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Trefis Has A Price Estimate Of $199 For Norfolk Southern's Stock
Trefis Price Estimate For Norfolk Southern
Norfolk Southern is engaged primarily in freight transportation in the eastern U.S.Its customers include chemical producers, industrial manufactures, agricultural companies, steel processors, and automotive companies among others. It competes with other railroad companies, including Union Pacific and CSX Corporation.
#1. Estimating Norfolk Southern's Total Revenues:
Total Revenues have increased from $9.9 billion in 2016 to $11.5 billion in 2018, and could grow 5% to $12.1 Billion in 2020
Our Interactive Dashboard Analysis, How Does Norfolk Southern Make Money?, Provides An In Depth View Of The Company's Revenues.
Total Revenues [A + B + C)
Comparing trends in Norfolk Southern's Total Revenues with that of its peers
Note that 2019 sales for all three railroad companies are being impacted by lower exports, amid trade tensions, lower natural gas prices resulting in lower coal demand and shipments, and increased competition from the trucking industry.
Change In Norfolk Southern's Revenue
Change In CSX's Revenue
Change In Union Pacific's Revenue
#2. Deriving Norfolk Southern's Adjusted Net Income:
Adjusted Net Income grew from $1.7 billion in 2016 to $2.7 Billion in 2018, and we expect it to be around $3.0 billion in 2020
This growth will likely be led by margin expansion and higher revenues
The jump in net income margin in 2017 can be attributed to the impact of the U.S. Tax Act.
Net Income = A x B
Net Income Margin (A)
Total Revenues (B)
#3. Determining Norfolk Southern's EPS:
EPS has grown from $5.64 in 2016 to $9.51 in 2018, and we estimate it to be $11.61 in 2020
EPS growth from 2018 can be attributed to higher Net Income and lower Shares Outstanding.
Earnings Per Share = A ÷ B
Net Income (A)
No. of Shares (B)
#4. Estimating Norfolk Southern's Share Price:
Our Price Estimate of $199 For Norfolk Southern's Stock is based on our Detailed Valuation Model, and implies a 17.1x P/E Multiple on expected 2020 EPS of $11.61
Trefis Price Estimate = A x B
Price To Earnings Multiple (A)
Earnings Per Share (B)
Comparing Norfolk Southern's Historical P/E Multiple With That of Its Peers
P/E Multiples are based on average share price for Q3, and reported (or expected) earnings for the following full year
Note that 2016 P/E Multiples are lower for all three companies, given the tax related adjustments, that boosted the 2017 earnings.
Norfolk Southern's P/E
CSX Corporation's P/E
Union Pacific's P/E
Our complete set of analyses on Norfolk Southern
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1. How to save your forecasts for Bristol-Myers Squibb:
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2. How to monitor your scenario vs. actual results
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