NSC – Market expectations are for peak Uniform ROA, but management may be concerned about their efficiency, revenue, and expenditures

• Norfolk Southern Corporation (NSC:USA) currently trades above historical averages relative to UAFRS-based (Uniform) Earnings, with a 20.6x Uniform P/E. At these levels, the market has somewhat bullish expectations for the firm, while management may be concerned about their fuel efficiency initiatives, revenue per unit, and freight car expenditures
• Specifically, management is confident they have realized higher expenditures due to removing freight cards from service, and they may be concerned about the level of service they provide customers. Furthermore, they may lack confidence in their ability to effectively invest in fuel efficiency and continue cutting gross ton miles from their routes. Finally, they may lack confidence in their ability to continue driving T&E productivity through 2019, and they may be concerned about the sustainability of revenue per unit improvement.