The firm maintained its "neutral" rating on the stock.
Although the company is beginning to see "signs of life" on the service front in the most recent quarter, it lags behind its peers in terms of getting its network back in order, analysts stated.
This is on top of the already challenging volume backdrop with the export coal conditions getting worse, analysts noted.
Additionally, given low natural gas prices and elevated stockpiles, there is a downside risk to the company's domestic thermal coal guidance, according to the firm's note.
On Monday, shares closed flat at $82.80.
Norfolk Southern, together with its subsidiaries, engages in the rail transportation of raw materials, intermediate products, and finished goods.
Separately, TheStreet Ratings team rates NORFOLK SOUTHERN CORP as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:
"We rate NORFOLK SOUTHERN CORP (NSC) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its reasonable valuation levels, good cash flow from operations, largely solid financial position with reasonable debt levels by most measures and notable return on equity. We feel its strengths outweigh the fact that the company has had sub par growth in net income."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The debt-to-equity ratio is somewhat low, currently at 0.76, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.74 is somewhat weak and could be cause for future problems.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Road & Rail industry and the overall market on the basis of return on equity, NORFOLK SOUTHERN CORP has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- Net operating cash flow has slightly increased to $605.00 million or 2.89% when compared to the same quarter last year. Despite an increase in cash flow, NORFOLK SOUTHERN CORP's average is still marginally south of the industry average growth rate of 5.68%.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 9.0%. Since the same quarter one year prior, revenues slightly dropped by 4.5%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- You can view the full analysis from the report here: NSC Ratings Report