The yearly results for Norfolk Southern Corporation (NYSE:NSC) were released last week, making it a good time to revisit its performance. Norfolk Southern reported US$11b in revenue, roughly in line with analyst forecasts, although statutory earnings per share (EPS) of US$10.25 beat expectations, being 2.1% higher than what analysts expected. This is an important time for investors, as they can track a company's performance in its report, look at what top analysts are forecasting for next year, and see if there has been any change to expectations for the business. We thought readers would find it interesting to see analysts' latest (statutory) post-earnings forecasts for next year.
Following last week's earnings report, Norfolk Southern's 18 analysts are forecasting 2020 revenues to be US$11.3b, approximately in line with the last 12 months. Statutory earnings per share are expected to rise 7.9% to US$11.06. Yet prior to the latest earnings, analysts had been forecasting revenues of US$11.5b and earnings per share (EPS) of US$11.17 in 2020. The consensus analysts don't seem to have seen anything in these results that would have changed their view on the business, given there's been no major change to their estimates.
The consensus price target rose 6.6% to US$221 despite there being no meaningful change to earnings estimates. It could be that analysts are reflecting the predictability of Norfolk Southern's earnings by assigning a price premium. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values Norfolk Southern at US$250 per share, while the most bearish prices it at US$134. As you can see, analysts are not all in agreement on the stock's future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not totally unpredictable.
In addition, we can look to Norfolk Southern's past performance and see whether business is expected to improve, and if the company is expected to perform better than wider market. We would highlight that sales are expected to reverse, with the forecast 0.2% revenue decline a notable change from historical growth of 1.1% over the last five years. Compare this with our data, which suggests that other companies in the same market are, in aggregate, expected to see their revenue grow 6.3% next year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - analysts also expect Norfolk Southern to grow slower than the wider market.
The Bottom Line
The most obvious conclusion from these results is that there's been no major change in the business' prospects in recent times, with analysts holding earnings per share steady, in line with previous estimates. Fortunately, analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Norfolk Southern's revenues are expected to perform worse than the wider market. Analysts also upgraded their price target, suggesting that analysts believe the intrinsic value of the business is likely to improve over time.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have estimates - from multiple Norfolk Southern analysts - going out to 2024, and you can see them free on our platform here.
It might also be worth considering whether Norfolk Southern's debt load is appropriate, using our debt analysis tools on the Simply Wall St platform, here.
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