On Wednesday, Susquehanna has adjusted its price target for Norfolk Southern Corporation (NYSE: NYSE:NSC), increasing it to $285 from the previous $280, while keeping a Neutral rating on the stock. The adjustment follows Norfolk Southern's recent earnings report for the third quarter of 2024.
In his assessment, the Susquehanna analyst highlighted the company's performance during the third quarter, which marked the first for Mark George as CEO. The company was commended for delivering solid results and effectively managing expectations for the fourth quarter, which is traditionally a period of higher seasonal demand.
Norfolk Southern reported adjusted earnings per share (EPS) of $3.25 for the third quarter of 2024. This figure excludes certain one-time gains and expenses, such as $1.60 per share from line gains, insurance recoveries, and restructuring costs. The reported EPS surpassed Susquehanna's estimate of $3.04 and was also $0.14 higher than the consensus estimate.
The analyst expressed appreciation for Norfolk Southern's narrative, particularly as it pertains to the company's cash flow situation. However, the valuation of the company was cited as a reason for the analyst's continued Neutral stance on the stock.
The report concludes by reiterating the analyst's view that while Norfolk Southern's recent performance and cash flow trajectory are positive, the current stock valuation prevents a more bullish rating at this time.
In other recent news, Norfolk Southern Corporation has been the focus of several analyst firms following its strong third-quarter performance. RBC Capital Markets raised its price target for Norfolk Southern from $272 to $282, reflecting a positive assessment of the company's recent operating results.
Similarly, UBS increased its target to $309, Jefferies to $285, Barclays to $290, and Citi to $302, all maintaining positive ratings. The company's third quarter was marked by a 23% increase in adjusted earnings per share, reaching $3.25, and a 3% rise in revenue, totaling $3.05 billion. These results were attributed to effective cost management and operational efficiencies.
Norfolk Southern's Chief Operating Officer, John Orr, was recognized for his leadership in advancing Positive Train Control implementation. Despite potential operating ratio deterioration signaled for the fourth quarter, the company remains confident in achieving its target of a sub-60 operating ratio, contingent on macroeconomic support.
InvestingPro Insights
Norfolk Southern's recent performance aligns with several key metrics and insights from InvestingPro. The company's impressive gross profit margins, as highlighted by InvestingPro Tips, are reflected in the latest data showing a gross profit margin of 48.31% for the last twelve months as of Q3 2024. This robust profitability supports the solid results mentioned in the analyst's assessment.
The stock's strong return over the last three months, another InvestingPro Tip, is quantified by the 16.76% price total return over that period. This performance likely contributed to Susquehanna's decision to raise the price target, despite maintaining a Neutral rating.
InvestingPro Data shows that Norfolk Southern is trading at a P/E ratio of 23.27, which may explain the analyst's caution regarding valuation. This aligns with the InvestingPro Tip suggesting that NSC is trading at a high P/E ratio relative to near-term earnings growth.
For investors seeking a more comprehensive analysis, InvestingPro offers 11 additional tips for Norfolk Southern, providing a deeper understanding of the company's financial health and market position.
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