Norforlk Southern stock hit with three downgrades
Norfolk Southern (NSC) has received three analyst downgrades from Stifel, TD Cowen, and Morgan Stanley. Both Stifel and TD forecasted no substantial margin improvement from Norfolk Southern, while all three firms stated the railroad is falling behind competitors within the rail industry.
Yahoo Finance's Bradley Smith and Seana Smith break down the details.
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Editor's note: This article was written by Angel Smith
Video Transcript
BRAD SMITH: Well, Stifel, TD Cowen, and Morgan Stanley all getting off the Norfolk Southern train. The three firms, they're issuing separate downgrades on the rail company this week. Both TD and Stifel saying they don't expect margin improvement this year. And all three say NSC is trailing its competitors. This comes after the company cut 7% of its management and staff. Last week, we were tracking shares of NSC. They are down by about 1.3% right now.
SEANA SMITH: Yeah, certainly, Brad. And I think this just points to the fact that Norfolk Southern is going to have a challenging several months and several years potentially ahead of them. And that was my takeaway from these three notes and also really follows what we heard from Norfolk Southern when they did report that weaker guidance here. They are still clearly suffering from that derailment just about a year ago.
Now, they have invested heavily in safety. They've invested heavily in tech in order to hopefully, in the future, avoid these types of situations. But it is still reflected in the costs that continue to grow here for this company. Their profit falling over 30%. And TD Cowen really making the case that this is a name that will likely, because of all that, continue to lag many of its peers here for the next two to three years as they do try to right the ship a little bit.
BRAD SMITH: Yeah. Part of the riding the ship effort is going to have to move through some of the dicey situations that are on the East Coast that Stifel points out the outlook for ports on the East Coast in 2024 murky, they say. Disruptions in Panama Canal and the Red Sea that could be further heightened by looming dockworkers' strike. So that on the docket here and Norfolk Southern specifically for them, these disruptions, Stifel says, could have far reaching impacts of the peer group, the most intermodal exposure this company has representing over half their total volumes right now.
