Norfolk Southern (NSC) to Post Q3 Earnings: What's in Store?

Zacks Equity Research

Norfolk Southern Corporation NSC is scheduled to report third-quarter 2019 results on Oct 23, before the market opens.

The Zacks Consensus Estimate for the company’s third-quarter earnings has been revised 6.9% downward in the past 60 days. Given this weak scenario, let’s delve into the factors that might have influenced the company’s quarterly performance.

Persistent weakness in freight volumes is most likely to have affected Norfolk Southern's top line in the soon-to-be-reported quarter. The Cass Freight Shipments Index’s decline for three successive months in the third quarter bears testimony to this dismal scenario. Notably, the index that measures North American freight volumes and expenditures declined for 10 consecutive months.

Within the Merchandise segment, the automotive sub-group is expected to have performed poorly due to sluggish vehicle production in the United States. Additionally, below-par traffic volumes might get reflected in coal and intermodal volumes. Evidently, the Zacks Consensus Estimate for coal volumes indicates an approximate 14.8% decline from the reported figure in third-quarter 2018. The same for intermodal volumes suggests a 5% decrease from the year-ago reported number.

However, the company’s consistent cost-reduction initiatives should have boosted earnings in the third quarter. With reduced costs, the operating ratio (operating expenses as a percentage of revenues) is expected to have improved as has been the case in the first two quarters of 2019. Lower the value of this key metric, the better.

Norfolk Southern Corporation Price and EPS Surprise

 

Norfolk Southern Corporation Price and EPS Surprise

Norfolk Southern Corporation price-eps-surprise | Norfolk Southern Corporation Quote


Highlights of Q2 Earnings

In the last reported quarter, the company witnessed a negative earnings surprise of 2.5%. Railway operating revenues also lagged the Zacks Consensus Estimate. While the bottom line improved 8% on a year-over-year basis owing to lower costs, the top line inched up 1% year over year on the back of 5% increase in revenue per unit.

Earnings Whispers

Our proven model does not conclusively show a beat for Norfolk Southern this earnings season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of beating estimates. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Norfolk Southern has an Earnings ESP of 0.00% as both the Zacks Consensus Estimate and the Most Accurate Estimate are pegged at $2.57.

Zacks Rank: Norfolk Southern has a Zacks Rank #3, but 0.00% Earnings ESP makes surprise prediction difficult.

Stocks to Consider

Investors interested in the broader Transportation sector may consider Expeditors International of Washington, Inc. EXPD, Allegiant Travel Company ALGT and Southwest Airlines Co. LUV as these stocks possess the right mix of elements to beat on earnings in their next releases.

Expeditors has an Earnings ESP of +0.74% and a Zacks Rank of 3. The company will report third-quarter 2019 results on Nov 5. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Allegiant has an Earnings ESP of +1.39% and is Zacks #3 Ranked. The company will announce third-quarter earnings results on Oct 24.

Southwest has an Earnings ESP of +0.31% and is #3 Ranked. This company will release third-quarter financial numbers on Oct 24.

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