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On Wednesday, BofA Securities analyst Ken Hoexter increased the price target for Norfolk Southern Corporation (NYSE: NYSE:NSC), a major transportation company, from $281.00 to $292.00, while reiterating a Buy rating on the stock. Currently trading at $256.74, InvestingPro analysis suggests the stock is fairly valued, with impressive gross profit margins of 48.37%. The adjustment follows Norfolk Southern’s reported adjusted earnings per share (EPS) for the fourth quarter of 2024, which came in at $3.04, marking a 7% increase from the previous year. This figure surpassed both BofA’s prediction of $2.85 and the consensus estimate of $2.96.
Norfolk Southern’s recent performance has notably surpassed expectations, particularly with an operating ratio of 64.9%, or 65.3% excluding a one-time gain of $20 million from liquidated damages. This efficiency measure outperformed its competitor CSX (NASDAQ:CSX), which reported a 65.7% operating ratio, despite Norfolk Southern being in the early stages of an operational overhaul. The company maintains a strong financial profile with an InvestingPro Financial Health Overall Score of 2.29, rated as ’FAIR’, and has maintained dividend payments for 43 consecutive years - one of several key insights available through InvestingPro’s comprehensive research reports.
The company has already realized approximately $300 million in productivity savings, exceeding its target of $250 million. Looking ahead, Norfolk Southern aims to achieve an additional $150 million in savings and a 150 basis point improvement in its operating ratio for 2025. Hoexter estimates this will result in an operating ratio of 63.8%, a 200 basis point improvement year-over-year. Chief Operating Officer John Orr expressed confidence in exceeding these targets, citing ongoing efforts to enhance service quality, workforce productivity, asset utilization, and network fluidity.
In the fourth quarter of 2024, Norfolk Southern experienced a 2.8% year-over-year growth in carloads, despite having 5% fewer employees on average. The company’s service improvements have laid the groundwork for a positive pricing environment and the potential for market share gains from both existing customers and the trucking industry. COO Orr highlighted the 2025 plan’s focus on reducing handling times, tightening schedules and connections, and increasing efficiency overall.
For 2025, Norfolk Southern is targeting a 3% revenue growth, which is slightly below Hoexter’s estimate of 2.9% growth, down from the previous year’s 3.6%. This target takes into account low-single-digit volume growth and robust core pricing, balanced against lower fuel costs and a decline in coal volume and export pricing. With a market capitalization of $58.23 billion and an analyst consensus recommendation of 2.11, the stock shows mixed signals. InvestingPro subscribers can access 8 additional ProTips and detailed valuation metrics in the comprehensive Pro Research Report, helping investors make more informed decisions about this transportation giant.
In other recent news, Norfolk Southern Corporation reported fourth-quarter earnings that surpassed analyst expectations. The railroad operator announced an adjusted earnings per share of $3.04, exceeding the consensus estimate of $3.01. However, revenue fell slightly short of analysts’ projections, coming in at $3.02 billion compared to the anticipated $3.04 billion. This figure still represents a 2% year-over-year increase when excluding fuel surcharge impacts.
Norfolk Southern’s adjusted operating ratio, a crucial efficiency indicator, improved to 64.9% in Q4, a significant improvement from 68.8% in the same period last year. This enhancement was attributed to productivity initiatives. The company reported an annual adjusted earnings per share of $11.85 for 2024, a marginal increase from $11.74 in 2023. The annual revenue remained relatively stable at $12.1 billion.
These recent developments indicate a positive trend in Norfolk Southern’s performance. The company also reported that it met its operating ratio targets for the second half and full year of 2024, with management pointing out that productivity initiatives were the key drivers of these results. They also anticipate additional opportunities in 2025. The company’s quarterly volume grew by 3% YoY, indicative of improving demand trends.
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