Nomura Securities Starts Norfolk Southern (NSC) at Neutral

Nomura Securities initiates coverage on Norfolk Southern (NYSE: NSC) with a Neutral rating and a price target of $119.00.

Analyst Matt Troy commented, "A high quality story with one of the industry’s best management teams, NSC's disciplined longer-term view when investing in its operations and willingness to walk away from unprofitable business has allowed this blue chip railroad to consistently generate among the best ROIC and free cash flow of the Class I railroads. Specifically, in an industry that has historically struggled to earn its cost of capital, NSC, through more efficient capital deployment, has posted returns exceeding the industry’s cost of capital in two of the last four years (with a four-year average of 11.6%). Yet after leading the Eastern railroads out of the doldrums in domestic coal, momentum shifted to competitor CSX in 2014, as customer and regional stockpile-specific mix issues made its franchise a better later cycle play on the stabilization in domestic coal. Specifically, after recovering sooner out of the 2012-2013 trough, NSC’s coal traffic declined 6% YTD, while CSX’s coal grew 5%. With sluggish coal traffic set to dampen NSC’s margins and EPS into early 2015, we think investors have both time and opportunity to pick better entry points in this high quality name."

For an analyst ratings summary and ratings history on Norfolk Southern click here. For more ratings news on Norfolk Southern click here.

Shares of Norfolk Southern closed at $104.08 yesterday.

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