On Wednesday, UBS reaffirmed its Buy rating on Norfolk Southern Corp (NYSE:NSC), with a steady price target of $302. The endorsement follows a meeting with Jim Barber and Jamie Boychuk, who are the CEO and COO candidates put forward by activist investor Ancora. The focus of the discussion was on the potential operational improvements that the candidates plan to implement at Norfolk Southern's rail network.
The proposed strategies by Barber and Boychuk include achieving a better balance in train starts, revising the method of blocking cars at their origin, and introducing a new train schedule. These changes aim to reduce the number of train starts and minimize the handling of rail cars. The anticipated outcome of these operational enhancements is a reduction in costs and an increase in reliability for the rail network.
According to UBS's analysis, which was part of the rationale behind the upgrade to a Buy rating, more efficient operations within Norfolk Southern's merchandise network could lead to a significant improvement in the company's operating ratio. The firm's projections suggest that the operating ratio could be optimized to the low 60s, indicating a more profitable and efficient operation.
The recent meeting and the strategies discussed therein have reinforced the confidence of UBS in the potential for Norfolk Southern to improve its performance.
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