Norfolk Southern Corporation Stock Buy Recommendation Reiterated (NSC)

Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.

NEW YORK ( TheStreet) -- Norfolk Southern Corporation (NYSE: NSC) has been reiterated by TheStreet Ratings as a buy with a ratings score of B+ . The company's strengths can be seen in multiple areas, such as its attractive valuation levels, good cash flow from operations, expanding profit margins, largely solid financial position with reasonable debt levels by most measures and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

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Highlights from the ratings report include:
  • Net operating cash flow has increased to $589.00 million or 27.21% when compared to the same quarter last year. In addition, NORFOLK SOUTHERN CORP has also modestly surpassed the industry average cash flow growth rate of 22.61%.
  • 35.30% is the gross profit margin for NORFOLK SOUTHERN CORP which we consider to be strong. Regardless of NSC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 15.38% trails the industry average.
  • NORFOLK SOUTHERN CORP's earnings per share declined by 8.4% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, NORFOLK SOUTHERN CORP reported lower earnings of $5.37 versus $5.47 in the prior year. This year, the market expects an improvement in earnings ($5.52 versus $5.37).
  • NSC, with its decline in revenue, slightly underperformed the industry average of 2.0%. Since the same quarter one year prior, revenues slightly dropped by 4.0%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.

Norfolk Southern Corporation engages in the rail transportation of raw materials, intermediate products, and finished goods in the United States. Norfolk Southern has a market cap of $23.36 billion and is part of the services sector and transportation industry. The company has a P/E ratio of 13.8, below the S&P 500 P/E ratio of 17.7. Shares are up 21.7% year to date as of the close of trading on Tuesday.

You can view the full Norfolk Southern Ratings Report or get investment ideas from our investment research center.

--Written by a member of TheStreet Ratings Staff.

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