Zinger Key Points
- BofA Securities raised NSC's price target to $291, noting potential for earnings acceleration through productivity gains.
- RBC raised the target to $282, highlighting strong operational performance and lower 2025 capital expenditures.
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Several analysts revised the price target on Norfolk Southern Corporation NSC following third quarter results.
On Tuesday, Norfolk Southern reported adjusted earnings of $3.25 per share, beating analyst estimates of $3.11 per share.
The company said it remains on track to achieve its adjusted operating ratio targets for the second half and full year of 2024.
RBC Capital Markets analyst Walter Spracklin raised the price target to $282 from $272 while maintaining the Outperform rating.
The analyst writes that the key takeaway from the results is that COO John Orr’s efforts are driving substantial operational changes, leading to strong performance, especially when compared to a peer that faced challenges during the quarter.
Additionally, management indicated that capital expenditures are expected to decrease in 2025 compared to 2024, which should lead to higher free cash flow growth next year, adds the analyst.
The analyst expects this shift to pave the way for increased shareholder returns and/or debt reduction.
The analyst adds that continued progress across several metrics this quarter reinforces the confidence in management’s capacity to drive further improvements moving forward. The analyst raised FY24 EPS estimates to $11.91 from $11.80.
BofA Securities analyst Ken Hoexter boosted the price target to $291 from $276 and reaffirmed a Buy rating.
The analyst writes that CFO Jason Zampi projects the fourth quarter operating ratio to worsen to around 65.5%, exceeding typical seasonal patterns.
This decline is due to lower fuel recovery, decreased land sales, hurricane clean-up costs, and ongoing pressure on export coal yields, writes that analyst. NSC is positioned to accelerate earnings through productivity improvements, adds the analyst.
The analyst raised 2024 and 2025 EPS estimates by 1% each, bringing them to $11.87 and $13.85, up from $11.80 and $13.80, respectively. The fourth quarter estimate has been adjusted down to $3.05 from $3.10 due to a higher operational ratio target.
Benchmark analyst Nathan P. Martin boosted the price target to $285 from $270 and reiterated the Buy rating.
The analyst writes that the fourth-quarter EPS estimate stays at $3.13, reflecting a 1% year-over-year revenue increase from a 3% growth in carloads.
Martin projects a 140-basis-point quarter-over-quarter decline in the operating ratio (OR) to 64.8% but a 400-basis-point year-over-year improvement, leading to a second-half average OR of 64.1% at the lower end of NSC’s 64%-65% guidance range.
Following these updates, the analyst raised the 2024 EPS estimate to $11.94 from $11.80, with flat year-over-year revenues and a 160-basis-point OR improvement.
On the other hand, Stephens analyst Daniel Imbro reiterates an Equal-Weight rating and price target of $263.
The analyst says that the company performed well in the third quarter. Despite the anticipated OR decline in the fourth quarter, the analyst is encouraged by NSC’s progress toward its long-term goals.
The analyst’s adjusted EPS estimate for 2024 is now $11.83 (down from $11.93), and for 2025, it is $13.52 (down from $13.71).
Loop Capital analyst Rick Paterson increased the price target to $287 from $285 and reaffirmed a Buy rating. The analyst raised the EPS estimate for 2024 from $11.72 to $12.06 and for 2025 from $13.02 to $13.51.
Investors can gain exposure to the stock via Tidal ETF Trust Aztlan North America Nearshoring Stock Selection ETF NRSH and Themes US Infrastructure ETF HWAY.
Price Action: NSC shares are down 1.79% at $255.78 at the last check Wednesday.
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