BMO cuts Norfolk Southern stock target to $255 amid weak demand

On Thursday, BMO Capital Markets adjusted its outlook on Norfolk Southern Corporation (NYSE:NSC) stock, reducing the price target from $265.00 to $255.00, while retaining a Market Perform rating. The revision follows the company’s first-quarter results for the year 2025, which surpassed expectations, signaling a strong operational performance. The railroad giant, currently valued at $50.45 billion, trades at a P/E ratio of 15.26x, which according to InvestingPro analysis, suggests the stock is trading below its Fair Value.

The BMO Capital analyst noted that despite Norfolk Southern’s solid performance in the first quarter, with impressive gross profit margins of 49.52%, the remainder of the year poses greater challenges. The analyst emphasized that while the company’s management could leverage its cost-savings program to mitigate potential impacts of faltering demand, the broader demand outlook has weakened. This anticipated decrease in demand has led to a downward revision of revenue and earnings per share (EPS) estimates for the years 2025 and 2026, with InvestingPro data showing 14 analysts have revised their earnings downwards for the upcoming period.

Norfolk Southern’s first-quarter results demonstrated robust operational momentum, generating $12.11 billion in revenue over the last twelve months, slightly outperforming BMO Capital’s projections. However, the analyst expressed concerns about the sustainability of this performance as the year advances and comparisons become more demanding. Want deeper insights? InvestingPro subscribers have access to over 30 additional premium insights and the comprehensive Pro Research Report for Norfolk Southern.

The analyst’s comments reflect caution regarding the macroeconomic environment and its potential effects on the company’s business. While the cost-savings program provides a buffer, it may not fully compensate for the anticipated decline in demand.

In summary, while acknowledging Norfolk Southern’s strong operational results in the early part of 2025, BMO Capital Markets has revised its price target to $255, citing concerns over weakening demand and a challenging macroeconomic outlook. The Market Perform rating remains unchanged as the firm awaits further developments that could influence the company’s financial trajectory.

In other recent news, Norfolk Southern Corporation reported its Q1 2025 earnings, revealing mixed financial results with an earnings per share (EPS) of $2.69, which fell short of the expected $2.81. Despite this, the company’s revenue remained stable year-over-year at approximately $2.99 billion. Norfolk Southern resumed share repurchases, buying back $250 million in shares, and achieved significant operational improvements, including a 43% reduction in train accident frequency. Jefferies maintained a Buy rating on Norfolk Southern with a price target of $260, highlighting the company’s ability to meet its financial targets despite challenges such as winter weather disruptions. The firm expressed confidence in Norfolk Southern’s potential, emphasizing its commitment to achieving $150 million in productivity savings. Norfolk Southern also reaffirmed its full-year guidance, targeting a 3% revenue growth and a 150 basis point improvement in the operating ratio. The company’s focus on operational efficiency and strategic responses to unexpected events has been noted as a testament to its resilience.

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