Norfolk Paves Way for Investment
In 2012, major transportation firm Norfolk Southern Corporation (NSC) helped state and local authority to identify the location for new industries along its rail lines. This will lead to an industrial investment of nearly $2.1 billion by the customers of Norfolk Southern.
Along with governmental bodies and economic development officials across 19 states, the company has chalked out plans to open 64 new trading hubs as well as expand 30 existing industries in the coming days. This will not only provide employment to almost 6,100 people within the railroad sector but will also generate over 141,000 carloads of new rail traffic each year.
A Norfolk Southern executive stated that the company’s expansion strategies are fueled by the development of the energy sector, including the gas exploration projects in Marcellus and Utica shale plays as well as ventures associated with coal and power generation. The company will introduce 32 energy-related projects in 14 states within its service territory.
Management expects to see more transportation of crude oil from the Bakken play to the east coast refineries in 2013, given the ongoing revival in the metals and automotive markets. These movements are expected to boost the performance level of the company going forward.
Norfolk, Virginia based Norfolk Southern has been actively involved in industrial park designing, site layout, track planning and logistics support for infrastructural development. Over the last 10 years, the Industrial Development Department of the company has assisted in setting up 1,021 facilities with an investment of $28.7 billion by various customers in the terrain under the railroad.
Currently, we have a long-term Underperform recommendation on the stock. For the short term (1–3 months), the stock retains a Zacks #4 Rank (Sell rating).
We believe that Norfolk Southern’s operating margins in the near term will likely remain under pressure from increased railroad regulation such as PTC implementation, intense competition from other railroads such as Union Pacific Corporation (UNP) and CSX Corp. (CSX), increased compensation expenses and unionized workforce.
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