NSC Financial Analysis

Analysis Date: 1/30/2025

Business Model

Norfolk Southern Corporation (NSC) generates revenue primarily from railway operations across Merchandise, Intermodal, and Coal segments. Revenue is also generated from fuel surcharges.

Revenue Sources

• Merchandise: Transportation of various goods (Q4 2024 Revenue: $1,842M)
• Intermodal: Transportation of containers and trailers (Q4 2024 Revenue: $792M)
• Coal: Transportation of coal (Q4 2024 Revenue: $390M)
• Fuel Surcharge: Revenue from fuel surcharges applied to transportation services (Q4 2024 Revenue: $205M)

Income Statement Analysis

• Railway Operating Revenues decreased by 0.9% sequentially from Q3 2024 to Q4 2024 (Adjusted).
• Railway Operating Expenses increased by 1.4% sequentially from Q3 2024 to Q4 2024 (Adjusted).
• Operating Ratio increased to 64.9% in Q4 2024 (Adjusted) from 63.4% in Q3 2024 (Adjusted), indicating a decrease in operational efficiency.
• Income from Railway Operations decreased by 4.9% sequentially from Q3 2024 to Q4 2024 (Adjusted).

In the 2025 guidance, NSC mentioned Capex expected to be ~$2.2B in 2025 and initiating share repurchases starting in 1Q25. This indicates a focus on reinvestment in the business and returning value to shareholders through share repurchases. Dividends are not explicitly mentioned in the provided documents but are a common capital allocation strategy for mature companies like NSC.

Management Commentary

“We closed 2024 with another quarter of solid performance, building on the success of Q3. Our network is running fast; our terminals are more efficient; and service metrics are steady. Our customers are noticing and rewarding us with more business,”

“We are seeing momentum in all areas from consistently prioritizing safety, productivity, and operational excellence. We are well-positioned to build on our success and drive long-term value for all our stakeholders.”

2025 Guidance includes 3% revenue growth, >$150M year-over-year productivity savings, and 150bps Operating Ratio improvement.

Overall Sentiment: Positive. Management expresses confidence in the company's performance, operational improvements, and future outlook, supported by specific guidance for 2025.

Recommendation

Rating: Hold

Reason for Rating: Given the slightly declining sequential financial performance in Q4 2024 compared to Q3 2024, despite positive management sentiment and 2025 guidance, a 'Hold' recommendation is appropriate. The company is showing operational improvements and productivity gains, but the income statement indicates some pressure on profitability in the latest quarter. Further observation of performance in Q1 2025 and progress towards achieving the 2025 guidance is warranted before considering a more decisive 'Buy' or 'Sell' rating.

Disclaimer: This report is for informational purposes only and not investment advice. The analysis is based on limited information and subject to change. Investing in securities involves risks, including potential loss of principal. Past performance doesn't guarantee future results. Always conduct your own research, understand the risks, and consult a financial professional before making investment decisions.

Generated on: 1/30/2025, 6:22:02 AM