Will Volume Softness Mar Norfolk Southern's (NSC) Q1 Earnings?
Norfolk Southern Corporation NSC is scheduled to report first-quarter 2022 results on Apr 27, before market open.
The Zacks Consensus Estimate for NSC’s first-quarter earnings has been revised downward by 5.2% in the past 60 days. However, the company has an impressive earnings surprise history, having outperformed the Zacks Consensus Estimate in each of the preceding four quarters, the average beat being 6.1%.
Let’s see how things are shaping up for Norfolk Southern this earnings season.
Norfolk Southern Corporation Price and EPS Surprise
Norfolk Southern Corporation price-eps-surprise | Norfolk Southern Corporation Quote
Factors to Note
Escalating fuel costs due to the Russia-Ukraine war are expected to have dented Norfolk Southern’s bottom line in the first quarter.
Supply chain disruptions and slower network velocity are expected to have weighed on volumes in the first quarter. The Zacks Consensus Estimate for carloads (volumes) in the first quarter indicates a 5.1% decline from the year-ago reported number.
Despite supply chain woes, strong freight market conditions are expected to have boosted revenues in the to-be-reported quarter. The Zacks Consensus Estimate for coal revenues hints at a 14.7% rise from the year-ago reported quarter. The same for intermodal revenues suggests a 14% increase from the first-quarter 2021 reported number. The consensus mark for merchandise revenues shows a 3.2% climb from the year-ago quarter’s reported figure.
Due to an expected increase in revenues, operating ratio (operating expenses as percentage of revenues), a key measure of efficiency, is likely to have improved in the quarter. The Zacks Consensus Estimate for operating ratio stands at 61%, better than 62% reported in the year-ago period. Lower the value of the metric, the better.
What Does the Zacks Model Say?
The proven Zacks model does not conclusively predict an earnings beat for Norfolk Southern this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. However, this is not the case here, as elaborated below. You can see the complete list of today’s Zacks #1 Rank stocks here.
Earnings ESP: Norfolk Southern has an earnings ESP of 0.00% as both the Most Accurate Estimate and the Zacks Consensus Estimate are pegged at $2.91.You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Norfolk Southern carries a Zacks Rank #3.
Highlights of Q4 Earnings
Norfolk Southern's fourth-quarter 2021 earnings of $3.12 per share surpassed the Zacks Consensus Estimate of $3.04. Moreover, the bottom line improved 18.2% year over year despite supply chain disruptions. Railway operating revenues in the quarter under review came in at $2,852 million, outperforming the Zacks Consensus Estimate of $2,789.9 million. The top line increased 10.8% year over year with all key segments, Merchandise, Intermodal and Coal, registering an improvement in revenues.
Stocks to Consider
Investors interested in the broader Transportation sector may consider American Airlines AAL and Expeditors International of Washington EXPD. These companies possess the right combination of elements to beat on earnings in this reporting cycle.
American Airlines has an Earnings ESP of +3.01% and is a Zacks #3 Ranked stock. AAL will release first-quarter 2022 earnings numbers on Apr 21.
American Airlines’ earnings surpassed the Zacks Consensus Estimate in each of the preceding four quarters, the average beat being 4.4%.
Expeditors has an Earnings ESP of +3.12% and a Zacks Rank #1. EXPD will announce first-quarter 2022 results on May 3.
Expeditors’ earnings also trumped the Zacks Consensus Estimate in each of the trailing four quarters, the average beat being 34.2%.
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