Norfolk Southern Corporation (NSC) is a leading North American transportation provider with approximately 20,000 route miles in 22 states and the District of Columbia.
The company generated about 60% of its revenue from merchandise—including chemicals, agricultural products, metals, automotive, and consumer products—In 2019. The remaining revenue came from intermodal (25%), which involves the transportation of domestic and international containers and trailers, and coal (15%).
Weathering the COVID-19 Storm
Norfolk Southern’s fourth quarter revenue fell 4.5% to $2.6 billion but exceeded consensus analyst estimates by $30 million. While the COVID-19 pandemic disrupted rail activity, volumes have picked up since hitting bottom in May 2020. Margins are also on the rise, with the company’s $2.64 in Q4 GAAP EPS coming in 15 cents higher than analyst estimates.
Argus analyst John Eade believes that the company will be a strong performer following the pandemic given that it’s a critical link in an increasingly important domestic supply chain. The analyst also believes that its strong balance sheet and experienced management team put it in a good position to weather the current downturn.
The company raised its quarterly dividend by 5.3% to $0.99 per share, which represents a 1.7% forward yield, while announcing an increase to its long-term target dividend payout ratio to a range of 35% to 40% of net income. The dividend is payable on March 10, 2021 to shareholders on record as of February 5, 2021.
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