Norfolk Southern (NSC) PT Raised to $244 at Stifel

Stifel analyst Benjamin Nolan raised the price target on Norfolk Southern (NYSE: NSC) to $244.00 (from $233.00) while maintaining a Hold rating.

The analyst commented: 'Norfolk Southern announced preliminary results this quarter revealing an adjusted 69.9% OR, which is not good by any measure. While nobody was expecting the first quarter's results to be glamorous, it does bring uncertainty on the railroad's ability to achieve the 400-500 bps improvement needed for its near-term OR target of 64-65% by the second half of this year. While there is clearly work to do, in the long term, the proxy battle is, at the very least, pushing the company to deliver improved results one way or the other and set meaningful targets. In the previous quarter's earnings call, the company's margin outlook was for 100-150 bps of annual OR improvement, which has now been replaced with significantly more aggressive targets to close that gap to peers. We expect there is a reasonably higher probability of success in Ancora's bid to replace the board and management, and this would be relatively well-received by the market, although some of this upside is already priced into the shares, given the relative out-performance YTD in 2024. However, in the event the proxy fight is unsuccessful, we believe the shares would give up much of their relative gains. Currently, the company is trading at 21x our 2024 EPS, relative to CSX which is at 18x, in large part because the market is already giving them credit for a turnaround that has been hoped for but not delivered for decades. While clearly there could be upside from a turnaround, in the near term, we view the risk-reward as not compelling.'

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