TD Cowen lifts Norfolk Southern stock target to $272, keeps Hold rating

On Wednesday, TD Cowen analysts updated their outlook on Norfolk Southern Corporation (NYSE: NYSE:NSC), increasing the price target from $247.00 to $272.00 while maintaining a Hold rating on the stock. According to InvestingPro data, the stock is currently trading near its Fair Value, with analysts’ targets ranging from $175 to $309. The revision followed Norfolk Southern’s performance that surpassed both the firm’s forecasts and consensus expectations, concluding a challenging year on a positive note.

The analysts highlighted that Norfolk Southern is the only U.S. Class I railroad to set specific margin targets for 2025, which, despite being slightly below TD Cowen’s prior estimates, demonstrates the company’s commitment to financial planning. The company has maintained impressive gross profit margins of 48.4% and has consistently paid dividends for 43 consecutive years, as revealed by InvestingPro analysis. The firm’s decision to raise the price target to $272 reflects a forward-looking approach, extending their financial model into 2026.

According to the analysts’ commentary, Norfolk Southern’s ability to maintain strong service levels despite a reduced workforce is viewed positively. With an overall Financial Health score of "FAIR" from InvestingPro, and particularly strong scores in profitability metrics, this operational efficiency suggests that the company has additional opportunities for improvement in the coming year. The analysts expressed confidence in Norfolk Southern’s potential for further progress, which contributed to the decision to adjust the price target. InvestingPro subscribers have access to over 30 additional financial metrics and insights for NSC.

Norfolk Southern’s recent achievements in a tough market environment have been acknowledged by TD Cowen, with the analysts noting that the company ended the year strongly. This performance has set a solid foundation for Norfolk Southern as it moves into the new year with clear financial and operational goals.

The Hold rating indicates that while the analysts see value in Norfolk Southern’s current strategy and recent performance, they advise investors to maintain their positions without increasing their holdings at this time. The new price target of $272 suggests a modest optimism about the company’s future financial performance, based on the extended model projections.

In other recent news, Norfolk Southern Corporation reported fourth-quarter earnings that exceeded analyst expectations. The adjusted earnings per share for the quarter came in at $3.04, surpassing both the consensus estimate of $3.01 and BofA Securities’ prediction of $2.85. However, the company’s revenue slightly missed analysts’ projections, standing at $3.02 billion against the anticipated $3.04 billion.

The company’s adjusted operating ratio, a key efficiency measure, showed significant improvement from 68.8% in the same period last year to 64.9% in the fourth quarter. This enhancement is attributed to productivity initiatives. Norfolk Southern’s annual adjusted earnings per share for 2024 were reported at $11.85, a slight increase from $11.74 in 2023. The annual revenue remained relatively stable at $12.1 billion.

Norfolk Southern’s recent performance has notably surpassed expectations. 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.

BofA Securities analyst Ken Hoexter increased the price target for Norfolk Southern from $281.00 to $292.00, while reiterating a Buy rating on the stock. This adjustment follows Norfolk Southern’s reported adjusted earnings per share for the fourth quarter of 2024. These recent developments indicate a positive trend in Norfolk Southern’s performance.

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