Norfolk Southern Corp. NSC reported its fourth-quarter results that were ahead of expectations. Yet the company's operating results were disappointing if an unusually large gain from a property sale is excluded, in Credit Suisse's view.
The Analyst
Credit Suisse’s Allison Landry maintained an Outperform rating on Norfolk Southern and raised the price target from $175 to $181.
The Thesis
Although Norfolk Southern’s operating results improved versus the same quarter last year, the company’s expenses climbed due to higher re-crew rates, overtime costs, car hires and locomotive expenses, Landry said in a Friday note.
Service metrics have improved, but the rate of progress “continues to stand in stark contrast” to CSX Corporation CSX and Union Pacific Corporation UNP, the analyst said.
Norfolk Southern should be able to improve its operating results provided the volume and pricing environment remains supportive, Landry said. She expressed concern, however, regarding the company’s margins in the event the macro environment becomes more challenging, especially since its main competitor is strengthening its cost profile and service reliability.
Credit Suisse raised its EPS estimates for 2019 and 2020 from $10.08 to $10.09 and from $11.25 to $11.31, respectively.
Price Action
Norfolk Southern shares were trading up 0.31 percent at $166.45 at the time of publication Friday.
Related Links:
Norfolk Southern Q4 Earnings Preview
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