Atlanta, Georgia – Norfolk Southern Corporation, a major Class I railroad in North America, is facing challenges that have impacted its performance in recent years. Despite struggles with slowing growth rates, margin pressures, labor issues, and a significant train derailment in Ohio costing the company billions, there is potential for a turnaround.

Historically, Norfolk Southern’s stock performance has been aligned with the market, but a divergence began in early 2023 as the company started to lag behind. Its revenue and EBITDA growth rates have slowed significantly, with recent figures showing minimal growth over the last ten and five years. The company had been a top performer until the financial crisis, after which it struggled to keep up with competitors like CP Rail and Union Pacific.

In 2017, Norfolk Southern implemented ‘precision railroading’ to increase efficiency, but faced challenges with margin pressures in 2022, primarily due to labor-related issues and declining intermodal volumes. However, recent improvements in volume growth provide hope for a turnaround, even amidst ongoing margin pressures.

Despite a decrease in quarterly revenues in Q1’24, Norfolk Southern saw a 4% increase in volumes driven by intermodal growth. While challenges with fuel surcharges and intermodal revenues persist, the company anticipates improvements in margins in the coming quarters through cost-cutting measures and efficiency enhancements.

Looking ahead, Norfolk Southern aims for enhanced profitability as volumes continue to rise. Analysts have a positive outlook on the company, with a majority of ‘buy’ ratings and an average price target suggesting potential upside. The company’s valuation metrics also indicate attractiveness compared to peer groups, making it a compelling investment opportunity.

Potential risks include macroeconomic factors and lingering impacts from the derailment incident. However, with a focus on cost reductions, volume growth, and operational improvements, Norfolk Southern has the potential for significant revenue growth in the medium term. As such, the company’s stock is viewed favorably as a ‘buy’ recommendation.