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Norfolk Southern stock is down by about -32% compared to about -28% for CSX since early February. The current coronavirus crisis will likely impact railroad companies, due to an overall decline in manufacturing, lower demand amid lockdowns, lower oil prices impacting production and transportation of oil and related products, as well as lower natural gas prices resulting in lower demand for coal. Given that several countries are on lockdown, even the exports are expected to take a hit. With the global economy expected to be in recession, the railroad business will feel the heat from lower shipments, and this trend could continue beyond Q2, till the time consumer buying power increases. This explains the underperformance of these stocks vis-a-vis the S&P 500, which has declined around 20% since early February. Below, we take a look at whether Norfolk Southern could be a better bet compared to CSX by looking at its fundamental performance.
CORONAVIRUS CRISIS : Since early February, Norfolk Southern stock has moved -32.5% compared to -27.9% for CSX.Norfolk Southern's stock has declined by about 32% since early February, compared to 28% decline for CSX, after the WHO declared a global health emergency relating to Coronavirus.Both, Norfolk Southern and CSX stock, fell 20% since March 8th, as the U.S. cases accelerated.
Norfolk Southern % Change For Key Dates: 2020 Crisis
CSX % Change For Key Dates: 2020 Crisis
HISTORICAL PERFORMANCE: From 2009-2019 Norfolk Southern stock has grown at 0.8x the rate of CSX
Norfolk Southern stock went from $41.34 at the end of 2009 to $193.28 at the end of 2019, representing a change of 367.5%.
During the same time period, the CSX went from $13.23 to $72.11 representing a change of 445%.
This implies that Norfolk Southern stock grew at 0.8x the rate of CSX
NSC Stock Price
CSX Stock Price
NSC Stock Price Annualized Rate of Return
CSX Stock Price Annualized Rate of Return
ANALYSIS: Is Norfolk Southern stock expensive based on a review of the fundamentals?
P/E Ratio: Based on trailing 2019 P/E ratios, NSC stock looks expensive compared to prior years and comparable to CSX
Norfolk Southern current (trailing) P/E ratio of 12.0 is comparable to 11.9 P/E for CSX.
* P/E Ratio is calculated based on year end market price and trailing earnings. However, for 2020 P/E, we use 2019 earnings and current market price.
Historical Revenue Growth: Both Norfolk Southern and CSX have seen decline at -1% rate.
Norfolk Southern 2014-19 annualized revenue growth of <-1% is comparable with 2014-19 CSX annualized revenue growth rate of -1.2%.
2014-19 Annualized Revenue Growth Comparison
NSC Annual Change in Revenue
CSX Annual Change In Revenue
Historical EPS Growth: Norfolk Southern's EPS growth has been slower than CSX's over the past few years.
Norfolk Southern 2014-19 annualized EPS growth of 10% is 0.6x that of the 2014-19 CSX annualized EPS growth rate of 17%.
2014-19 Annualized EPS Growth Comparison
NSC Annual Change in EPS
CSX Annual Change in EPS
Survival Check: Total Debt Comparisons
Norfolk Southern Total Debt has increased from $10 billion to $12 between 2016 and 2019. In comparison, Total Debt for CSX has risen from $11 billion to $16 billion over the same period.
NSC Total Debt
CSX Total Debt
Both the companies' stocks have underperformed through the crisis, thus far, and CSX could see a larger upside if the health crisis abates, considering its EPS growth has been higher than Norfolk Southern. CSX's P/E ratio is lower compared to its own historical P/E ratio, and also slightly lower than that of Norfolk Southern. While both the companies have been focused on reducing their operating ratio, CSX has been more successful with its strategies, as it posted 1000 bps decline in its operating ratio from 69.2% in 2016 to 58.4% in 2019, as compared to Norfolk Southern's 500 bps decline from 69.6% to 64.7% over the same period. As such, we believe that CSX will be able to better cope with the crisis by managing its expenses.
How Does Norfolk Southern Spend Its Money?
How Big Is Norfolk Southern's Intermodal Business?
What Factors Drove Over 85% Growth In Norfolk Southern's Stock In The Last 3 Years?
Norfolk Southern Valuation: Expensive Or Cheap?
NSC Revenues: How Does Norfolk Southern Make Money?
Norfolk Southern - NSC
Road & Rail