Norfolk Southern EPS Estimates Southbound: How to Play the Stock?

Norfolk Southern Corporation (NSC) is currently mired in multiple headwinds such as rail network issues, coal market weakness and declining freight environment. The negative sentiment surrounding Norfolk Southern stock is evident from the fact that the Zacks Consensus Estimate for the first quarter of 2026, the second quarter of 2026 and for full-year 2026 earnings has been revised downward in the past 90 days. The consensus mark for 2027 earnings has also been projected downward in the past 90 days.

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The unfavorable estimate revisions indicate brokers’ lack of confidence in the stock.

Given this backdrop, the question now arises whether it is worth buying, holding, or selling the Norfolk Southern stock at current prices. Let us delve deeper to find out.

Headwinds Weighing on Norfolk Southern Stock

Macroeconomic concerns are leading to a tough freight environment. Risks associated with an economic slowdown, geopolitical tensions and tariff-induced economic uncertainty do not bode well for railroad stocks like NSC. As things stand now, consumer spending and business investments remain low. Production levels have decreased in response to reduced demand, affecting demand for goods transportation and resulting in a freight recession (The Cass Freight Shipments Index, which declined 7.1% year over year in January 2026, deteriorated in each of the 12 months in 2025 and led to sub-par freight rates).

Rail network issues due to headwinds like locomotive or crew/labor shortages and other service disruptions represent a major challenge for NSC. Network issues or supply chain constraints are likely to adversely impact service levels, in turn hurting operating efficiency or volume of shipments. With labor costs being high, operating expenses are elevated, in turn hurting the bottom line.

Coal market weakness is another headwind for NSC. The coal business remains subject to secular pressures from greener alternatives, which is leading to the planned retirement of coal units. The weak coal market has resulted in below-par coal revenues. Coal revenues fell 8% year over year to $1.48 billion in 2025. Coal revenues per unit declined 9% year over year in 2025.

Stock prices of railroad companies like NSC are notoriously volatile. This is mainly because the health of the company is tied to the economy, which is undergoing a turbulent phase. As such, shares of NSC may not be suitable for investors who are not comfortable with the often-substantial day-to-day volatility.

Unattractive Valuation Picture for NSC Stock

Norfolk Southern looks expensive from a valuation standpoint. Considering the forward 12-month price-to-sales ratio (P/E-F12M), NSC is trading at a premium compared to the industry.

The stock has a forward 12-month P/E-F12M of 22.83X compared with 20.01X for the industry over the past five years. The company’s forward 12-month P/E-F12M ratio is also above the median level of 18.71X over the past five years. These factors indicate that the stock’s valuation is unattractive. NSC has a Value Score of D.

NSC P/E Ratio (Forward 12 Months) Vs. Industry

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NSC Stock's Price Performance

Shares of Norfolk Southern stock have gained 39.6% in the past year, outperforming the Zacks Transportation - Rail industry’s 26.5% surge, as well as that of other industry players, Canadian Pacific Kansas City Limited (CP) and Canadian National Railway Company (CNI), within the same time frame.

NSC Stock's One-Year Price Comparison

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Factors Working in Favor of NSC Stock

E-commerce growth is a tailwind for Norfolk Southern. E-commerce demand strength should continue to support growth of railroad stocks like Norfolk Southern. NSC’s AccessNS, an e-commerce tool, gives customers an efficient and convenient one-stop digital platform to conduct business with the railroad operator.

Further, Norfolk Southern’s focus on utilizing the Precision Scheduled Railroading (PSR) operating plan to reduce costs and enhance services for optimal asset utilization is commendable.

Norfolk Southern’s solid balance sheet increases financial flexibility. The company ended fourth-quarter 2025 with cash and cash equivalents of $1.53 billion, higher than the current debt level of $607 million. This implies that the company has sufficient cash to meet its current debt obligations. Further, NSC’s long-term debt has declined to $16.4 billion at fourth-quarter 2025-end from $16.6 billion at the end of fourth-quarter 2024.

A strong balance sheet enables the company to reward shareholders with dividends and share repurchases. As a reflection of its shareholder-friendly stance, during 2025, the company paid dividends worth $1.21 billion and repurchased and retired common stock worth $534 million. Norfolk Southern's strong free cash flow-generating ability supports its shareholder-friendly activities. Such shareholder-friendly moves indicate the company’s commitment to creating value for shareholders and underline its confidence in its business.

Time to Retain Norfolk Southern Stock

It is understood that NSC stock is currently unattractively valued. Risks associated with an economic slowdown, geopolitical tensions and tariff-induced economic uncertainty do not bode well for railroad stocks like NSC. Rail network issues due to headwinds like locomotive or crew/labor shortages and other service disruptions continue to bother NSC. Weaknesses in freight revenues and volumes do not bode well for NSC. Coal market weakness and share price volatility are also causes for worry.

Despite the headwinds, we advise investors not to sell NSC stock now due to its environmentally-friendly approach of reducing greenhouse gas emissions and focus on utilizing the PSR operating plan to reduce costs and enhance services for optimal asset utilization. NSC’s solid balance sheet allows it to reward shareholders through dividends and share buybacks. Such shareholder-friendly moves boost investor confidence and positively impact the company's bottom line.

Considering all the aforesaid factors, we advise investors to wait for a better entry point. For those who already own the stock, it will be prudent to stay invested. The company’s current Zacks Rank #3 (Hold) justifies our analysis. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Canadian National Railway Company (CNI): Free Stock Analysis Report

Norfolk Southern Corporation (NSC): Free Stock Analysis Report

Canadian Pacific Kansas City Limited (CP): Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).

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