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Thursday, Norfolk Southern Corporation (NYSE:NSC) received a reiterated Hold rating from Benchmark analyst Nathan Martin, who maintained the firm’s price target on the stock. According to InvestingPro data, analyst targets for NSC range from $175 to $305, with 16 analysts recently revising their earnings expectations downward for the upcoming period. Martin highlighted Canadian Pacific Kansas City’s (NYSE:CP) strong performance, noting that the company concluded the year with a fourth-quarter core adjusted combined EPS of C$1.29. This result surpassed the consensus estimates by C$0.05, despite challenges such as work stoppages and adverse weather conditions.
Looking forward into the 2025 fiscal year, CP’s management has set goals that include mid-single digit RTM growth, which aligns with the previous consensus of a 5% increase. They also aim for ongoing operating ratio (OR) improvement and a year-over-year rise of 12%-18% in core adjusted diluted EPS, which is slightly above the prior consensus of a 17% increase.
The company’s projections conservatively account for potential risks related to the broader economic environment and tariffs, yet management remains confident that, barring extreme market volatility, CP could reach the higher end of their guidance. This optimism is based on the company’s ability to focus on controllable factors such as unique synergy opportunities and specific growth initiatives.
Despite CP’s positive outlook and strategic plans, Martin notes that the stock’s premium valuation is already factored into the current price. CP’s valuation stands at 20.5 times the estimated 2026 earnings per share (EPS), compared to the peer average of 17.0 times. Similarly, NSC trades at a P/E ratio of 22.33x and maintains an impressive 44-year streak of consecutive dividend payments. Consequently, Benchmark’s stance on Norfolk Southern remains unchanged, with the Hold rating reflecting the belief that CP’s strategy and potential are already represented in the stock’s pricing. InvestingPro analysis suggests NSC is slightly overvalued at current levels, with additional valuation insights available in the comprehensive Pro Research Report, which provides detailed analysis of 1,400+ top US stocks.
In other recent news, Norfolk Southern Corporation has seen several positive developments. The company reported fourth-quarter earnings that exceeded analyst expectations, with an adjusted earnings per share of $3.04. However, the revenue slightly missed the mark, coming in at $3.02 billion against the anticipated $3.04 billion. Analysts from various firms, including Stifel, Stephens, BMO Capital Markets, TD Cowen, and BofA Securities, adjusted their price targets for the company, reflecting their confidence in Norfolk Southern’s performance.
The company’s operational efficiency showed significant improvement, with the adjusted operating ratio, a key efficiency measure, improving from 68.8% in the same period last year to 64.9% in the fourth quarter. This is attributed to the company’s productivity initiatives, which have already realized approximately $300 million in savings, surpassing the company’s target. Additionally, Norfolk Southern has set its sights on achieving an extra $150 million in savings and a 150 basis point improvement in its operating ratio for 2025.
These recent developments indicate a positive trend in Norfolk Southern’s performance, with the company successfully meeting its early 2024 guidance and making significant strides in operational efficiency and service quality under new leadership. Despite ongoing macroeconomic challenges and persistent coal headwinds, the company’s strategic initiatives have strengthened its capacity to seize volume growth opportunities as the freight market recovers.
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