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 most well known railroads in the United States, operating approximately 20,000 route miles in 22 states.
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 he bought Burlington Northern Santa Fe, then the nation’s second-largest railroad, for $34 billion in 2009.
Norfolk Southern Corp. (NYSE:NSC) trades for a cheap valuation and recently increased its dividend. Should you add Norfolk Southern Corp. (NYSE:NSC) to your portfolio?
A mixed second quarter report
Norfolk Southern Corp. (NYSE:NSC) recently released its second quarter report, which showed signs of progress in certain areas, but overall left the market unimpressed.
All told, Norfolk Southern Corp. (NYSE:NSC)’s diluted earnings per share declined 9% from the year-ago quarter, due largely to a 17% drop in coal shipments.
Overall, total railway operating revenues were $2.8 billion, representing a 3% decline year over year. Volumes rose 2%, and the company’s other two segments, General Merchandise and Intermodal, saw revenue increases. Clearly, coal is the elephant in the room.
On a positive note, Norfolk Southern Corp. (NYSE:NSC) increased its dividend by 4%, to $0.52 per share. Norfolk Southern has a long history of paying dividends. In fact, the company has paid a common stock dividend every quarter for 124 years. More recently, this is Norfolk Southern’s seventh dividend increase in the last five years.
Fellow U.S. railroad Union Pacific Corporation (NYSE:UNP) is firing on all cylinders over the past several quarters.
In what proved to be a difficult year for most railroads, Union Pacific Corporation (NYSE:UNP) outperformed its U.S. rivals. 2012 was actually the most profitable year in Union Pacific Corporation (NYSE:UNP)’s 150-year history. The company reported 23% growth in diluted earnings per share, with EPS coming in at $8.27 per share.
In addition, the good times kept up in the first quarter of 2013. Union Pacific Corporation (NYSE:UNP) racked up another profit record, seeing another 13% growth in diluted EPS.
Making things even better, the company recently reported second-quarter results that saw another 13% growth in diluted earnings per share and 5% growth in operating revenues.
An interesting alternative to the two U.S.-based railroads is Canadian Pacific Railway Limited (USA) (NYSE:CP), which, as its name suggests, is headquartered in Calgary and operates mainly throughout Canada.