Norfolk Southern Corp. (NSC): Why This Railroad Is a Compelling Buy

Page 1 of 2

Railroads are often seen as a bellwether for the broader economy because of the amount of retail and manufactured goods they transport across the nation. Norfolk Southern Corp. (NYSE:NSC) is one of the biggest railroads in the United States, with a $23 billion market capitalization. In addition, Norfolk Southern Corp. (NYSE:NSC) operates approximately 20,000 route miles in 22 states and serves every major container port in the eastern US.

Norfolk Southern Corp. (NYSE:NSC)

The railroad industry counts Warren Buffett, one of the world’s most famous investors of all time, as a fan. Buffett is a well-known railroad enthusiast and proved it when his Berkshire Hathaway Inc. (NYSE:BRK.A) bought Burlington Northern Santa Fe, then the nation’s second-largest railroad, for $34 billion in 2009.

Should you follow the philosophy of the world’s most famous investor and add Norfolk Southern Corp. (NYSE:NSC) to your portfolio?

Railroad profits keep chugging along

Of course, Norfolk Southern Corp. (NYSE:NSC) isn’t the only railway operator in the United States. Major competitor Union Pacific Corporation (NYSE:UNP) operates a rail network including 31,000 route miles.

Union Pacific managed to impressively reverse the pattern of railroads reporting disappointing 2012 results, with last year being the most profitable year in the company’s 150-year history. Union Pacific Corporation (NYSE:UNP) reported full-year diluted earnings per share of $8.27, an increase of 23% year over year.

Furthermore, Union Pacific Corporation (NYSE:UNP)’s record results extended into the first quarter of 2013. The company’s diluted earnings per share represented another record, growing 13% year over year. Operating revenue grew 3%, also a new record.

In addition, Canada is home to some excellent railroads, including Canadian National Railway (USA) (NYSE:CNI), which carries a $40 billion market value.

Unfortunately, Canadian National Railway (USA) (NYSE:CNI)’s first quarter report was less than impressive. The company’s net income per share declined 25% during the first three months, year over year. Moreover, Canadian National Railway (USA) (NYSE:CNI)’s operating ratio, which compares expenses to sales, deteriorated by more than two percentage points. This was due largely to a 7.7% increase in fuel costs.

That being said, analysts were quick to point to the extremely tough weather conditions seen in the first quarter and are more optimistic about the company’s future.

Meanwhile, Norfolk Southern Corp. (NYSE:NSC) recently issued a very solid first-quarter earnings report. The railroad reported 15% growth in diluted earnings per share on $2.7 billion in railway operating revenues through the first three months of the year.

Shipment volumes increased 3% year over year, and particular strength was seen in the company’s general merchandise revenues (up 2%) and in its intermodal revenues (up 9%) versus the prior year’s first quarter.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 44 percentage points in 21 months Learn how!

Lists

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top Businesses to Invest In

Top 5 Things You Might Be Doing Wrong With Your Business

Top 5 Strategic Technology Trends in 2014

Top Rags to Riches Stories

Parenting Behavior That Promotes Future Leaders

Top 5 Mistakes Made by Small Businesses

Top 5 Most Common and Potentially Devastating Financial Blunders

Top 5 Highest Paying Jobs for Web Designers

Top 6 Most Respected Professions that Also Pay Well

Top 5 Pitfalls Investors Should Avoid

Top 6 Lawyers and Policy Makers Under 30

Top 6 New Year’s Resolutions for Entrepreneurs

Top 7 Locations to Check in on Facebook

Top 5 Mistakes made by Rookie eBay Sellers

Top 7 eBook Publishers in 2013

Top 6 Health Industry Trends in 2014

5 Lessons for Entrepreneurs from Seth Godin

Top 5 Success Tips from Jordan Belfort – the Wolf of Wall Street

Best Master’s in Finance Degree Programs

Top 6 Earning Celebrities Over 50

The most expensive sports to play

Top 7 Earning Celebrities Under 25

Best 7 Online Courses to Take: Free Finance MOOCs

Top 6 Bad Habits that Promote Failure

20 Most Valuable Soccer Teams in the World in 2013

12 Most Expensive Countries for Foreign Students

Top 30 Most Influential Women in the World

Top 20 Most Expensive New Year Eve Shows

Top 5 Best Vocational Careers

Top 10 Jobs for 2014 by Salary Gain (Predictions)

Top 5 Digital Trends for 2014

Top 6 Things You Can Do To Increase Your Productivity

Top 9 Trending Smartphones in 2013

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!