Hey Traders,
Over the past few weeks, railroads and rail regulation have been at the forefront of national conversation
We’ve also seen a CEO get fired for poor performance.
Needless to say, this sleepy industry is waking up.
That’s why I want to take a look at Norfolk Southern (Ticker: NSC) and see if it’s worth buying post-East Palestine.
The train derailment caused NSC to take a 12% haircut. Talk about getting railroaded!
I am going to turn things around and lead with the bad this week,then move into the good.
The Bad:
The derailment has been an environmental and PR disaster. We have no idea what the cost is going to be to NSC over the coming months and years.
There will be lawsuits, hearings,and new regulation proposals (which will probably go nowhere).
The headlines will be bad and that could cause some selling.
Then there is the earnings…
NSC actually beat projections by a penny – or missed by .02, depending on your source – but the market still did not like the news.
Revenue surprised to the upside, but that wasn’t enough; the stock took it on the chin.
The stock has been in an overall decline since peaking in early 2022.
Despite all the bad press, NSC is not at a 52 week low; that took place in October when the whole market was bottoming.
It’s worth noting though that the stock is down hard even as the market has mostly been spinning its wheels.
There are clearly problems.
The Good:
Bad news that affects a stock (that isn’t debt-related) tends to be a buying opportunity.
The stock has stabilized after melting for two-straight weeks.
Each railroad essentially is a monopoly in its area, so it’s not like they’ll be getting a bunch of competition all of a sudden.
So NSC‘s real question is about the economy.
If the economy really takes it on the chin, NSC will see a fall in earnings.
But the economy has already softened and we saw NSC beat on revs …
Despite all the bad news, I think NSC is probably a decent long term investment.
Below 220 a share I am a buyer.
Your Only Option,
Mark Sebastian