🚀 June’s AI-picked stocks soar, with Adobe +18.1% in 11 days. Don’t miss July’s upcoming picks.Unlock full list

Why Are Norfolk Southern (NSC) Shares Up More Than 16% YTD?

Published 08/19/2019, 11:52 PM
Updated 07/09/2023, 06:31 AM
NSC
-
DAL
-
GATX
-
CP
-

Shares of Norfolk Southern Corporation (NYSE:NSC) have rallied 16.6% so far this year, primarily owing to the company’s consistent cost-containment measures. Additionally, its endeavors to reward shareholders through dividends and share buybacks are also encouraging.


Let’s delve into the details.

Norfolk Southern is making constant efforts to streamline operations with an eye on increasing productivity. In line with its efforts to improve efficiencies, the company’s operating ratio (operating expenses as a percentage of revenues) improved to 64.8% in the first half of 2019 from 66.9% a year ago. Notably, lower the value of the metric, the better. This key metric is benefiting from the company’s low operating expenses, courtesy of modest fuel prices.

In a bid to improve efficiencies and customer service further, the company has implemented the precision scheduled railroading operating plan, TOP21. Gaining traction from this model, the company predicts its operating ratio (operating expenses as a percentage of revenues) to improve at least 100 basis points in 2019 compared with 65.4% achieved in 2018. Additionally, the company aims for a full-year operating ratio of 60% by 2021.

As far as the company’s measures to reward shareholders through dividends and share buybacks are concerned, it has returned $1.5 billion to its shareholders through dividend payouts ($458 million) and repurchases ($1,050 million) in the first half of 2019, reflecting a 36% year-over-year increase. Additionally, this July, the company’s board announced a dividend hike of 9% to 94 cents a share ($3.76 annually). The fact that the company has generated free cash flow of $973 million during the first half of 2019 hints at an uptick in such shareholder-friendly activities.

Further, increase in revenue per unit has aided the company’s top line in the first six months of 2019. While the top line rose 4.5% in the first quarter, it inched up 1% in the second. Higher revenues helped the company generate earnings growth of 30.1% and 8% in the first and second quarter of 2019, respectively.

Zacks Rank & Key Picks

Norfolk Southern carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader Transportation sector are Canadian Pacific Railway Limited (NYSE:CP) , GATX Corporation (NYSE:GATX) and Delta Air Lines, Inc. (NYSE:DAL) . While Delta sports a Zacks Rank #1 (Strong Buy), Canadian Pacific and GATX carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Shares of Canadian Pacific, GATX and Delta have gained more than 35%, 6% and 16% so far this year, respectively.

Legalizing THIS Could Be Even Bigger than Marijuana

Americans spend an estimated $150 billion in this industry every year… more than twice as much as they
spend on marijuana.

Now that 8 states have fully-legalized it (with several more states following close behind), Zacks has
identified 5 stocks that could soar in response to the powerful demand. One industry insider described
the future as “mind-blowing” – and early investors can still get in ahead of the surge.

See these 5 “sin stocks” now >>



Delta Air Lines, Inc. (DAL): Free Stock Analysis Report

GATX Corporation (GATX): Free Stock Analysis Report

Canadian Pacific Railway Limited (CP): Free Stock Analysis Report

Norfolk Southern Corporation (NSC): Free Stock Analysis Report

Original post

Zacks Investment Research

Latest comments

Loading next article…
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.