Norfolk Southern (NYSE: NSC) is scheduled to report its Q3 2022 results on Wednesday, October 26. We expect NSC stock to trend higher, with the company expected to post results above the street expectations. The company should continue to benefit from a shift toward lower-cost transportation alternatives. Furthermore, our forecast indicates that NSC stock has ample room for growth from its current levels, as discussed below. Our interactive dashboard analysis of Norfolk Southern’s Earnings Preview has additional details.
(1) Revenues expected to be slightly above the consensus estimates
- Trefis estimates Norfolk Southern’s Q3 2022 revenues to be around $3.3 billion, reflecting a 14% y-o-y growth and above the $3.2 billion consensus estimate.
- Higher inflation has resulted in some shippers turning to low-cost alternatives, such as railroads.
- With rising costs, the company should be able to expand its average revenue per carload, boding well for its top-line growth.
- Looking back at Q2, the company reported a 16% rise in revenue to $3.3 billion, led by a solid 20% rise in average revenue per carload, while the total volume of carloads was down 3%.
- Our dashboard on Norfolk Southern Revenues has more details.
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(2) EPS likely to be above the consensus estimates
- Norfolk Southern’s Q3 2022 earnings per share (EPS) is expected to be $3.75 per Trefis analysis, higher than the consensus estimate of $3.66.
- The company’s net income of $819 million in Q2 2022 reflected no growth from its $819 million figure in the prior-year quarter, as higher expenses offset strong revenue growth.
- The company’s operating ratio of 60.9% in the last quarter reflected a 4% rise from the 58.3% figure in the prior year quarter.
- For the full-year 2022, we expect the EPS to be higher at $13.70 compared to the EPS of $12.11 in 2021.
(3) NSC stock looks like it has room for growth
- We estimate Norfolk Southern’s Valuation to be around $280 per share, which reflects a 26% upside from the current market price of $222.
- At its current levels, NSC stock is trading at just 16x forward earnings, compared to the last three-year average of 22x, implying that it has ample room for growth.
- Furthermore, if the company reports upbeat Q3 results and provides an outlook better than the street estimates, the P/E multiple will likely be revised upward, resulting in higher levels for NSC stock.
While NSC stock has more room for growth, it is helpful to see how Norfolk Southern’s Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.
Furthermore, the Covid-19 crisis has created many pricing discontinuities which can offer attractive trading opportunities. For example, you’ll be surprised at how counter-intuitive the stock valuation is for CSX vs. Amerco.
With inflation rising and the Fed raising interest rates, among other factors, NSC stock has fallen 25% this year. Can it drop more? See how low Norfolk Southern stock can go by comparing its decline in previous market crashes. Here is a performance summary of all stocks in previous market crashes.
|S&P 500 Return||4%||-22%||66%|
|Trefis Multi-Strategy Portfolio||3%||-24%||201%|
 Month-to-date and year-to-date as of 10/19/2022
 Cumulative total returns since the end of 2016