Key Stats for NSC Stock
- Past-6-Month Performance: 13%
- 52-Week Range: $202 to $320
- Valuation Model Target Price: $365
- Implied Upside: 16.8%
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What Happened?
Norfolk Southern stock is up about 13% over the last 6 months, recently trading near $313 per share as investors responded to improving productivity, disciplined cost control, and stabilization in core merchandise revenue despite a soft freight backdrop.
Shares have steadily recovered toward the upper end of their 52-week range as confidence builds around management’s operational execution heading into 2026.
The recent gains were driven by stronger earnings durability than feared. This week, the company reported fourth quarter volume declined 4% and revenue fell 2%, but adjusted EPS came in at $3.22 with an adjusted operating ratio of 65.3%, reflecting tight expense management.
Management delivered $216 million in full-year cost savings, generated $2.2 billion in free cash flow, reduced 2026 capital spending to $1.9 billion from $2.2 billion, and posted a quarter with 0 reportable mainline derailments.
CEO Mark George reinforced the tone, saying they will “fight like hell for quality revenue here,” underscoring a focus on pricing discipline and productivity rather than chasing weaker volume.
Institutional positioning also shows active but balanced ownership shifts. NEOS Investment Management raised its stake by 47% to 25,298 shares valued at about $7.6 million, Skandinaviska Enskilda Banken increased its position by 10% to 49,965 shares worth $15 million, and Varma Mutual Pension Insurance boosted holdings by 8.7% to 47,410 shares valued at $14 million.
New positions were initiated by Krilogy Financial with 4,754 shares valued at about $1.3 million and Caprock Group with 8,679 shares worth approximately $2.4 million.
At the same time, Vestmark Advisory Solutions cut its stake by 13.6%, Centennial Bank AR reduced exposure by 90.8%, Eagle Rock Investment Company trimmed 87.2%, Advisors Asset Management lowered holdings by 33.7%, and Aberdeen Group cut 15.5%, reflecting selective portfolio rebalancing rather than broad institutional exit.
Overall, institutional investors still own roughly 75.10% of Norfolk Southern, including Vanguard Group with a 9.16% stake valued at about $6.17 billion and PNC Financial Services Group holding 369,996 shares worth about $111 million.
The combination of productivity-driven margin resilience, lower capital intensity in 2026, and steady institutional participation has supported the stock’s advance as investors position for continued execution rather than a sharp freight recovery.
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Is NSC Undervalued?
Under valuation assumptions, the stock is modeled using:
- Revenue Growth (CAGR): 4.0%
- Operating Margins: 35.5%
- Exit P/E Multiple: 22.5x
Revenue is expected to grow modestly as merchandise pricing discipline, automotive strength, and utility coal demand help offset softer intermodal trends.
Management expects cost discipline to remain central in 2026, with an expense base guided to $8.2 billion to $8.4 billion and continued productivity initiatives targeting another $150 million in cost takeout.
Operating leverage remains the key earnings driver. In 2025, the company moved 3% more GTMs with 4% fewer employees, reflecting structural productivity gains that can continue to support margins even if freight volumes remain uneven.
Lower capital spending of approximately $1.9 billion in 2026, down from $2.2 billion, also supports stronger free cash flow conversion.
Based on these inputs, the model estimates a target price of $365, implying about 16.8% total upside over the next several years.
At current levels near $313, Norfolk Southern appears modestly undervalued if management continues delivering productivity gains, disciplined pricing, and consistent free cash flow generation in 2026.
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