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Norfolk Southern Corp. (NYSE:NSC - News), one of the leading rail transportation companies in the U.S., is slated to release its fourth quarter 2011 results on Tuesday, January 24, after the closing bell. The current Zacks Consensus Estimate for the fourth quarter is pegged at $1.40 per share, representing an annualized growth of 39.74%.
Third Quarter Flashback
Norfolk’s third quarter financial results surpassed the Zacks Consensus Estimate and came in above the year-ago level backed by strong pricing and shipment across all segments.
Revenue was in line with the Zacks Consensus revenue estimate and grew 18% year over year to $2.9 billion buoyed by higher revenue per unit and fuel price recoveries.
Agreement of Estimate Revisions
Estimates for the fourth quarter have reflected a positive bias over the last 30 days. Over the last 30 days, out of 23 analysts, 11 analysts moved upward while only three made downward revisions.
Similar trend has been witnessed for fiscal 2011 and 2012. For fiscal 2011, out of 23 analysts, 10 analysts increased their estimates in last 30 days but three decreased the same. For fiscal 2012, out of 25 analysts, six analysts moved upward while two moved in the opposite direction.
Similar to other railroads like CSX Corporation (NYSE:CSX - News), we believe that Norfolk’s upward projections reflect the positive sentiment of the market regarding the railroad stocks given favorable pricing trend. We expect this momentum to continue in fourth quarter and beyond based on growing demand for rail intermodal services. In the domestic and premium intermodal markets, higher pricing and shipments will be driven by continued truckload conversions, and pricing improvements. In addition, widespread interest in intermodal as a less carbon-intensive alternative to truck will aid market share gains in intermodal along with new business opportunities.
Product wise, agriculture and automotives look attractive. Agricultural products are likely to benefit from the growing ethanol network. To improve services and productivity in agriculture business, management purchased 2,100 new grain hoppers in October. In the automotive category, a projected gain of 14% in light vehicle production will boost automotive production to approximately 14 million vehicles in fiscal 2011. Additionally, the automobile assembly plant in Chattanooga, Tennessee, will also drive further shipments. Further, the recovery of Japanese suppliers after the twin disasters in March is also likely to aid automotive volumes.
The company’s coal segment has also exhibited significant growth in the past quarter of 2011 and remains a significant revenue driver. However, an expected downfall in the export coal demand will likely result lackluster coal shipment compared to the sequentially preceding quarter.