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Last update on 2024-06-06

Norfolk Southern (NSC) - Piotroski F-Score Analysis for Year 2023 (Final Score: 5/9)

Piotroski F-Score Analysis for Norfolk Southern (NSC) in 2023. Assessing profitability, liquidity, and operating efficiency for this year's final score of 5/9.

Knowledge hint:
The Piotroski F-Score is a number between 0 to 9 which reflects the strength of a company's financial position. It is based on 9 criteria involving profitability, liquidity, and leverage. This model helps investors identify stocks that are strong, undervalued investments.
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Short Analysis - Piotroski Score: 5

We're running Norfolk Southern (NSC) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

Criteria
Company has a positive net income?
1
Company has a positive cash flow?
1
Return on Assets (ROA) are growing?
0
Operating Cashflow are higher than Netincome?
1
Leverage is declining?
0
Current Ratio is growing?
1
Number of shares not diluted?
1
Cross Margin is growing?
0
Asset Turnover Ratio is growing?
0

Norfolk Southern (NSC) underwent a Piotroski F-Score analysis and scored a 5 out of 9 based on criteria that evaluate its profitability, liquidity, and operating efficiency. The analysis breaks down the company's financial profile into nine criteria. NSC scored positively in terms of net income, cash flow from operations, operating cash flow higher than net income, current ratio, and shares not diluted. However, it did not score in return on assets, leverage, gross margin, and asset turnover because of lower efficiency and increased financial risk.

Insights for Value Investors Seeking Stable Income

With a Piotroski F-Score of 5, Norfolk Southern (NSC) stands in the middle range, indicating some solid financial strengths and some areas that need improvement. For potential investors, it's worth investigating further especially if they value consistent profitability and cash flow generation. However, they should be cautious about the declines in asset efficiency, gross margin, and increasing leverage. This mixed profile suggests that while NSC shows good signs of financial health and profitability, there are underlying operational inefficiencies and increased risk that might affect future performance.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Profitability of Norfolk Southern (NSC)

Company has a positive net income?

Net income is a crucial measure of a company's profitability. A positive net income implies the company is generating profit.

Historical Net Income of Norfolk Southern (NSC)

The net income for Norfolk Southern (NSC) in 2023 stands at $1,827,000,000, indicating a positive profit. This is in line with historical trends as the company has consistently reported positive net income over the past 20 years, except in 2016 when notable fluctuations were observed due to a significant rise in 2017, attributed possibly to one-time events or restructuring. This positive trend is instrumental for shareholders and analysts, as it reflects sustainable profitability which could translate to potential growth in shareholder wealth. Thus, Norfolk Southern earns 1 point for net income.

Company has a positive cash flow?

The Cash Flow from Operations (CFO) criterion checks if a company’s operating cash flow is positive, indicating a company’s ability to generate sufficient cash from its core business activities.

Historical Operating Cash Flow of Norfolk Southern (NSC)

For Norfolk Southern (NSC), the CFO for 2023 stood at $3.179 billion, marking a positive trend. This favorable outcome allows us to add 1 point for this criterion. Observing the last 20 years of data, NSC has consistently maintained positive CFO, fluctuating between $1.05 billion in 2003 and peaking at approximately $4.255 billion in 2021. Notably, the CFO generated in 2023 is notably lower than that of 2021 but still substantially positive. This persistence in positive CFO demonstrates NSC’s reliability in generating cash from its operations, reflecting robust financial health despite market fluctuations.

Return on Assets (ROA) are growing?

Change in Return on Assets (ROA) is crucial as it measures a company's profitability relative to its total assets. A higher ROA indicates more efficient use of assets in generating earnings.

Historical change in Return on Assets (ROA) of Norfolk Southern (NSC)

In 2023, Norfolk Southern's ROA is 0.0454, a decrease from 0.0845 in 2022. This declining trend in profitability relative to its assets is concerning as it suggests less efficient asset utilization. Over the past 20 years, Norfolk Southern's ROA has varied but has largely been consistent, excluding economic downturns. Compared to the industry median ROA, Norfolk Southern's figures lag significantly, especially in recent years where the industry median has stayed above 0.24. This declining trend in 2023 is thus a negative indicator, and adds zero points in the Piotroski Analysis for Norfolk Southern.

Operating Cashflow are higher than Netincome?

Operating Cash Flow higher than Net Income: This criterion measures the quality of earnings. Higher operating cash flow compared to net income indicates a high-quality earnings, as it means the company is generating enough cash.

Historical accruals of Norfolk Southern (NSC)

In 2023, Norfolk Southern (NSC) reported an Operating Cash Flow of $3.179 billion and a Net Income of $1.827 billion. Since the Operating Cash Flow is higher than the Net Income, we assign this criterion a point. This trend is a positive indicator of financial health, as it suggests that NSC is proficient at converting its net income into cash. Reviewing the historical data, we observe that NSC has maintained a healthy operating cash flow in comparison to net income over the years, particularly notable in years like 2019 and 2012 with high levels of cash flow relative to net income. Overall, this trend is good, signalling consistent and high-quality earnings performance.

Liquidity of Norfolk Southern (NSC)

Leverage is declining?

Change in Leverage measures the degree to which a firm is financing its operations through debt. It is pivotal for understanding financial risk.

Historical leverage of Norfolk Southern (NSC)

For Norfolk Southern (NSC), the leverage increased from 0.3805 in 2022 to 0.4192 in 2023, indicating an uptick. This increase suggests higher financial risk as the company is using more debt to finance its operations. Over the last 20 years, the leverage value has varied, but this recent rise breaks a two-decade pattern of relatively stable or slightly increasing leverage. Historically, NSC has maintained more conservative financing with lower leverage, which may be a cause for concern for investors wary of escalating financial risk. Thus, no point is awarded in this category as increased leverage is viewed negatively based on the Piotroski analysis criteria.

Current Ratio is growing?

The Current Ratio is a measure of a company's ability to pay short-term obligations with its short-term assets.

Historical Current Ratio of Norfolk Southern (NSC)

In 2023, Norfolk Southern (NSC) achieved a Current Ratio of 1.2428, which shows an increase from 0.7576 in 2022. This rise signifies improved liquidity, aligning positively with the criterion as it demonstrates improved financial stability compared to last year. Thus, one point is added for this criterion. Historical analysis over the past 20 years reveals a fluctuating trend. In the 2023 fiscal year, the Current Ratio of NSC rose above its levels from 2022 for the first time in several years. Historically, the 1.2428 figure in 2023 hasn’t been consistently high and has underperformed compared to the industry’s median ratios since 2021. Nevertheless, the upward movement for 2023 is seen as positive when analyzed within the criterion’s scope.

Number of shares not diluted?

Change in Shares Outstanding: This criterion examines whether there has been an increase or decrease in the company’s outstanding shares over the period. A decrease in outstanding shares is considered favorable.

Historical outstanding shares of Norfolk Southern (NSC)

The Outstanding Shares of Norfolk Southern (NSC) have decreased from 234,800,000 in 2022 to 226,900,000 in 2023. This change represents a reduction in the number of outstanding shares by 7.9 million. This trend is favorable according to the Piotroski F-Score analysis as it indicates that the company might be engaging in share buybacks, which typically suggests management's confidence in the firm’s performance and a direct return of value to shareholders over the long term. Historically, Norfolk Southern’s outstanding shares have been on a downtrend for the past two decades, decreasing from 390,510,949 in 2003 to 226,900,000 in 2023.

Operating of Norfolk Southern (NSC)

Cross Margin is growing?

Criterion evaluates profitability efficiency; a rising margin shows improved cost control or pricing.

Historical gross margin of Norfolk Southern (NSC)

For Norfolk Southern (NSC), the Gross Margin decreased from 0.4111 in 2022 to 0.3648 in 2023. This is a negative trend as it indicates reduced profitability and efficiency. To put this into perspective, over the last 20 years, NSC's Gross Margin has fluctuated, with peaks like 0.6525 in 2009 and significant drops such as a low of 0.3226 in 2015. Compared to the industry median, which was 0.3176 in 2023, Norfolk Southern's margin of 0.3648, although lower than its past, still stands above the industry's median, suggesting relative competitive strength despite declining efficiency from last year. Consequently, no point is awarded for this criterion.

Asset Turnover Ratio is growing?

Asset Turnover measures a company's efficiency in using its assets to generate sales.

Historical asset turnover ratio of Norfolk Southern (NSC)

The Asset Turnover for Norfolk Southern (NSC) has decreased from 0.3294 in 2022 to 0.3019 in 2023, which is not a good sign for the company's operational efficiency. Asset Turnover ratio is pivotal as it indicates how effectively the company is utilizing its assets to produce revenue. Historically, analyzing the last 20 years, NSC's Asset Turnover fluctuated with a notable rise in 2008 at 0.4066 and a dip in 2020 at 0.258. The current decrease reflects a -8.34% drop from the previous year, suggesting less efficient use of resources in generating sales. Hence, it doesn't add any points in Piotroski Analysis.


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