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Norfolk Southern Beats 3Q17 Estimates on Property Sale Gains

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Norfolk Southern Beats 3Q17 Estimates on Property Sale Gains PART 1 OF 8

Norfolk Southern Beats 3Q17 Estimates, Stock Falls 2.8%

NSC’s 3Q17 earnings

Norfolk Southern (NSC), an Eastern US major freight railroad, released its 3Q17 earnings on October 25, 2017. The company surpassed the estimates of the analysts surveyed by Thomson Reuters by 7.4%. Analysts had estimated $1.63 per share.

On a YoY (year-over-year) basis, Norfolk Southern reported earnings of $1.75 per share in 3Q17, up 13% from $1.55 in 3Q16.

Norfolk Southern Beats 3Q17 Estimates, Stock Falls 2.8%

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Why NSC stock slid after the 3Q17 results

On October 25, 2017, Norfolk Southern’s stock price fell 2.8%, closing at $128.7 per share. Notably, the company reported $9.0 million as land sale gains, which are non-recurring in nature.

The recent hurricanes broadly impacted the operations of many transportation companies in 3Q17, and so the extent of losses and additional costs to restore facilities are a factor. NSC also reported higher compensation related costs in 3Q17. Despite its cuts to managerial and non-managerial staff, it reported 9% higher employee expenses. This raised concerns in the market over NSC’s capability to derive efficiency gains.

Peer group stock returns

In 2017, Norfolk Southern has returned ~20% to shareowners, compared with the following returns of its peer group:

  • Arch rival CSX (CSX): 47.3%
  • Union Pacific (UNP): 6.4%
  • Kansas City Southern (KSU): 20.4%
  • Genesee & Wyoming (GWR): 3.8%
  • Canadian National Railway (CNI): 20.8%
  • Canadian Pacific (CP): 22%

Since January 1, 2017, the iShares Dow Jones US Industrial ETF (IYJ) has returned 17.5%. This ETF holds around 6% in major US railroads.

Continue (below) to the next part of this series for a closer look at Norfolk Southern’s 3Q17 revenue.

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