Norfolk Southern drops to six-month low, institutional shareholder Panagora Asset Management Inc. sells 12 August 2019

NEWS BITES - NORTH AMERICA

Norfolk Southern Corp. (NYSE:NSC), the NYSE's 2nd largest Railroads company by market cap, traded at its 157-day low of $US173.39. Norfolk Southern's stock price has decreased $US3.16 (1.8%) from its previous trading session to close at $US174.54. Compared with the S&P 500 Index which fell 35.6 points (1.2%) in the day, the relative price change was -0.6%. The volume was 0.9 times the average daily trading volume of 1.9 million shares. There were 1,635,511 shares worth $US285.5 million traded today.

PEOPLE'S NEWS

August 12 Norfolk Southern Director John R. Thompson's value of investment decreases by $280,935 in the past quarter

Norfolk Southern (NYSE:NSC) Director John R. Thompson holds 12,150 shares worth US$2.2 million at the last price of US$177.70, a fall in value by US$280,935 (11.5%). Three months ago John R. Thompson held the same number of shares and the price was US$201.69.

August 12 Norfolk Southern Director Michael D. Lockhart's value of investment decreases by $674,604 in the past quarter

Norfolk Southern (NYSE:NSC) Director Michael D. Lockhart holds 29,841 shares worth US$5.3 million at the last price of US$177.70, a fall in value by US$674,604 (11.3%). Three months ago Michael D. Lockhart held the same number of shares and the price was US$201.69.

August 12 Norfolk Southern Independent Director Thomas D. Bell's value of investment decreases by $542,009 in the past quarter

Norfolk Southern (NYSE:NSC) Independent Director Thomas D. Bell holds 23,926 shares worth US$4.3 million at the last price of US$177.70, a fall in value by US$542,009 (11.3%). Three months ago Thomas D. Bell held the same number of shares and the price was US$201.69.

BULLISH TURNING POINT

Dividend Yield increases to 1.98%

Based on dividends of $US3.46 per share for the trailing twelve months and the last price of $US174.54 the dividend yield is 1.98%, an improvement from 1.95% on the previous day.

Stock Summary

Today's close (USD)174.54
52-Week Range (USD)136.7-209.5
SectorRailroads sector
Shares Outstanding263,407,000
Market Cap$US46 billion

Highlights in today's Report:

SECTION 1 TODAY'S BEARISH SIGNALS

SECTION 2 TODAY'S BULLISH SIGNALS

RECAP FROM PREVIOUS REPORTS (UPDATED AT THE LAST PRICE OF $US174.54):

SECTION 3 THE PAST WEEK

SECTION 4 ONGOING BULLISH PARAMETERS

SECTION 5 ONGOING BEARISH PARAMETERS

SECTION 6 REPORTED BUYING AND SELLING

SECTION 7 SUMMARY FINANCIALS

SECTION 8 CORPORATE PROFILE

SECTION 1 NORFOLK SOUTHERN BEARISH SIGNALS

1.1 Downtrend:

Price/Moving Average Price and MACD:

+ The Price/MAP of 0.97 for NSC is lower than the Price/MAP for the S&P 500 Index of 1.04.

+ The Moving Average Convergence Divergence (MACD) indicator of 12-day Exponential Moving Average (EMA) of 182.48 minus the 26-day EMA of 187.47 is negative suggesting a bearish signal. Both the 12-day EMA as well as the 26-day EMA are falling, another bearish signal.

+ The price to 50-day EMAP ratio is 0.9, a bearish indicator. The 50-day EMAP has decreased to $US190.71. A decrease is another bearish indicator.

+ In the past 200 days this ratio has been under 0.97, 15 times suggesting downside. The 200-day MAP has decreased to $US179.48. A decrease is another bearish indicator.

Past Week:

+ Norfolk Southern Corp. is placed 2216/2736 in BuySellSignals' ranking of NYSE performers in the past week, a percentile ranking of 19.

+ In the past week, volume was 0.9 times average and the shares were down 3.0%. Monday's close price is at a 2.3% discount to its 5-day Volume Weighted Average Price (VWAP) of $US178.58.

Past Month:

+ The price plummeted 11.5% in the past month.

+ Compared with the S&P 500 Index which fell 4.3% for the month, this represented a relative price decrease for Norfolk Southern's stock of 7.2% for the month.

+ The present value of $US1,000 (PV1000) invested one month ago in Norfolk Southern is $US890, comprising a capital loss of $US115 and dividend reinvested of $US4.

Slipping Relative Strength (1mo, 3 mo):

+ In the NYSE market of 1,879 stocks and 287 units traded today, the stock has a 6-month relative strength of 43 which means it has underperformed 57.0% of the market.

+ Also, the relative strength percentile is slipping at 22 for 3 months and 21 for 1 month.

1.2 Low Price Performance Indicator and rank of Norfolk Southern in the NYSE market:

DescriptionNSC ValueRank In Market
Price/MAP500.9In Bottom Quartile

SECTION 2 NORFOLK SOUTHERN BULLISH SIGNALS

2.1 Undervaluation [compared with sector average]:

Price/Earnings and Earnings Yield

+ Price/Earnings of 16.9 [18.9]. We estimate Norfolk Southern stock is trading at a current year P/E of 9.2 and a forward year P/E of 4.9. The P/E of 16.9 plus annual inflation in the United States of 1.6% adds up to 18.5, well within the value benchmark Rule of 19.

+ Earnings yield of 5.9% is 3.4 times the 10-year bond yield of 1.75%.

+ The trailing twelve months earnings yield of 5.9% has a spread of 4.2% vs the 10-year treasury yield of 1.7%. This is the widest and most attractive spread in the past seven months.

Dividend Yield

+ To quote Benjamin Graham: "A dividend yield of at least two-thirds the triple-A bond yield"; the stock's dividend yield is 1.1 times the triple-A bond yield of 1.7%.

+ The relative yield of NSC, defined by its yield of 2%, divided by average yield of dividend yielding stocks in the S&P 500 Index of 1.7% is 117.9%. This suggests Norfolk Southern stock is undervalued in dividend yield terms.

Price to Book

+ Price to Book of 3 [4.4]. We estimate Norfolk Southern stock is trading at a current year Price to Book of 2.7 and a forward year Price to Book of 2.3.

MCap/Total Assets

+ Tobin's Q Ratio, defined as MCap divided by Total Assets, is 1.3. Compared with the rest of the market the stock is undervalued.

2.2 Uptrend:

+ Falling open interest with falling price

+ Open Interest Trend

Same day trend: The price decreased 1.8% from $US177.70 to $US174.54; Open interest has plummeted 13.0% from 9,595 to 8,345. A fall in price combined with a decline in open interest suggests long position holders are being compelled to liquidate their positions and the market is strengthening. This is a bullish signal awaiting a turning point when long position holders have completed their selling.

DurationOpen Interest change %Price change %Interpretation
1-day-13.0-1.8Market is Strengthening

+ Put Call Contracts

The Put/Call ratio has declined from 1.551 to 1.19 suggesting an uptrend.

Put ContractsCall ContractsPut/Call ratio
Today4,5343,8111.19
Previous day5,8343,7611.551

+ Top three traded put options [1 contract is 100 shares]

Exercise PriceExercise DateOption PriceChange %Contracts Traded
$US172.50August 16, 2019$US1.4023.917
$US175.0August 16, 2019$US2.3535.811
$US175.0August 23, 2019$US2.9018.49

Price/Moving Average Price:

+ The price to 200-day MAP ratio is 0.97.

2.3 High Price Performance Indicators and rank of Norfolk Southern in the NYSE market:

DescriptionNSC ValueRank In Market
Today's Trading Turnover$US285.5 millionIn Top 6%
MCap$US46 billionIn Top 7%

Oversold/Bullish Signals:

+ The Relative Strength Index (RSI) of 24.8 has breached the oversold line of 30, suggesting the price decrease of 24.8% in the last 14 days is unusually high.

+ The stock is oversold according to the Williams % R indicator of -93.8, suggesting the price is close to its 14-day low of $US173.39.

RECAP FROM PREVIOUS REPORTS (UPDATED AT THE LAST PRICE OF $US174.54):

SECTION 3 THE PAST WEEK

3.1 Snapshot: Norfolk Southern stock was down $US5.39 or 3.0% in the past week. Volume in the week was 0.9 times average trading of 9.3 million shares. It underperformed the S&P 500 index in 4 out of 5 days.

DayNorfolk SouthernClose price [USD]Price change %Relative change %Comment
FridayDecreases177.7-1.6-0.9Steepest Fall
ThursdayIncreases180.510.8-1.1Top Rise
WednesdayFalls in 4 out of last 5 days179.03-1.3-1.4Price fall on falling relative strength
TuesdayIncreases181.360.8-0.5Oversold: close to 14-day low
MondayFalls in 4 out of last 5 days179.93-1.11.8VI*=1.8

[Volume Index (VI); 1 is average]

3.2 Stock Buzz: Past Week

News DateHeadlinePublisher
Aug 06Norfolk Southern Corp. (NYSE:NSC) Shares Sold by Mn Services Vermogensbeheer B.V.Dispatch Tribunal
Aug 06Hartford Investment Management Co. Acquires 298 Shares of Norfolk Southern Corp. (NYSE:NSC)theenterpriseleader.com

3.3 PEOPLE'S NEWS:

August 10 Norfolk Southern Independent Director Amy E. Miles' value of investment decreases by $277,539 in the past quarter

Norfolk Southern (NYSE:NSC) Independent Director Amy E. Miles holds 12,000 shares worth US$2.1 million at the last price of US$177.70, a fall in value by US$277,539 (11.5%). Three months ago Amy E. Miles held the same number of shares and the price was US$201.69.

3.4 Volatility:

+ Norfolk Southern is at a discount of 16.7% to its 12-month high of $US209.49 on April 24. It is also at a premium of 27.7% to the 12-month low of $US136.65 on December 26, 2018.

SECTION 4 ONGOING BULLISH PARAMETERS

4.1 Growth:

Quarterly Trend in Revenue, Net Profit and Net Profit Margin:

+ Net Profit margin is positive and has seen consecutive rises in recent quarters. [All figures in %]

Qtr-endedRevenue GrowthNet Profit GrowthNet Profit Margin
Jun 19 [Q2]36.624.7
Mar 19 [Q1]-1.9-3.623.8

4.2 Low Debt Indicators:

+ Total Liabilities/EBITDA of 4.6 is less than the Joseph Piotroski benchmark of 5.

4.3 High Performance Indicators and rank of Norfolk Southern in the NYSE market:

DescriptionValueRank In Market
EBITDA Margin %39.9In Top Quartile
Return on Equity [ROE] %17.4In Top Quartile

4.4 Past 4 Quarters Sequential EPS growth averaged 2.0%:

Quarterly ReportEPS ($US)Growth %
Q2/20192.727.5
Q1/20192.53-1.6
Q4/20182.571.2
Q3/20182.540.8

The most recent quarter (Q2/2019) showed a rise of 7.5% in sequential growth of Quarterly EPS. There have been three rises and one decline in the past 4 quarters. Average quarterly growth in the past 4 quarters was muted at 2.0%.

4.5 Moving Annual Return (Past 5 years)

Based on a dynamic start date of 5 years ago, the real rate of return has averaged 17.6%. The Moving Annual Return has been positive in 4 of the last 5 years. An investment a year ago in NSC would have produced a return of 5.5%.

NSCClose (USD)Dividends (USD)Capital Gain / (Loss) %% YieldAnnual Return %
Aug 12174.543.463.52.15.5
1 Yr ago168.662.8548.52.551.0
2 Yrs ago113.563.0131.63.535.1
3 Yrs ago86.292.3610313.0
4 Yrs ago78.422.32(19.1)2.4(16.7)

Close 5 years ago $US96.91

4.6 Increased VWAP

Past five years, 12 months ended Aug 12 (USD)

YearHigh PriceVWAPLow Price
2019209.49175.3136.65
2018171.1138.16112.9
2017121.15107.2185.15
201695.4779.9962.37
2015113.7498.2977.28

In the past five years Volume Weighted Average Price (VWAP) has increased by 78.4% to $US175.30. Based on a dynamic start date of five years ago, there have been declines in VWAP in 2 out of 5 years.

4.7 Increased Average Daily Turnover

Past five years, 12 months ended Aug 12 (USD million)

YearAverage Daily Turnover
2019324.8
2018226.3
2017188.2
2016159.1
2015187.3

In the past five years, average daily share turnover has increased 73.4% to $US324.8 million. This suggests increased liquidity.

4.8 Decrease in Insider Selling

In the past 5 years a total of 394,570 Norfolk Southern shares worth $US47.5 million were sold by insiders. Based on a dynamic start date of 5 years ago, insider selling has averaged 78,914 shares per year. In the past year, insiders sold 48,052 shares, a decrease of 20.1% from the previous year.

SECTION 5 ONGOING BEARISH PARAMETERS

5.1 Performance:

+ Return on Equity 17.4% [18.5%].

+ Return on Assets 7.4% [7.9%].

+ Return on Capital Employed 10.3% [11.0%].

+ As per the Du Pont analysis, Return on Equity [ROE] of 17.4% is lower than sector average of 18.5%. ROE is computed as net profit margin of 23.3% times asset turnover [sales/assets] of 0.32 times leverage factor [total assets/shareholders' equity] of 2.4.

5.2 High Debt Indicators:

+ The debt to equity ratio of 72.5% is above a safe benchmark figure of 70%. Moreover, it has deteriorated from 60.1% a year ago.

5.3 Past 5 years Annual EPS growth:

Annual ReportEPS ($US)Growth %
20189.58-48.9
201718.76231.4
20165.6611.0
20155.1-20.2
20146.395.8

Average Annual Compounded rate of growth in EPS for the 5 years was 9.7%. There have been three rises and two declines in the past 5 years.

5.4 Declining ADVT past five years

Avg. Daily Volume Traded 12 months ended Aug 12, million shares

YearADVT
20191.9
20181.6
20171.7
20162.0
20151.9

In the past five years, Average Daily Volume of Trading (ADVT) has decreased 2.0% to 1.9 million shares.

5.5 Turnover Rate & Turnover Period:

+ The turnover rate in the 12 months to date was 178.1% (or a turnover period of 6 months). The average length of ownership of the stock is 0.9 times the average holding period of 7 months for stocks in the S&P 500 Index.

SECTION 6 NORFOLK SOUTHERN REPORTED BUYING AND SELLING

6.1 Institutional Buying and Selling Quarter Ended March 31

Total reported Institutional buying = 13,000,484 shares

Total reported Institutional selling = 14,481,174 shares

Net reported institutional selling = 1,480,690 shares

6.2 Reported Holdings of Institutions as at Mar 31, 2019

Total = 172,966,920 shares

Market Value = $US32 billion

Institutions hold 65.7% of Issued Shares.

SECTION 7 NORFOLK SOUTHERN SUMMARY FINANCIALS

7.1 Dividend History

Trailing 12 months dividend for the 12 months ended August 12 has improved from $US2.32 in 2015 to $US3.46 in 2019; there were 1 decline in the past 5 years. Dividends were up 21.4% for the 12 months ended August 12 from $US2.85 in 2018 to $US3.46 in 2019.

7.2 Financials Summary

Year endedDec 2018Dec 2017Dec 2016
Sales (USD)11.5B10.6B-
Pretax (USD B)3.53.12.6
Net (USD B)2.75.41.7
EPS (USD)9.5818.765.66

+ Net profit was down 50.7% from US$5.4 billion in 2017 to US$2.7 billion in 2018.

+ Earnings Per Share (EPS) was down 48.9% from $US18.76 to $US9.58.

7.3 Quarterly Report: Key Parameters

Quarterly Report Analysis Q2 2019: Norfolk Southern EPS increases 8%

Norfolk Southern (NYSE:NSC), announced EPS of $US2.72 for the quarter-ended 30 June 2019 [Q2/2019], up 7.5% sequentially from $US2.53 in the previous quarter [Q1/2019].

Quarter-ended30 Jun [Q2/2019]31 Mar [Q1/2019]31 Dec [Q4/2018]
EPS, $US2.722.532.57
Sequential growth in EPS %7.51-1.561.18
Revenue$US2.9b$US2.8b$US2.9b
Sequential growth in Revenue %2.99-1.93-1.73
Net Profit$US722m$US677m$US702m
Sequential growth in Net Profit %6.65-3.560.0

Compared with the previous corresponding period [PCP; Q2/2018], year-over-year [y.o.y.] EPS was up 7.9%, Revenue was up 0.9% and Net Profit was up 1.7%.

Quarter-ended30 Jun [Q2/2019]30 Jun [Q2/2018]
EPS, $US2.722.52
PCP growth in EPS %7.9446.51
Revenue$US2.9b$US2.9b
PCP growth in Revenue %0.939.9
Net Profit$US722m$US710m
PCP growth in Net Profit %1.6942.86

7.4 Annual Report: Key Parameters

FY2018 Annual Report: Norfolk Southern profits hit by 51% fall

Norfolk Southern (NYSE:NSC) reported net profit for the year-ended 31 December 2018 of $US2.7b, down 50.7% from $US5.4b in the previous year.

Major changes compared with previous year:

Favourable Changes:

- Total revenue up 8.6% from $US10.6b to $US11.5b

- EBIT Margin up from 29.6% to 30.3%

- EBIT to total assets up from 8.8% to 9.6%

- Profit before tax to Revenues up from 29.6% to 30.3%

- Sales and marketing expenses to Revenues down from 28.2% to 25.5%

- Long-term investments to Total Assets up from 8.3% to 8.6%

- Total Liabilities to EBITDA of 4.6 compares favourably with the Joseph Piotroski benchmark of <5. Unfavourable Changes:

- Net profit slumps 50.7% from $US5.4b to $US2.7b

- Debt to Equity up 21.7% from 0.6 to 0.7

- Total liabilities to Total assets up 7.4% from 0.5 to 0.6

- Current ratio down 14.3% from 0.8 to 0.7

- Retained earnings to total assets down from 38.7% to 35.5%

- Total current assets to Total Assets down from 6% to 5.1%

- Total Liabilities to Operating Cash Flow of 5.6 compares unfavourably with the Joseph Piotroski benchmark of <4. However, it has improved by 5.9% from the previous year's ratio of 6.0.

- Net tangible assets per share down 2.7% from $US56.35 to $US54.83

Note:

- Total revenue to total assets steady at 0.3

- Depreciation to Revenues down from 10% to 9.6%

- Total non-current assets to Total Assets up from 94% to 94.9%

- Other non-current assets to Total Assets up from 85.6% to 86.3%

- Current Inventory to Total Assets steady at 0.6%

Annual Report [Year-on-year comparison: 2018 vs 2017]

Company Name : Norfolk Southern Corp. (NSC)
December 3120182017Change
Description$US m$US m(%)
Total Revenue11,45810,551Up 8.6
EBITDA4,5714,183Up 9.3
Depreciation1,1021,055Up 4.5
EBIT3,4693,128Up 10.9
Pre-Tax Profit/(Loss)3,4693,128Up 10.9
Profit/(Loss) after Tax2,6665,404Slumps 50.7
Working Capital(729)(396)Deterioration 84.1
Current Assets1,8622,149Down 13.4
Current Liabilities2,5912,545Up 1.8
Shareholders' Funds15,36216,359Down 6.1
Total Liabilities20,87719,352Up 7.9
Total Assets36,23935,711Up 1.5
Current Debt585700Down 16.4
Non-Current Debt10,5609,136Up 15.6
Total Debt11,1459,836Up 13.3
Operating Cash Flow3,7263,253Up 14.5
Net Assets15,36216,359Down 6.1
Net Tangible Assets15,36216,359Down 6.1
AuditorKPMG LLP 

Year-on-year comparison of Per Share figures

December 3120182017Change (%)
Description$US $US
EBIT12.510.9Up 15
EBITDA16.514.5Up 13.3
Shareholders' Funds55.356.8Down 2.6
Total Liabilities75.267.2Up 11.8
Total Assets130.5124Up 5.2
Current Debt2.12.4Down 13.4
Non-Current Debt3831.7Up 19.8
Total Debt40.134.2Up 17.5
Net Tangible Assets54.856.4Down 2.7

Year-on-year comparison of Performance Ratios

December 3120182017Change (%)
Return on Equity (%)17.433Down 47.3
Return on Assets (%)7.415.1Down 51
Total debt to net tangible assets (%)72.560.1Up 20.6
Total Liabilities to EBITDA (Down 1.3% from 4.63 to 4.57)4.64.6Down 1.3
Total Liabilities to Operating Cash Flow5.66Down 5.9
Debt/Equity0.70.6Up 21.7
Total Liabilities/Total Assets0.60.5Up 7.4
Current Ratio0.70.8Down 14.3
Common Size Ratios by Assets %
Total non-current assets to Total Assets 94.9 94.0 Up 1.0
Other non-current assets to Total Assets 86.3 85.6 Up 0.8
Long-term investments to Total Assets 8.6 8.3 Up 3.0
Total current assets to Total Assets 5.1 6.0 Down 15.3
Current Inventory to Total Assets 0.6 0.6 Down 3.5
Common Size Ratios by Revenues %
Profit before tax to Revenues 30.3 29.6 Up 2.2
Sales and marketing expenses to Revenues 25.5 28.2 Down 9.7
Depreciation to Revenues 9.6 10.0 Down 4.0
Tax expenses to Revenues 7.0 (21.6) Up 132.5

Five-year record of growth and performance:

In the last 5 years EBITDA averaged $US4.3B and Net Profit averaged $US2.7B.

DescriptionAnnual ($US B)5-year Avg ($US B)5-year CAGR %
EBITDA4.64.30.7
Operating Profit3.53.3(0.1)
Net Profit2.72.76.9

Five-year record of EBITDA, Operating Profit, Net Profit, ROE, ROA and ROCE

In 2018 Net Profit Margin of 23.3% was below its 5-year Avg of 26.6% (All Figures in %)

Description20185-year Avg
EBITDA Margin39.939.5
Operating Profit Margin30.330
Net Profit Margin23.326.6
Return on Equity17.418.5
Return on Assets7.47.6
Return on Capital Employed10.310.1

SECTION 8 CORPORATE PROFILE

8.1 Activities

Norfolk Southern Corporation (Norfolk Southern) controls a freight railroad, Norfolk Southern Railway Company. Norfolk Southern Railway Company is primarily engaged in the rail transportation of raw materials, intermediate products and finished goods primarily in the southeast, east and Midwest and, via interchange with rail carriers, to and from the rest of the United States. Norfolk Southern also transports overseas freight through several Atlantic and Gulf Coast ports. The Company provides logistics services and offers an intermodal network in the eastern half of the United States. Norfolk Southern and CSX Corporation (CSX) jointly own Conrail Inc. (Conrail), whose primary subsidiary is Consolidated Rail Corporation (CRC).

8.2 Top Management

The chief executive officer and chairman is James A. Squires and the chief financial officer is Cynthia C. Earhart.

8.3 Issued Capital and MCap

Based on 263,407,000 issued shares the market capitalisation is $US46 billion.

8.4 Vanguard Total World Stock ETF 7701:

The stock was one of 7701 global stocks selected by Vanguard Total World Stock ETF (VT) who sold 1,241 shares in the period May 31, 2019 to Jun 30, 2019 worth $US-243,590 at an estimated Volume Weighted Average Price (VWAP) of $US196.285. As at Jun 30, 2019, the Vanguard Total World Stock ETF held 87,395 shares worth $US17,154,328 or 0.1% by value of the ETF's portfolio [Ranked 161 out of 7701 by value and 73 out of 1092 for NYSE].

COMPANY IDENTIFIERS

Contact: +1 757 629-2680

Physical Address: Three Commercial Place, Norfolk, VA,23510-2191

State/Province/Country: VA [VA], United States

Country of Incorporation: United States

Industry [NAICS]: 482111

Exchange: New York Stock Exchange

ISIN: US6558441084

N:NSC; NSC.N

PermID: 4295904619

RIC: NSC.N

CIK: 702165

CUSIP: 655844108

Norfolk Southern Corp

Source: www.BuySellSignals.com