Norfolk Southern Corp. (NYSE:NSC)

The financial data reveals fluctuations in current and deferred income tax expenses over the five-year period ending December 31, 2021. The current tax expense shows a generally moderate level of variability, with values starting at 583 million US dollars in 2017, peaking at 689 million in 2021, and reaching a low point of 375 million in 2020. This indicates some inconsistency in taxable income or tax payment timing, with a notable dip during 2020.

Deferred tax expenses demonstrate a pronounced volatility and a significant shift from 2017 to subsequent years. In 2017, the deferred tax figure is a negative 2,859 million US dollars, which suggests a substantial deferred tax benefit or reversal of previously recognized liabilities. From 2018 onwards, the deferred taxes are positive and considerably lower, ranging between 142 million and 330 million US dollars. This shift from a large negative to positive deferred tax expense indicates a major change in the company's deferred tax asset or liability position, possibly due to changes in tax regulations, accounting estimates, or deferred tax balance revaluation.

As a result, the total income tax expense (sum of current and deferred) shows distinct movement. In 2017, the total is negative 2,276 million US dollars, reflecting the influence of the large negative deferred tax figure. For 2018 through 2021, income tax expense remains positive, fluctuating between 517 million and 873 million US dollars. There is a peak in 2018 reaching 803 million and again an increase to 873 million in 2021, suggesting higher tax obligations in those years compared to the relatively lower value in 2020.

Overall, the trends suggest a stabilizing but relatively elevated current tax expense in later years contrasted with a large one-time deferred tax adjustment in 2017. The total tax expense profile exhibits a return to positive expense from a significant negative figure in 2017, which impacts the understanding of tax-related earnings effects during this period.

Federal Income Statutory Tax Rate

The federal statutory tax rate decreased significantly from 35% in 2017 to 21% in 2018 and remained stable at 21% through 2021, reflecting a major tax policy change that impacted the company's tax obligations starting in 2018.

State Income Taxes, Net of Federal Tax Effect

State income taxes, net of the federal tax effect, fluctuated moderately over the period. Starting at 2.8% in 2017, it increased to 3.5% in 2018, then declined slightly to 3.1% in 2019, rose again to 3.3% in 2020, and returned to 2.8% in 2021, indicating some variability in state tax impacts over time.

Excess Tax Benefits on Stock-Based Compensation

The excess tax benefits on stock-based compensation were negative throughout the period, starting at -1.2% in 2017, improving slightly to -0.7% in 2018 and 2019, but deteriorating to -1.5% in 2020 before a modest improvement to -0.6% in 2021. This suggests that stock-based compensation consistently resulted in a tax expense rather than a benefit, with some volatility across years.

Other, Net

Other net tax-related items were negative during the entire period, with the most considerable negative impact at -2.4% in 2020. The values were -1.7% in 2017, improving to -0.7% in 2018, worsening to -1.3% in 2019, sharply declining to -2.4% in 2020, and rebounding to -0.7% in 2021. This indicates occasional significant charges or adjustments affecting the effective tax rate.

Effective Income Tax Rate, Before Tax Reform

This rate declined sharply from 34.9% in 2017 to 23.1% in 2018, reflecting the effects of changing tax law and tax planning strategies. It then decreased more gradually to 22% in 2019 and 20.4% in 2020, before increasing slightly to 22.5% in 2021.

Equity in Earnings Related to Tax Reform

This item showed a negative figure of -1.2% in 2017 and is not reported in subsequent years, suggesting a one-time impact from tax reform equity earnings recognized in 2017 only.

Tax Reform

A very significant negative value of -106.5% is recorded in 2017, which disappears in later years. This reflects a substantial one-time tax reform impact that dramatically lowered the effective tax rate that year.

Effective Income Tax Rate

The overall effective income tax rate shows a striking change from -72.8% in 2017 due to extraordinary tax reform effects, then stabilizes to levels consistent with the statutory and state tax rates, ranging from 23.1% in 2018 to a low of 20.4% in 2020, followed by a moderate increase to 22.5% in 2021. This demonstrates the normalization of the company's tax burden after the initial impact of tax reform.

The financial data reveals several notable trends across the various categories from 2017 to 2021.

Compensation and Benefits

There is a general decline in compensation and benefits expenditures over the five-year period, from $235 million in 2017 to $181 million in 2021. After an increase in 2018 to $284 million, the amounts decreased steadily each subsequent year, reaching the lowest point in 2021.

Accruals, Including Casualty and Other Claims

This category shows a gradual upward trend from $64 million in 2017 to a peak of $93 million in 2020, with a slight decrease to $92 million in 2021. Overall, accruals rose by approximately 44% over the five years.

Other Liabilities

The "Other" category displays a significant increase from $67 million in 2017 to a high of $202 million in 2019, followed by a slight decrease and stabilization around $188 million in 2021. This suggests a notable expansion in miscellaneous liabilities peaking in 2019.

Gross Deferred Tax Assets

Gross deferred tax assets increased steadily from $366 million in 2017 to $513 million in 2019, then slightly declined to $461 million by 2021. This indicates an initial accumulation of deferred tax assets, followed by a moderate reduction in later years.

Valuation Allowance

The valuation allowance consistently grew in absolute terms from -$44 million in 2017 to -$60 million in 2021, reflecting an increasing reservation against deferred tax assets possibly due to greater uncertainty in realization.

Net Deferred Tax Assets

Net deferred tax assets followed a similar pattern as gross deferred tax assets, rising from $322 million in 2017 to a peak of $459 million in 2019, then decreasing to $401 million in 2021. This suggests that while deferred tax benefits grew initially, their net realizable value slightly diminished in recent years.

Property

The property-related deferred tax liabilities exhibit a steady increase in negative values, from -$6,212 million in 2017 to -$7,016 million in 2021. This indicates a growing obligation or tax deferral related to property assets over time.

Other Deferred Tax Liabilities

Other deferred tax liabilities show a similar trend, increasing in magnitude from -$434 million in 2017 to -$550 million in 2021. The rise is more gradual but consistent.

Total Deferred Tax Liabilities

Total deferred tax liabilities increased steadily from -$6,646 million in 2017 to -$7,566 million in 2021, reflecting an overall growth in deferred tax obligations.

Deferred Income Taxes

Deferred income taxes also show a rising trend in liabilities, moving from -$6,324 million in 2017 up to -$7,165 million in 2021, consistent with the other deferred tax liability accounts.

In summary, the data indicates decreasing costs related to compensation and benefits, alongside steadily increasing accruals and various deferred tax liabilities. The deferred tax asset accounts exhibit initial growth followed by a slight decline, with an increasing valuation allowance that suggests cautious recognition of these assets. The property-related and other deferred tax liabilities reveal consistent growth over the five-year period, signifying expanding future tax obligations.

The analysis of the net deferred tax liabilities over the five-year period from December 31, 2017, to December 31, 2021, indicates a consistent upward trend.

Trend Analysis

The net deferred tax liabilities increased from US$ 6,324 million at the end of 2017 to US$ 7,165 million by the end of 2021.

Year-over-Year Changes

Each year demonstrates a growth in the net deferred tax liabilities, with the increments ranging between approximately 100 and 350 million US dollars annually.

Insights

This steady increase suggests ongoing growth in timing differences for taxable income recognition or changes in tax law or rates that have affected the deferred tax calculations.

The absence of any decline or fluctuation indicates that there were no significant reversals or reductions in deferred tax liabilities during the period analyzed.

Overall, the data reflects a stable increase in deferred tax liabilities, which may impact future tax obligations and should be considered in long-term financial planning and analysis.

The financial data reveals several notable trends and variations over the five-year period from 2017 to 2021 when comparing reported figures with adjusted data that accounts for deferred income tax adjustments.

Total Liabilities

Reported total liabilities increase consistently each year, rising from $19,352 million in 2017 to $24,852 million in 2021, indicating a growth in the company's financial obligations over time.

Adjusted total liabilities, which factor in deferred income tax adjustments, also show a steady increase but at lower absolute values compared to reported figures, rising from $13,028 million to $17,687 million over the same period.

The difference between reported and adjusted total liabilities widens consistently, reflecting the impact of deferred taxes on liabilities and illustrating a more conservative measure of liabilities when adjustments are considered.

Stockholders’ Equity

Reported stockholders’ equity displays a declining trend from $16,359 million in 2017 to $13,641 million in 2021, reflecting a reduction in the company’s net assets under the reported basis.

Conversely, adjusted stockholders’ equity, which includes deferred tax adjustments, remains significantly higher than reported equity throughout the period. Although it also declines, the decrease is more moderate—from $22,683 million in 2017 to $20,806 million in 2021.

This suggests deferred tax adjustments positively affect equity, partially offsetting the downward trend observed in the reported figures.

Net Income

Reported net income shows considerable fluctuation over the years. It declines sharply from $5,404 million in 2017 to $2,666 million in 2018, then remains relatively stable through 2019 at $2,722 million. A further dip occurs in 2020 to $2,013 million, followed by a recovery to $3,005 million in 2021.

Adjusted net income presents a more stable and upward trend, beginning at a lower base of $2,545 million in 2017 but increasing steadily to $3,189 million in 2021. This smoother trajectory indicates that deferred tax adjustments serve to normalize income performance over time, reducing volatility observed in the reported net income.

Overall Insights

The adjusted figures reflect the impact of deferred income tax adjustments, which generally result in lower liabilities and higher equity compared to reported data. This adjustment also tends to stabilize net income figures, showing less variability and a slight upward trend through the analyzed years.

The contrasting trends between reported and adjusted data highlight the importance of considering deferred income tax effects to obtain a more comprehensive and potentially conservative view of the company’s financial position and profitability.

Net Profit Margin

The reported net profit margin experienced a notable decline from 51.22% in 2017 to 20.56% in 2020, followed by a recovery to 26.97% in 2021. The adjusted net profit margin showed a more stable pattern, increasing from 24.12% in 2017 to a peak of 27.02% in 2019, dipping to 22.01% in 2020, and recovering to 28.62% in 2021. This indicates that while reported margins were volatile, the adjusted margins reveal steadier profitability with resilience in the latest period.

Financial Leverage

Both reported and adjusted financial leverage ratios demonstrated an upward trend over the five-year period. Reported financial leverage increased from 2.18 in 2017 to 2.82 in 2021, while adjusted financial leverage rose from 1.57 to 1.85 over the same period. The consistent increase suggests a growing use of debt financing or other leverage mechanisms, albeit the adjusted figures indicate a more moderated increase relative to reported values.

Return on Equity (ROE)

The reported ROE declined sharply from 33.03% in 2017 to 13.61% in 2020, then improved to 22.03% in 2021. Adjusted ROE followed a similar, though less pronounced trend, increasing from 11.22% in 2017 to 13.87% in 2019, dropping to 9.92% in 2020, and rising again to 15.33% in 2021. The adjusted ROE trend suggests more consistent profitability relative to equity, whereas the reported ROE shows higher volatility.

Return on Assets (ROA)

The reported ROA decreased significantly from 15.13% in 2017 to 5.3% in 2020, with a partial recovery to 7.81% in 2021. Adjusted ROA remained relatively stable, starting at 7.13% in 2017, peaking at 8.05% in 2019, and then falling to 5.68% in 2020 before improving to 8.28% in 2021. This pattern indicates that asset utilization efficiency decreased markedly according to reported figures but was more stable and slightly improving on an adjusted basis.

The financial data reveals notable trends in both reported and adjusted net income and profit margins over the five-year period.

Reported Net Income

The reported net income shows a significant decline from 5,404 million US dollars in 2017 to 2,666 million in 2018, representing a decrease of over 50%. It then stabilizes with slight fluctuations, recording 2,722 million in 2019, dropping to 2,013 million in 2020, and recovering to 3,005 million in 2021. The pattern indicates high volatility in reported earnings, with a notable drop after 2017 and partial recovery by 2021.

Adjusted Net Income

In contrast, adjusted net income follows a generally upward trend with some variability. It starts at 2,545 million in 2017, then rises to 2,839 million in 2018 and further to 3,052 million in 2019. This is followed by a decline to 2,155 million in 2020, possibly reflecting external or operational challenges during that year. However, adjusted net income recovers strongly in 2021 to 3,189 million, surpassing the initial 2017 level. This trend suggests that adjustments for income tax and other factors smooth out some of the volatility seen in reported figures.

Reported Net Profit Margin

The reported net profit margin mirrors the net income trend with an initial steep decline from 51.22% in 2017 to 23.27% in 2018. Subsequent years show marginal fluctuations with 24.1% in 2019, a dip to 20.56% in 2020, and a rise to 26.97% in 2021. This pattern aligns with the reported net income volatility, indicating fluctuations in profitability relative to revenue.

Adjusted Net Profit Margin

The adjusted net profit margin displays more stability and consistent growth, increasing from 24.12% in 2017 to 24.78% in 2018 and 27.02% in 2019. A decline to 22.01% is observed in 2020, which is followed by a recovery and new high of 28.62% in 2021. This steady increase, except for the 2020 dip, indicates improved underlying profitability when excluding deferred tax effects or other adjustments.

Overall, the analysis shows that the company's reported financial results have exhibited high variability, with a pronounced drop after 2017 and a partial rebound by 2021. Adjusted figures, accounting for deferred income taxes and other adjustments, present a less volatile and more favorable profitability trend. The divergence between reported and adjusted metrics highlights the impact of tax treatments and one-time adjustments on the financial results, emphasizing the importance of considering adjusted metrics for assessing operational performance over time.

Reported Stockholders’ Equity

The reported stockholders’ equity demonstrates a consistent downward trend from 2017 to 2021. Starting at approximately $16.4 billion in 2017, the figure steadily declines each year, reaching about $13.6 billion by the end of 2021. This indicates a reduction of roughly 17% over the five-year period, suggesting that the company’s reported equity base has contracted during these years.

Adjusted Stockholders’ Equity

Adjusted stockholders’ equity values are considerably higher than the reported figures, ranging from approximately $22.7 billion in 2017 to about $20.8 billion in 2021. While this adjusted metric also follows a generally downward trend, the decline is less pronounced than in the reported equity, with a decrease of around 8% over the same period. This adjustment appears to provide a more favorable equity assessment, reflecting a potentially stronger capital base when accounting for deferred income tax impacts.

Reported Financial Leverage

The reported financial leverage ratio shows a gradual increase from 2.18 in 2017 to 2.82 in 2021. This upward trend indicates a rising reliance on debt financing relative to equity, implying increased financial risk as the period progresses. The increase is consistent year-over-year, with the most significant change occurring between 2020 and 2021.

Adjusted Financial Leverage

The adjusted financial leverage ratio, while lower than the reported ratio, also exhibits an increasing pattern, moving from 1.57 in 2017 to 1.85 in 2021. This rising leverage trend suggests that even after adjusting for deferred income tax effects, the company has incrementally increased its debt relative to its adjusted equity base. The adjusted leverage remains substantially below the reported leverage, reflecting the impact of adjustments on the perceived capital structure and financial risk.

Summary of Trends

Overall, the data reveals a general decline in equity values, both reported and adjusted, with a more severe reduction in the reported figures. At the same time, financial leverage ratios demonstrate a continuous increase throughout the time frame, indicating progressively higher financial risk due to increased debt levels relative to equity. The adjustments made for deferred income tax effects notably increase the equity base and reduce leverage ratios, but they do not change the underlying trend of declining equity and rising leverage. These patterns point to a company experiencing pressure on its equity position while simultaneously expanding its use of debt financing over the analyzed period.

Net Income Trends

Reported net income exhibits a declining trend from 2017 to 2020, decreasing from 5,404 million USD in 2017 to 2,013 million USD in 2020, followed by a partial recovery to 3,005 million USD in 2021. In contrast, adjusted net income displays more stability and moderate growth over the same period, increasing from 2,545 million USD in 2017 to 3,189 million USD in 2021, with a dip in 2020 that mirrored the reported net income decline.

Stockholders' Equity Trends

Reported stockholders’ equity shows a consistent downward trajectory across the five years, declining from 16,359 million USD in 2017 to 13,641 million USD in 2021. Adjusted stockholders’ equity values are significantly higher in each year compared to reported figures but similarly indicate a gradual decline from 22,683 million USD in 2017 to 20,806 million USD in 2021. The adjusted figures suggest a more comprehensive capital base, but both measures depict a general reduction in equity over time.

Return on Equity (ROE) Analysis

Reported ROE follows the pattern of reported net income and equity, starting very high at 33.03% in 2017, then decreasing substantially to a low of 13.61% in 2020 before increasing again to 22.03% in 2021. Adjusted ROE values are lower across all years and exhibit less volatility, moving from 11.22% in 2017 to a low of 9.92% in 2020 and recovering somewhat to 15.33% in 2021. This suggests that the adjusted figures provide a more conservative and potentially more sustainable measure of profitability relative to equity.

Overall Insights

The divergence between reported and adjusted figures indicates that adjustments, likely related to deferred income tax, have a substantial impact on the financial presentation. Adjusted net income and equity figures are consistently higher and less volatile, implying that the core performance and financial position may be more stable than reported figures alone suggest. The recovery in net income and ROE in 2021, after declines in previous years, points to partial financial rebound, though equity reductions indicate ongoing capital depletion or other balance sheet changes. The lower and steadier adjusted ROE underscores a potentially more realistic assessment of returns to shareholders.

Reported Net Income

The reported net income demonstrates a significant decline from 5,404 million US dollars in 2017 to 2,666 million US dollars in 2018, followed by a slight increase to 2,722 million in 2019. Thereafter, it decreased again to 2,013 million in 2020 before recovering to 3,005 million in 2021. The overall trend indicates volatility with a general downward movement from 2017 to 2020, and a partial recovery in the latest year.

Adjusted Net Income

The adjusted net income shows a different pattern, beginning at 2,545 million US dollars in 2017 and increasing steadily to 2,839 million in 2018 and 3,052 million in 2019. This upward trajectory is interrupted by a drop to 2,155 million in 2020, potentially reflecting unusual or non-recurring impacts in that year. A recovery to 3,189 million in 2021 surpasses previous years, indicating a strong rebound and overall growth trend in adjusted earnings.

Reported Return on Assets (ROA)

The reported ROA mirrors the reported net income trend, starting high at 15.13% in 2017 and falling sharply to 7.36% in 2018, then declining slightly to 7.18% in 2019. It decreased further to 5.3% in 2020, followed by a rebound to 7.81% in 2021. This pattern suggests fluctuating asset efficiency, with a notable reduction after 2017 and some recovery in the most recent period.

Adjusted Return on Assets (ROA)

The adjusted ROA reveals a more stable and positive trend compared to the reported measures. Starting at 7.13% in 2017, it increased to 7.83% in 2018 and further to 8.05% in 2019, indicating improving asset utilization. Although it dropped to 5.68% in 2020, the adjusted ROA sharply rebounded to 8.28% in 2021, exceeding previous highs, which suggests strong underlying operational performance when adjusting for tax-related and other income statement impacts.