Norfolk Southern’s Q1 Earnings Bolstered By Intermodal Freight Growth And Lower Taxes
Norfolk Southern (NYSE:NSC) reported a strong quarter, with earnings growth of 30%, led by a double digit growth in the Intermodal segment, which benefited from tightening truck capacity. In addition, a lower tax rate aided the quarterly performance. Coal Freight remained lower, as higher export volume was offset by lower utility volume. We continue to believe that the Intermodal segment will see strong growth in the near term while Coal Freight will remain subdued. We have created an interactive dashboard on Norfolk Southern’s expected performance in 2018. You can adjust the revenue and margin drivers to see the impact on the company’s performance.
Intermodal Freight Will See Strong Growth In 2018
- What’s Next For Norfolk Southern Stock After A 21% Fall This Year?
- Which Is A Better Railroad Pick – Norfolk Southern Stock Or CSX?
- Will Norfolk Southern Stock Rebound To Its Pre-Inflation Shock Highs?
- Will Norfolk Southern Stock Trade Higher Post Q1?
- Why Did Norfolk Southern Stock Fall 30% Since 2021?
- Pick Either Norfolk Southern Stock Or This Travel Company: Both May Offer Similar Returns
We expect Norfolk Southern’s Intermodal freight revenue to grow 9% in 2018, primarily due to a positive impact of capacity constraints in the trucking industry, given the full implementation of the ELD (electronic logging device) mandate. The company’s management stated that e-commerce growth will further aid the segment performance. In addition, higher fuel surcharge will aid the pricing growth. Fuel surcharges are dependent on oil prices, which have been trending higher in 2018, with WTI crude trading above $68 levels. Looking at Coal Freight, we don’t expect any change in the revenues, as compared to the prior year, due to an overall expected decline in production, and lower natural gas prices. It should be noted that the coal export volume is expected to decline by 17% in 2018. Merchandise segment volume declined in low single digits in Q1. However, the company expects it to be higher for the full year.
Overall, the company’s Q1 performance was in line with expectations. The company also raised its annual share repurchases to $1.5 billion. We now forecast full year earnings of $8.21 in 2018, and TTM price to earnings multiple of 19 by the end of 2018, to arrive at our price estimate of $154 for Norfolk Southern Corp. This implies a premium of over 7% to the current market price.
What’s behind Trefis? See How It’s Powering New Collaboration and What-Ifs
For CFOs and Finance Teams | Product, R&D, and Marketing Teams
Like our charts? Explore example interactive dashboards and create your own.