Norfolk Southern Corp (NYSE: NSC)

Sector: Industrials Industry: Railroads CIK: 0000702165
Market Cap 98.17 Bn
P/B 7.91
P/E 49.09
P/S 8.45
ROIC (Qtr) 11.31
Div Yield % 1.15
Rev 1y % (Qtr) -1.65
Total Debt (Qtr) 17.09 Bn
Debt/Equity (Qtr) 1.10
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About

Investment thesis

Bull case

  • Healthy cash reserves of 1.53B provide 2.52x coverage of short-term debt 607M, demonstrating strong liquidity position and minimal refinancing risk.
  • Strong tangible asset base of 45.24B provides 2.65x coverage of total debt 17.09B, indicating robust asset backing and low credit risk.
  • Tangible assets of 45.24B provide robust 34.66x coverage of other current liabilities 1.30B, indicating strong asset backing.
  • Retained earnings of 13.23B provide strong 10.14x coverage of other current liabilities 1.30B, indicating earnings quality.
  • Operating cash flow of 4.36B provides solid 1.16x coverage of current liabilities 3.77B, showing strong operational health.

Bear case

  • Operating cash flow of 4.36B barely covers its investment activities of (2.56B), with a coverage ratio of -1.70, indicating heavy reliance on external financing for growth which may not be sustainable in a tighter credit environment.
  • Operating cash flow of 4.36B provides thin coverage of dividend payments of (1.22B) with a -3.59 ratio, suggesting potential dividend sustainability issues if operational performance deteriorates.
  • High receivables of 988M relative to inventory of 271M (3.65 ratio) suggests aggressive credit terms or collection difficulties, potentially masking revenue quality issues.
  • Free cash flow of 2.32B represents just -14.24x of debt issuance (163M), suggesting concerning reliance on leverage rather than internal cash generation for growth.
  • High financing cash flow of (1.91B) relative to working capital of (577M), which is 3.31x suggests concerning dependence on external funding for operational needs.

Peer comparison

Companies in the Railroads
S.No. Ticker Company Market Cap P/E P/S Total Debt (Qtr)
1 UNP Union Pacific Corp 156.32 Bn 21.90 6.38 32.55 Bn
2 NSC Norfolk Southern Corp 98.17 Bn 49.09 8.45 17.09 Bn
3 CP Canadian Pacific Kansas City Ltd/Cn 77.60 Bn 25.11 7.13 17.31 Bn
4 CSX Csx Corp 76.97 Bn 26.64 5.46 18.87 Bn
5 CNI Canadian National Railway Co 67.54 Bn 19.60 5.35 15.71 Bn
6 WAB Westinghouse Air Brake Technologies Corp 44.42 Bn 37.97 3.98 5.54 Bn
7 TRN Trinity Industries Inc 2.81 Bn 29.44 1.29 5.94 Bn
8 GBX Greenbrier Companies Inc 0.96 Bn -16.79 0.84 1.77 Bn

Industry comparisons

Current Valuation Value Ind Avg Percentile
EV to Assets EV to Assets 2.34 1.36
EV to Cash from Ops. EV/CFO 36.25 16.53
EV to Debt EV to Debt 6.18 2.59
EV to EBIT EV/EBIT 28.72 7.63
EV to EBITDA EV/EBITDA 23.32 18.51
EV to Free Cash Flow [EV/FCF] EV/FCF 115.99 28.00
EV to Market Cap EV to Market Cap 1.08 1.04
EV to Revenue EV/Rev 9.09 2.75
Price to Book Value [P/B] P/B 7.91 3.50
Price to Earnings [P/E] P/E 49.09 21.48
Dividend Metrics Value Ind Avg Percentile
Dividend Coverage Ratio Div Coverage (Qtr) 2.36 2.51
Dividend Payout Ratio % Div Payout % (Qtr) 42.30 22.50
Dividend per Basic Share Div per Share (Qtr) 5.40 1.27
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr) 52.20 15.26
Interest Coverage Int. cover (Qtr) 5.63 0.60
Growth Metrics Value Ind Avg Percentile
Capex Growth (1y) % Capex 1y % (Qtr) -11.90 -6.16
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr) -6.76 35.27
Dividend Growth (1y) % Div 1y % (Qtr) 0.00 3.76
EBIAT Growth (1y) % EBIAT 1y % (Qtr) 7.25 17.20
EBITDA Growth (1y) % EBITDA 1y % (Qtr) 5.99 -15.55
EBIT Growth (1y) % EBIT 1y % (Qtr) 7.76 18.03
EBT Growth (1y) % EBT 1y % (Qtr) 10.09 15.09
EPS Growth (1y) % EPS 1y % (Qtr) 10.19 15.15
FCF Growth (1y) % FCF 1y % (Qtr) 4.13 426.49
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr) -2.70 -4.94
Liquidity Ratios Value Ind Avg Percentile
Asset Utilization Ratio Asset Util Ratio (Qtr) 0.27 0.57
Cash Payout Ratio Cash Payout (Qtr) 0.19 0.16
Cash Ratio Cash Ratio (Qtr) 0.41 0.90
Current Ratio Curr Ratio (Qtr) 0.85 1.61
Debt to Equity Ratio Debt/Equity (Qtr) 1.10 1.04
Interest Cover Ratio Int Coverage (Qtr) 5.63 0.60
Times Interest Earned Times Interest Earned (Qtr) 5.63 0.60
Profitability Value Ind Avg Percentile
EBITDA Margin % EBITDA Margin % (Qtr) 48.00 -101.68
EBIT Margin % EBIT Margin % (Qtr) 36.59 -107.52
EBT Margin % EBT Margin % (Qtr) 30.09 -114.27
Gross Margin % Gross Margin % (Qtr) 69.90 37.55
Net Profit Margin % Net Margin % (Qtr) 23.60 -117.34