along with recovery in the construction and agriculture markets will likely support the company's efforts to generate better revenues in the coming quarters. However, our positive outlook on Norfolk Southern is somewhat dampened by the lackluster performance by the Coal segment that could hold back its momentum in the quarters ahead. Other risks faced by the company include regulatory issues, volatile fuel prices, labor problems and competitive pressure. Hence, we adhere to our Neutral recommendation on the stock.

Overview:

Based in Norfolk, Virginia, Norfolk Southern Corporation controls a major freight railroad, Norfolk Southern Railway Company. The company is primarily engaged in the rail transportation of raw material, intermediate products and finished goods, primarily in the Southeast, East, and Midwest and, via interchange with rail carriers to and from the rest of the United States. Norfolk Southern also transports overseas freight through several Atlantic and Gulf Coast ports. Norfolk Southern provides comprehensive logistics services and offers the most extensive intermodal network on the eastern side of the United States.

Norfolk derives freight revenue from transporting coal, general merchandise and intermodal (truck, rail and ship) containers:

Coal business includes transportation of utility coal, export coal and domestic metallurgical coal from mines to electricity generating plants.

General Merchandise business includes transportation of automotives, chemicals, metals and construction, agriculture, consumer products, and paper, clay and forest products.

The Intermodal segment is responsible for haulage of international container cargo from steamship companies and truckload carriers.

Through a limited liability company, Norfolk Southern and CSX Corporation jointly own Conrail Inc. (Conrail), the primary subsidiary of which is Consolidated Rail Corporation. Norfolk has a 58% economic and 50% voting interest in the jointly owned entity, and CSX has the remainder of the economic and voting interests.

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