NSC – Market expectations are for Uniform ROA to sustain peaks, but management may be concerned about volume, locomotives, and costs

• Norfolk Southern Corporation (NSC:USA) currently trades near corporate averages relative to UAFRS-based (Uniform) earnings, with a 22.0x Uniform P/E. At these levels, the market has expectations for profitability to sustain peaks, but management may be concerned about volume declines, excess locomotives, and cost reduction initiatives
  
  

• Specifically, management may lack confidence in their ability to improve their operating ratio and bottom-line growth, increase operating leverage, and mitigate the impact of declines in volume and shipment counts. In addition, they may have concerns about excess locomotives in their fleet, their ability to sideline and dispose locomotives, and their ability to idle and convert hump terminals. Moreover, they may lack confidence in their ability to sustain cost reductions through fuel efficiency gains and lower fuel consumption, moderate capex growth, and maintain train weight improvements. Furthermore, they may be exaggerating their superior service and improved cost structure, their business resiliency through market disruptions, and the progress of their DC to AC locomotive fleet upgrades