Norfolk Southern To See Volume Gains Amid Productivity Improvements Despite Management Churn: Analyst

BofA Securities analyst Ken Hoexter reiterated the Buy rating on Norfolk Southern Corporation NSC, with a price objective of $259.

Norfolk Southern has appointed Mark George as President & CEO, replacing Alan Shaw, who was terminated for violating company policies. The board’s decision follows an investigation revealing Shaw’s inappropriate relationship with the company’s Chief Legal Officer.

Norfolk Southern has reaffirmed its 2024 targets, aiming for a 66% full-year operating ratio with a 64% – 65% target for the second half. New CEO Mark George, alongside COO John Orr, will focus on enhancing operational efficiency and closing the margin gap with peers, the analyst writes.

Also Read: Norfolk Southern CEO Alan Shaw’s Controversial Tenure Close To End Amid Ethics Scandal: WSJ

Hoexter’s price objective is based on 19x the FY25 EPS estimate. The target multiple is above its 12x-18x range as it moves past its 2023- 2024 earnings trough.

Per the analyst, the company is set to accelerate earnings gains given its productivity improvements and focuses on volume gains and accelerating yields.

The analyst notes that the management transition will be seamless as COO Orr continues the operational overhaul and new CEO George provides continuity and highlights the firm’s management depth. The analyst’s estimate for FY25 EPS stands at $13.60 per share.

According to Benzinga Pro, NSC stock has gained over 28% in the past year. Investors can gain exposure to the stock via iShares Trust iShares U.S. Transportation ETF IYT and Tidal ETF Trust Aztlan North America Nearshoring Stock Selection ETF (NRSH).

Price Action: NSC shares are trading higher by 0.31% to $254.55 on Thursday.

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