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Will Volume Weakness Mar Norfolk Southern (NSC) Q4 Earnings?

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Zacks Equity Research
·4 min read
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Norfolk Southern Corporation NSC is scheduled to report fourth-quarter 2020 results on Jan 27, before market open.

The Zacks Consensus Estimate for the company’s fourth-quarter earnings has been revised downward by approximately 2% in the last 60 days. However, it has an impressive earnings history, having outperformed the Zacks Consensus Estimate in each of the preceding four quarters, the average beat being 11.4%. Let’s see whether the company is able to retain its beat streak in its fourth-quarter results as well.

Factors to Note

Amid coronavirus-induced freight slowdown, volumes are likely to have been weak in the fourth quarter as was the case in the last two reported quarters. Notably, the Zacks Consensus Estimate for volumes in the fourth quarter shows a 1.2% dip from the year-ago period’s reported figure. This anticipated softness in volumes is expected to reflect in total revenues. The consensus mark for revenues indicates a 4.8% decline from the fourth-quarter 2019’s reported number.

Additionally, coal segment weakness due to low natural gas prices and unfavorable weather conditions, worsened by coronavirus, is likely to have hurt Norfolk Southern’s fourth-quarter performance. The Zacks Consensus Estimate for coal volumes hints at a 25.9% plunge from the year-ago reported number. The same for coal revenues implies a 29.2% drop from fourth-quarter 2019’s reported number.

However, increased efficiency and reduced costs owing to the precision scheduled railroading (“PSR”) model is expected to have aided the bottom line. Benefits from the PSR model should get reflected in the operating ratio (operating expenses as a percentage of revenues). The Zacks Consensus Estimate for operating ratio is pegged at 62%, better than the year-ago reported figure of 63%. Notably, lower the value of the metric the better.

Norfolk Southern Corporation Price and EPS Surprise

Norfolk Southern Corporation Price and EPS Surprise
Norfolk Southern Corporation Price and EPS Surprise

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

What Does the Zacks Model Say?

Our proven 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, that 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 -0.90% as the Most Accurate Estimate is pegged at $2.46, lower than the Zacks Consensus Estimate of $2.48. 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 Q3 Earnings

In the last-reported quarter, the company delivered a positive earnings surprise of 6.4%. However, total revenues fell short of the Zacks Consensus Estimate. Both the top and bottom lines declined year over year due to drop in volumes, thanks to coronavirus-led woes.

Stocks to Consider

Investors interested in the broader Transportation sector may consider Canadian Pacific Railway Limited CP, CSX Corporation CSX and C.H. Robinson Worldwide CHRW, as these stocks possess the right combination of elements to beat on earnings this reporting cycle.

Canadian Pacific has an Earnings ESP of +0.12% and a Zacks Rank #3. The company will announce fourth-quarter 2020 results on Jan 27.

CSX has an Earnings ESP of +0.47% and a Zacks Rank #3. The company will release fourth-quarter 2020 results on Jan 21.

C.H. Robinson has an Earnings ESP of +1.01% and a Zacks Rank #3. The company is scheduled to release fourth-quarter 2020 results on Jan 26.

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CSX Corporation (CSX) : Free Stock Analysis Report
 
C.H. Robinson Worldwide, Inc. (CHRW) : Free Stock Analysis Report
 
Norfolk Southern Corporation (NSC) : Free Stock Analysis Report
 
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