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US Equities · Finance research note

NSC — Norfolk Southern

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2. Company Fundamentals

2.1 Competitiveness

Metric Value
Operating Margins 32.26%
Profit Margins 21.91%
Return on Equity 17.61%
Return on Assets 5.89%
Free Float 0.22B
Dividend Yield 1.73%
Short Int % Utilisation 3.64%

2.2 Growth

Metric Value
Revenue Growth 0.2%
Free Cash Flow 1.3B
EBITDA 15.34 (Ratio)
Enterprise Value 85.68B
EV/Revenue 7.03
EV/EBITDA 15.34

Revenue growth of 0.2% suggests mature or challenged top-line momentum.

2.3 Management

Role Metric
Consensus Rating N/A

2.4 Return

Metric Value
Expected Return (Ann.)* 23.94%
Risk / Std Dev (Ann.)* 20.47%
1-Year Price Return* 21.22%

Latest Market Data (as of 2026-08-14, US Eastern time):

Metric Value
Last Price $334.41
52-Week Range $268.23 – $358.60
Observation Count 251 trading days

The return and risk statistics use daily adjusted closes from the retrieved one-year series and annualise daily moments using 252 trading days. The last price is the latest regular-market price reported for the stated date. Source: Yahoo Finance market data.

DuPont Model Analysis

The DuPont model decomposes return on equity (ROE) into three operating and capital-structure drivers:

ROE = Net Margin × Asset Turnover × Equity Multiplier

The comparison uses the latest two comparable annual periods available for the issuer, with reported statement amounts shown in US$. Revenue and net income are income-statement flows; total assets and shareholders’ equity are year-end balance-sheet figures. This is a simplified year-end-balance DuPont comparison rather than an average-balance ROE calculation.

DuPont component Calculation FY2025 FY2024
Revenue Reported revenue $12.18B $12.12B
Net income Reported net income $2.87B $2.62B
Total assets Year-end reported balance $45.24B $43.68B
Shareholders’ equity Year-end reported balance $15.55B $14.31B
Net margin Net income ÷ revenue 23.56% 21.60%
Asset turnover Revenue ÷ total assets 0.2693x 0.2775x
Equity multiplier Total assets ÷ shareholders’ equity 2.9096x 3.0534x
ROE Net margin × asset turnover × equity multiplier 18.46% 18.31%

Source: Yahoo Finance annual statements. Values are based on the two latest comparable annual periods returned by the source; fiscal period labels use the statement period-end year.

2.5 FCFF DCF Valuation

Valuation basis: This research model follows a five-year, unlevered FCFF DCF. It starts from reported annual operating inputs, forecasts revenue and operating cash conversion under an explicit mechanical policy, discounts FCFF at WACC, applies a Gordon-growth terminal value, and bridges enterprise value to an indicative common-equity value per share. It is an analytical estimate rather than a recommendation or personalised target price.

Step 1 — Forecast Operating Profit and NOPAT

Reported operating input Value
Revenue $12.18B
Prior annual revenue $12.12B
EBIT $4.46B
Tax rate 21.60%
NOPAT = EBIT × (1 − tax rate) $3.49B
Forecast start-growth basis 0.47%
Forecast policy latest reported annual revenue growth, bounded to -10.00% / 15.00%

Step 2 — Calculate FCFF

Current FCFF building block Value
NOPAT $3.49B
Add: depreciation & amortisation $1.39B
Less: capital expenditure -$2.20B
Less/(add): working-capital cash-flow movement $301.00M
Current unlevered FCFF $2.98B

Explicit FCFF forecast

Forecast year Revenue growth NOPAT D&A Capex Change in NWC FCFF Present value
1 0.47% $3.51B $1.40B -$2.21B $302.42M $3.00B $2.86B
2 0.98% $3.55B $1.41B -$2.03B $305.37M $3.23B $2.80B
3 1.49% $3.60B $1.43B -$1.85B $309.91M $3.49B $2.74B
4 1.99% $3.67B $1.46B -$1.68B $316.08M $3.77B $2.69B
5 2.50% $3.76B $1.50B -$1.50B $323.98M $4.09B $2.64B

Step 3 — Determine the Discount Rate (WACC)

WACC input Value
Risk-free rate 4.71%
Equity risk premium assumption 5.50%
Beta 1.27
Cost of equity 11.69%
Pre-tax cost of debt 4.55%
WACC 10.20%
WACC validation within standard range

Step 4 — Estimate Terminal Value

Terminal-value input Value
Perpetuity growth rate 2.50%
Terminal value $54.41B
Implied terminal EV / EBITDA 8.64x
Terminal value as % of enterprise value 70.94%

Step 5 — Discount Cash Flows to Enterprise Value

Enterprise-value component Value
Present value of explicit FCFF $13.71B
Present value of terminal value $33.48B
Indicated enterprise value $47.20B
Discounting convention mid-year for explicit FCFF; terminal value discounted at year-end five

Step 6 — Convert Enterprise Value to Equity Value

Equity bridge Value
Indicated enterprise value $47.20B
Less: gross interest-bearing debt $17.30B
Add: cash and equivalents $1.53B
Add: affiliate investments $0.00
Less: minority interests $0.00
Indicated common equity value $31.42B

Step 7 — Calculate Indicative Value Per Share

Per-share output Value
Shares used 225,300,000.00
Share-count basis reported diluted weighted-average shares
Current market price $341.34
DCF indicative value per share $139.47
Indicative value vs. market price -59.14%

Model Integrity Checks

Check Result
Perpetuity growth is below the risk-free rate pass
Perpetuity growth is below WACC pass
WACC is within the configured operating-company range pass
Terminal-year FCFF is positive pass
Terminal capex converges to D&A pass
Terminal-value concentration within review band
Implied price differs from spot by more than 30% review required

2.6 Investor-Style Research Screen

Educational screen Result
Buffett-inspired cash-quality checks 3/4 evidenced checks
Lynch-inspired balance-and-growth checks 4/4 evidenced checks

Data lineage: Yahoo Finance public market and reported-statement data; retrieval timestamp: 2026-08-18 17:43:51.197411 UTC; latest reported fiscal period: 2025-12-31 00:00:00. Default assumptions: five-year forecast, mid-year discounting for explicit FCFF, a maximum 2.50% perpetuity-growth rate below both WACC and the risk-free rate, historical operating-ratio persistence, and capex convergence to D&A by year five. No sell-side consensus or management guidance is substituted for reported inputs. This is research and analysis only, not personalized financial advice.

2.7 Quantitative Factor Diagnostics

Model basis: Daily issuer USD excess returns are regressed in-sample using ordinary least squares on matching regional Fama–French factors. FF3 estimates market, size, and value loadings; FF5 adds profitability and investment. Coefficients are descriptive historical exposures, not predictions.

Estimation input Value
Regional factor set US
Factor-return currency USD
Issuer-return basis USD adjusted total return
Estimation window 2025-08-19 to 2026-06-30
Aligned daily observations 217
Minimum observation requirement 120
Currency conversion for HK listings not required

Fama–French Three-Factor and Five-Factor Results

Diagnostic FF3 FF5
Annualised alpha -7.49% 5.36%
Adjusted R² 0.17 0.24
Annualised residual volatility 18.32% 17.38%
Factor loading (t-statistic) FF3 FF5
Market excess return (Mkt-RF) 0.49 (4.57) 0.77 (6.54)
Size (SMB) 0.15 (1.04) 0.16 (1.09)
Value (HML) 0.64 (5.07) 0.36 (2.42)
Profitability (RMW) NM 0.48 (3.85)
Investment (CMA) NM 0.44 (2.02)

Definitions: Mkt-RF is the market return less the risk-free rate; SMB is small minus big; HML is high minus low book-to-market; RMW is robust minus weak profitability; CMA is conservative minus aggressive investment. Factor returns are sourced from the Kenneth R. French Data Library; issuer adjusted-return history is sourced from Yahoo Finance. For Hong Kong listings, adjusted HKD prices are converted into USD with daily USD/HKD closes before return calculation to match the USD regional factor basis. This is an in-sample historical regression; coefficients and t-statistics do not establish causation or predict future returns. This is research and analysis only, not personalized financial advice.

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