Norfolk Southern Earnings Are Coming. What to Expect.

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Norfolk Southern earnings are coming Wednesday. It’s the first quarter reported since the Ohio train derailment.


Maddie McGarvey/Bloomberg

Norfolk Southern
quarterly earnings should include a charge for the February Ohio train derailment. The charge probably isn’t in the Wall Street consensus estimate though. That could lead to some stock volatility after numbers are released, but investors are likely to focus more on what results say about the state of the U.S. economy.

Norfolk (ticker: NSC) is due to report first-quarter numbers on Wednesday morning. Wall Street is looking for earnings per share of $3.15 from sales of $3.1 billion. A year ago, Norfolk reported earnings of $2.93 from sales of $2.9 billion.

That earnings estimate doesn’t appear to include a big charge for the early February derailment of a train near East Palestine, Ohio, that released hazardous vinyl chloride gas into the atmosphere.

Street EPS estimates are down about 7 cents a share since the accident. That’s a pretax reduction of roughly $25 million. The costs not covered by insurance might run to almost $350 million, or about $1.50 a share before tax.

Investors are likely to look through any charge partly because they have already punished the stock for the derailment. Shares are down about $45, or 18%, since the accident. The
S&P 500
is down about 1% over the same span. The drop has shaved roughly $10 billion off the railroad’s market capitalization.

Wall Street analysts haven’t judged the accident as severely. The average analyst price target sits at about $239 a share, off about $11 since the derailment.

Earnings from logistics providers have been mixed so far in the first quarter as the U.S. economy slows down. Truck services firms
J.B. Hunt Transport Services
(JBHT) and
Knight-Swift Transportation
(KNX) both missed first-quarter earnings estimates in recent days. Both stocks dropped after earnings. Earnings from railroads
CSX
(
CSX
) and
Union Pacific
(UNP), on the other hand, both beat Wall Street’s earnings estimates. Both of those stocks rose following the earnings reports.

“Rail earnings releases were much more palatable [than truck],” wrote Evercore ISI analyst Jonathan Chappell in a earnings recap report from Friday. “The pricing power and end-market diversity of the rail model really came to the fore thus far, as intermodal may be mired in the freight recession.”

Railroads might be less volatile than other transportation modes, but it hasn’t helped Norfolk shares so far in 2023. The stock is down about 16% year to date. The S&P 500 and
Dow Jones Industrial Average
are up about 8% and 1%, respectively.

The accident is part of the reason for underperformance. Investors and analysts will expect some update about derailment on the company’s quarterly conference call which begins at 8:45 a.m. Eastern time. Freight demand and how the second half of the year is shaping up should be discussed too.

CSX shares are flat year to date. Union shares are down about 6%.

Write to Al Root at [email protected]

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