QUOTE AND NEWS
SeekingAlpha  Oct 11  Comment 
By Daniel Jones: As earnings near on Oct. 14, investors who have shares of CSX Corp. (NYSE:CSX) are likely kicking around what to do with the business. Currently, with shares of the railroad giant trading near their 52-week high, it may be...
SeekingAlpha  Sep 30  Comment 
By Arie Goren: Most S&P 500 stocks pay dividends. In fact, 424 of them pay some dividends. 365 companies have a yield greater of 1%, 212 companies have a yield greater of 2%, 95 companies have a yield greater of 3%, and 35 companies have a yield...
Motley Fool  Sep 29  Comment 
Despite having hit new highs, Norfolk Southern faces challenges to its future growth.
Forbes  Sep 25  Comment 
Investors in Norfolk Southern Corp. (NYSE: NSC) saw new options become available today, for the November 7th expiration. At Stock Options Channel, our YieldBoost formula has looked up and down the NSC options chain for the new November 7th...
Motley Fool  Sep 23  Comment 
Norfolk Southern gave investors record results last quarter. Is momentum on the railroad's side?
Market Intelligence Center  Sep 17  Comment 
After closing Tuesday at $109.17, Norfolk Southern Corp (NSC) presents an attractive opportunity to get a 2.37% return in just 122 days, which is an annualized return of 7.09% (for comparison purposes only). To enter this trade, sell one Jan. '15...
SeekingAlpha  Sep 10  Comment 
By Michael Hooper: Union Pacific (NYSE: UNP) and BNSF Railway, a holding of Berkshire Hathaway (NYSE: BRK.B), own lucrative rail lines to West Coast ports, giving them an advantage over East Coast rivals CSX (NYSE: CSX) and Norfolk Southern (NYSE:...
Motley Fool  Sep 10  Comment 
Norfolk Southern has faced the same difficulties as other eastern-based railroads, but believes it can recover. Find out more about the company's future plans.
Market Intelligence Center  Sep 9  Comment 
After closing Monday at $108.64, Norfolk Southern Corp (NSC) presents an attractive opportunity to get a 2.70% return in just 130 days, which is an annualized return of 7.58% (for comparison purposes only). To enter this trade, sell one Jan. '15...
SeekingAlpha  Sep 7  Comment 
By Anup Singh: The railroad industry in the U.S. did well in 2013, and a similar trend was expected in 2014. A look at the performance of railroad player Norfolk Southern (NYSE:NSC) in 2014 indicates that the sector is indeed doing well. So far...




 

Norfolk Southern (NYSE:NSC) is a U.S. railroad shipping company. The most important commodity transported by NSC is coal, which accounted for 29% of NSC's $8 billion in 2009 total revenue. The largest commodities after coal are intermodal containers, agricultural products such as corn, cars, and consumer products.[1] Its principal subsidiary is wholly-owned Norfolk Southern Railway Company, and it also has joint ownership (along with CSX (CSX)) of Consolidated Rail Corporation. Altogether, it has a network of 21,000 miles of track throughout 22 U.S. states, the District of Columbia and Ontario, Canada.[1] NSC earned a net income of $1.03 billion in 2009.

In 2009, 105 million tons of freight, or approximately 65% of total general merchandise tonnage transported by NSC came from online orders.[1] As more and more customers are able to easily transport as well as track their orders online, this could prove to become an important area of growth for NSC.

Business Overview

In 2009, NSC had total revenues of $7.97 billion, earning a net income of $1.03 billion.[2] Compared to 2008, revenues decreased 25%, or $2.7 billion due to manufacturers reducing their production to meet lower consumer demand as a result of the tough economic climate. Part of the decrease in revenues was also due to the lower cost of fuel; with lower fuel costs, NSC was able to charge less for fuel surcharges. Its net income was also down significantly, from $1.7 billion in 2008.

The commodity that contributed the most to NSC's 2009 revenue was coal at 29%. Other commodities shipped by NSC include:[3]

Trends and Forces

NSC System Map 2007
NSC System Map 2007[4]

NSC's reliance on coal makes its earnings susceptible to coal

Since 29% of NSC's earnings come from shipping coal, its earnings rely heavily on the volume of coal being shipped. As a result, it is susceptible to the worldwide demand for coal. This reliance can be seen in its total revenues, as revenues from coal declined by $847 million in 2009, as there was lower demand among manufacturers as well as utility companies.[3] However, prior to this year, its coal earnings had grown significantly, highlighted by a 25% increase in the year 2007. [5] Whether the demand of coal remains high in the future may have large implications for the future earnings of NSC.

NSC and General Electric Company (GE) working together to improve efficiency

As of June 7, 2010 NSC and GE have been working on software technology that reportedly helps improve freight railroad capacity and reliability. This could increase train speed and, in turn, save fuel, according to NSC and GE.[6] While they are still testing this product, if successful it could improve efficiency by 10% to 20%, which could greatly help NSC reduce expenses.

NSC named as a defendant in fuel surcharge-fixing lawsuit

In March 2008, Archer-Daniels-Midland Company (ADM) filed an antitrust lawsuit against five U.S. railroad companies, including NSC. The suit alleges that Burlington Northern Santa Fe (BNI), CSX (CSX), Kansas City Southern (KSU), Union Pacific (UNP) and NSC cooperated in fixing their prices for fuel surcharges.[7] Fuel costs are a large part of NSC's operating expenses, making up 12% of total expenses in 2007.[8] As such, fuel surcharges are an important way of NSC to pass on some of these higher costs to its customers. As of July 2008, there was no news on the progress of the suit.

Competition

NSC's chief competitor is CSX (CSX), the other main freight railroad in the Eastern U.S. NSC and CSX cover most of the same territory.[9]

Figures are for FY 2007 Revenue (millions USD) Net Income (millions USD) Miles of Track Locomotives
CSX$10,321$1,44721,1664,007[10]
NSC$9,432$1,46420,8913,816[11]

Market Share

The Association of American Railroad reported that the total 2006 freight revenue in the U.S. rail industry was $54 billion (as of 7/28/08, 2007 figures were not yet available).[12] The following market share figures are based on this number.

(millions USD) 2006 Freight Revenue Market Share
Union Pacific (UNP) 14,791[13]27.4%
Burlington Northern Santa Fe (BNI) 14,540[14]26.9%
NSC9,117[15]16.9%
CSX (CSX)8,281[16]15.3%
Grand Trunk (subsidiary of Canadian National Railway Company (CNI))2,037[17]3.8%
Kansas City Southern (KSU)830[18]1.5%
Soo Line (subsidiary of Canadian Pacific Railway (CP))718[19]1.3%




References

  1. 1.0 1.1 1.2 2009 10-K Pg K3
  2. NSC 10-K 2009 Item 6
  3. 3.0 3.1 NSC 10-K 2009 Item 7
  4. NSC 2007 Annual Report, inside cover
  5. W. Va Could Benefit From Booming Coal Exports - Charleston Daily Mail, 1/30/08
  6. GE software speeds freight trains, cuts fuel consumption. Heather Clancy. ZDNet.
  7. Railroad shipping: Archers, Daniel, Midland Files Lawsuit Against Rail Carriers Over Fuel Surcharges - Logistics Management Magazine, 3/31/2008
  8. NSC 2007 10-K, pages K44
  9. NSC 2007 10-K, page K11
  10. CSX 2007 10-K, pages 24, 29
  11. NSC 2007 10-K, pages K5, K8
  12. Overview of American Railroads - Association of American Railroads, May 2008
  13. Union Pacific 2006 Report R-1, page 16
  14. BNSF 2006 Report R-1, page 16
  15. NSC 2006 Report R-1, page 16
  16. CSX 2006 Report R-1, page 16
  17. Grand Trunk Railroad 2006 Report R-1, page 16
  18. KSU 2006 Report R-1, page 16
  19. Soo Line Railroad Company 2006 Report R-1, page 16
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