Shares of Norfolk Southern Corporation decreased by 1.8% in pre-market trading on Monday after several prominent analysts downgraded the company. The rating cut by Morgan Stanley, from Equal-weight to Underweight, was attributed to various concerns.
Morgan Stanley Expresses Concerns
Morgan Stanley analysts cited the performance gap between Norfolk Southern and its peers, along with modest long-term targets, as reasons for the downgrade. They expressed doubts about the consensus on the company’s earnings per share expectations, as well as its stock multiple. According to the analysts, these factors are less justifiable compared to its industry peers.
Stifel Downgrades and Lowers Price Target
Similarly, analysts at Stifel downgraded Norfolk Southern from Buy to Hold and reduced the price target from $250 to $233. They explained that the company’s self-help story has not unfolded as expected. Norfolk Southern has yet to deliver results that demonstrate a narrowing of its performance gap with Class-1 rail peers.
“Given recent improvements in share price and the marginal improvement in profitability for 2024, we are downgrading NSC shares,” said the Stifel analysts.
TD Cowen Highlights Expected Catch-Up Game
The stock was also downgraded at TD Cowen, where analysts predicted that Norfolk Southern is likely to play catch-up with its peers. They pointed out that while the U.S. Class I rails struggle to find new avenues for top-line growth, Norfolk Southern’s cost structure is expected to notably underperform its peer group this year.
These downgrades reflect growing concerns about Norfolk Southern’s performance and future prospects in comparison to its competitors. Investors will be closely watching the company’s actions to address these issues and work towards closing the performance gap.