Norfolk Southern Corporation (NYSE:NSC) faced its second technology outage in a month, leading to significant disruptions in the company's rail operations. The issue began on the night of Thursday, September 28, 2023, affecting the dispatching system, train movements, and terminal operating system functionality. The problem was resolved early on Friday morning, as announced by the railroad operator.
The company stated that all systems are now fully functional and trains are running. Norfolk Southern anticipates the impact on operations to last at least a couple of weeks as it works to mitigate traffic congestion caused by the outage.
Contrary to potential speculation, officials have clarified that there is no indication that the outage was related to an unauthorized cybersecurity incident or the previous outage that occurred on August 28, 2023. "We are continuing to examine the root cause of the incident but believe at this time that it relates to a vendor product defect," said Norfolk Southern officials. In response to these issues, the company has initiated a comprehensive review of its data center and network technology's resiliency to prevent future outages.
This incident comes at a time when Norfolk Southern has been grappling with slowing revenue growth, as indicated by InvestingPro data, which shows a quarterly revenue growth of -8.31% for FY2023.Q2. The company's market capitalization stands at 43.02 billion USD, with a P/E ratio of 16.94.
Following these developments, Bank of America lowered its rating on Norfolk Southern due to ongoing service challenges. "We believe this is an increasing risk to future earnings as a lack of service consistency could lead to share loss and challenged pricing gains," warned BofA. Consequently, Bank of America reduced its price objective on Norfolk Southern to $215 from $266 and also decreased its EPS estimates for 2023-2025.
In response to these events, Norfolk Southern shares are down 3.9% on Monday to $189.2, against a 52-week trading range of $194.05 to $261.71. According to InvestingPro data, the company's stock is trading near its 52-week low, with its price at 75.76% of its 52-week high.
InvestingPro Tips highlight that despite the current challenges, Norfolk Southern has a history of strong financial performance. The company has maintained dividend payments for 42 consecutive years and has raised its dividend for 6 consecutive years. Additionally, Norfolk Southern's management has been aggressively buying back shares, indicating confidence in the company's future prospects. Investors interested in further insights can explore more tips at InvestingPro.
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