Norfolk Southern Corp.
), one of the leading U.S. railroad companies, reported stellar
fourth quarter and full-year 2012 results on the back of strong
contributions from the chemicals, auto, and housing sectors.
Trimming of costs along with higher productivity also enhanced
the performance level.
Quarterly adjusted earnings of $1.30 per share surpassed the
Zacks Consensus Estimate of $1.19 but deteriorated 8.5% from
$1.42 adjusted earnings in the year-ago quarter.
Total operating revenues were down 4.0% year over year at $2,684
million but were ahead of the Zacks Consensus Estimate of $2,670
million. On a year-over-year basis, Coal revenues declined 22.7%,
while General Merchandise and Intermodal revenues grew 3.6% and
In the fourth quarter, operating income was $714 million, down
10.8% year over year. Operating expenses dropped 1.4% year over
year to $1,970 million, resulting in an operating ratio of 73.4%.
For the full year, the company posted earnings of $5.37 per share
(surpassing our projection by 1.9% but deteriorating 1.5% year
over year), on revenues of $11,040 million (down 1.2% from the
Norfolk exited 2012 with cash and cash equivalents of $653
million compared with $276 million at year-end 2011. The company
had long-term debt (including current portion) of $8,482 million,
representing debt-to-capitalization ratio of 46.5%.
The company's board of directors approved a quarterly cash
dividend of 50 cents to shareholders of record on Feb 1, payable
on Mar 11.
Other Railroad Stocks
Rail transportation service company
Union Pacific Corporation
) will release its fourth-quarter 2012 financial results on Jan
24, 2013 before the opening bell. The Zacks Consensus Estimates
for the fourth quarter and 2012 earnings currently stand at $2.16
per share and $8.25 per share, respectively. The estimates
reflect a respective year-over-year growth of 8.7% and 22.7% for
the fourth quarter and 2012.
Other stocks worth considering within the sector are
Genesee & Wyoming Inc.
) that holds a Zacks Rank #1 (Strong Buy) and
American Railcar Industries
) that carries a Zacks Rank #2 (Buy).
Norfolk currently holds a Zacks Rank #3, implying a short-term
Hold rating. We believe the company is poised to benefit from
strong pricing momentum on the back of growing market demand and
shortage in truckload transportation. We expect pricing
improvements at Norfolk together with productivity gains to push
the profitability level higher.
However, we remain concerned about factors such as the prevailing
market condition in the core segment like Coal and uncertainties
in the present economic environment that would likely affect
shipments. Further, tightened railroad regulation and competitive
pressure also remain significant headwinds for the company's
AMER RAILCAR (ARII): Free Stock Analysis
GENESEE & WYO (GWR): Free Stock Analysis
NORFOLK SOUTHRN (NSC): Free Stock Analysis
UNION PAC CORP (UNP): Free Stock Analysis
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