Deutsche Bank Comments on Norfolk Southern After Q2 Results

Deutsche Bank has published a Company Alert on Norfolk Southern Corp

after Q2 results. In the report, Deutsche Bank wrote, " Yesterday after the close, NSC reported adjusted Q2 EPS of $1.38 well above our estimate of $1.23 and Consensus of $1.29 as export coal volume strength and core pricing improvement drove upside to our estimate. Q2 results exclude $68 million ($0.18/share) of non-recurring favorable income tax benefits. NSC's incremental margins expanded to 32.6% in Q2 (from 27.0% in Q1) as the company leveraged strong export coal volumes (up 23% y/y), longer haul utility coal business to the Southeast, intermodal carload growth (up 9% y/y), and solid above rail-inflation pricing. NSC expects to export coal to be a tailwind given rising European and Asian demand, sees continued tight domestic met coal supply in H2, and noted that it was unable to handle roughly 600,000 tons of coal in Q2 due to flooding in the Midwest and related-supply chain disruptions. Management expects to make up this tonnage in H2. We expect shares of NSC to react favorably to this beat today." Deutsche Bank rated Norfolk Southern a BUY with a price target of $79.00. Norfolk Southern closed Tuesday at $75.55.