Company Analysis

Company overview section

Norfolk Southern railroads relate to a class I railroad in the United States with its headquarters in Norfolk, Virginia. The railroad operates 36, 200 route miles in 22 eastern states, Columbia, and has rights in Canada. The railroad is primarily entitled with maintaining 29,000 miles with the remaining miles being operated under trackage rights. Norfolk train is also the greatest provider of the intermodal network in eastern North America.

Owned and operated by Norfolk Southern Corporation, Norfolk Southern Railway Company is the nation’s biggest railroads system that runs through 22 states mostly the South and East. The railroad further extends into Ontario, Canada covering approximately 21, 300 miles of rail. Southern Railway was formed in 1984 through merging by Richmond and Danville with the East Tennessee, Virginia and Georgia railroad. The company was initially owned by Samuel Spencer who over a span of 12 years ensured that Southern Railway acquired many more lines and equipment, and revenues escalated from $17 million to over $153 million (Watson, 2016). The huge increase in revenue saw the company shift from dependency in tobacco and cotton to more involvement with the South’s industrial development.

The company is primarily engaged in the rail transportation of raw materials, intermediate products, and finished goods particularly in the South East, East and Midwest. Besides, the company also engages in overseas transportation freights through the Atlantic and Gulf coast ports. It ensures the provision of logistics services and offers the intermodal network in the Eastern half of the United States (Pallme et al., 2015). The Company’s systems integrate various manufacturing plants, electric engineering facilities, mines, distribution centers and other businesses located in its service area. The company’s intermodal market group comprise of shipments moving in trailers, domestic and international containers and road trailer equipment. (Summers, 2014) Hold that, approximately one-quarter of Norfolk Southern’s revenues come from transportation of coal, coke, and iron core whereas intermodal services account for 20 % revenue, with the remaining revenue originating from automotive, chemicals, consumer, government and forest products. Before 2016, the company 11 operational divisions but consolidated the Bluefield and West Virginia with Roanoke and Virginia.

At the beginning of the year 2015, it was apparent that the railroad industry would be in great shape and financially stable. With the increase in fuel costs, Norfolk Southern tracks would enjoy a significant decline in one of their costs of operation. However, as (Iran, and Economist, 2016) argue, Norfolk Southern’s second quarter financial report highlights, railroads haven't been able to move full speed ahead, and a host of operational challenges has held Norfolk Southern back and sent its stock levels back since 2013.

Revenue plunged nearly 11% to $ 2.71 billion falling more than $100 million short of the consensus forecast. Net income is depicted to have declined more than double diminishing to $433 million and working out to earnings of $1.41 per share. The figure represents a $ 0.002 share less than what was anticipated, but it still underscores the difficulty that Norfolk Southern has had in maintaining its financial stability (Michel, and Gardiner, 2014). Norfolk spent $153 million less on fuel during the second quarter of 2015 as compared to the year 2016, but rising costs for compensation and benefits and other overhead expenses partially offset these savings resulting in just 6% fall in total expenditure. Also, Norfolk’s operating ratio escalated to 70% depicting how cost-cutting isn’t keeping up with declining sales.

References

Irani, D., & ECONOMIST, C. (2016). Economic and Fiscal Impact Analysis of Class I Railroads.

Michel, J. N., & Gardiner, R. G. (2014). Reducing the total cost of risk across the railway organisation. CORE 2014: Rail Transport For A Vital Economy, 448.

Pallme, D., Lambert, B., Miller, C., & Lipinski, M. (2015). A review of public and private intermodal railroad development in the Memphis region. Research in Transportation Business & Management, 14, 44-55.

Summers, M. W. (2014). Railroads, reconstruction, and the gospel of prosperity: aid under the radical Republicans, 1865-1877. Princeton University Press.

Watson, R. (2016). Norfolk Southern earnings rise 2% in 3Q, railroad is only one in US to boost profit. Transport Topics.

Written Assignment: In compliance with the communicative and critical thinking goals of the class, you will be required

to submit a research paper (a.k.a Company Analysis) covering a publicly traded company assigned at the beginning of the

semester. The paper will adhere to a pre -described format. Failure to complete the A ssignment will be regarded as a

failure to meet the requirements of the course and will result in an overall final grade of an “F” . Your task will be to review

and analyze the company from an investor’s perspective. You may not change companies or switch companies with

anyone. At a minimum, your analysis will include the following WELL DEFINED sections –

 SECTION 1 - Company Overview Section (representing 20 points of the total assignment’s grade) . This section

will include discussions pertaining to

 Company History – when did they start, who started the company, what did they originally do as a

business?

 Current Operations - What does the company do, where do they make their money? You may include:

 Significant Operational Divisions and/or

 Significant Products, and/or

 Significant Ownership stakes – who owns the company?

 Current Financial Stability – Are they making money or do they have a positive cash flow?

 Ratio Analysis - REQUIRED - Price Earnings, Earnings per Share, and Dividend Yield with a

comparison to Competitors and/or Industry for each of these ratios.

 This section must be at least 1⅔ pages in length.

 There must be a separate paragraph for each of the 3 elements identified above.

 SECTION 2 - Significant Issues. A discussion of Current or Pending issues facing the Company (representing

20 points of the assignment’s total grade). The issues may be positive or negative; (that determination is left to

your discretion).

 You should identify and discuss at least thre e issues. At least one of these issues should be one you

personally developed/identified/detected as a result of your research. The issue you personally

identify/develop/detect should NOT be one that has been documented in some media publication or news

article. Your self-developed issue is a clear indication that you meet the minimum requirements of the

introduction of critical thinking program outcomes.

 This section must be at least 1⅔ pages in length.

 There must be a separate paragraph for each of the 3 issues you identify.

 Each issue must be adequately explained and justified as a valid issue .

 Each issue must be supported with at least 3 supporting points .



 SECTION 3 – Opinion Section (representing 20 points of the assignment’s total grade) Take a position (for or

against) on the issues you identified based on observations you have made from your research. After you have

taken a position on each of the three issues and supported each of them with three talking points, conclude your

paper with an opinion as to whether you would or would not invest in this company and explain why.

 Your opinion must refer to or be related to the items noted in the previous two sections.

 You must take a position on the three issues you identified in section 2 and identify the position as

favorable or unfavorable toward the company.

 You must support you position in a separate paragraph for each of the 3 issues.

 You must provide 3 points to support your position on favorability (favorable or unfavorable).

 In you conclusion state whether you would or would not invest in this company and why.

 This section must be at least 1⅔ pages in length.

 CONSOLIDATED PAPER:

 The remaining points of your grade will be based on…

 30 Points for visits to the Writing Center (10 points for each of the first three sections)

 60 Points for the Final Combined Document.

 Consolidated paper must be at least 5 pages in length, excluding the title page, bibliography and any

tables included as part of the paper.

The visits to will Writing Center will be documented by the Center and given to me on a periodic basis. You must attend

one time for each section listed above. No other entities (tutors provided through other sources) will be allowed for these

points. It is the student’s responsibility to schedule these appointments in advance.

Each section of your Company Analysis will be scanned for plagiarism using SafeAssign. If the SafeAssign Match

percentage exceeds 5%, there will be point deductions equaling 2 times the amount of the percentage that exceeds

5% for that particular section. This deduction will be assessed at the end of the grading for each section.