Norfolk Southern Corp. (NYSE:NSC)

Net Operating Profit After Taxes (NOPAT)

The net operating profit after taxes demonstrates a generally positive trend over the period analyzed. Starting at $2,921 million in 2017, it rose consistently to $3,546 million by 2019. However, a significant decline occurred in 2020, with NOPAT dropping to $2,658 million, likely reflecting unusual or adverse conditions in that year. By 2021, the NOPAT recovered strongly to $3,711 million, surpassing previous years and indicating a rebound in operating profitability.

Cost of Capital

The cost of capital has remained relatively stable throughout the five-year period. It fluctuated slightly between approximately 14.86% and 15.31%, showing minimal variation and indicating consistent financing costs or market conditions related to capital during these years.

Invested Capital

Invested capital displayed a gradual upward trend from $33,382 million in 2017 to $35,469 million in 2021. This steady increase reflects ongoing capital investment or asset growth, with a mild deceleration in growth rates noted especially between 2019 and 2021, suggesting a conservative or stabilized approach to capital deployment in recent years.

Economic Profit

Economic profit remained negative throughout the period, indicating that the returns on invested capital did not exceed the cost of capital. Starting from -$2,039 million in 2017, the negative economic profit improved slightly year-on-year until 2019, reaching -$1,830 million. Nonetheless, it deteriorated markedly in 2020 to -$2,741 million, consistent with the decline in operating profitability and possibly higher capital costs or reduced returns. A recovery is seen in 2021 with economic profit improving to -$1,711 million, though it remains negative, underlining ongoing challenges in generating value above the cost of capital.

The financial data indicates fluctuations in key profitability measures over the five-year period ending December 31, 2021.

Net Income

The net income shows a notable decline from 2017 to 2018, dropping from 5404 million US$ to 2666 million US$. This represents a reduction of approximately 50.6%. From 2018 onwards, net income slightly increased to 2722 million US$ in 2019 but then declined again to 2013 million US$ in 2020. A recovery is observed in 2021, with net income increasing to 3005 million US$. Overall, net income has not returned to the 2017 peak by the end of the period.

Net Operating Profit After Taxes (NOPAT)

NOPAT presents a generally upward trend from 2017 through 2019, increasing from 2921 million US$ to 3546 million US$. However, in 2020, there is a decline to 2658 million US$, reflecting operational challenges or increased costs. The figure recovers significantly in 2021, reaching 3711 million US$, which is the highest level recorded during the period and exceeds the 2017 value.

The data suggests that while net income experienced volatility with an initial sharp decline and partial recovery by 2021, operational profitability as measured by NOPAT has demonstrated resilience with an overall increasing trajectory. The year 2020 marks a downturn in both measures, likely correlated with adverse external or internal factors during that period. The stronger rebound in NOPAT by 2021 compared to net income may imply improved operational efficiency or changes in non-operational factors affecting net income.

The financial data presents notable fluctuations in the income taxes and cash operating taxes over a five-year period ending December 31, 2021.

Income Taxes

The income taxes exhibit significant variability. In 2017, there was a considerable negative value, indicating a tax benefit or recovery of US$ 2,276 million. Subsequently, income taxes turned positive, registering amounts ranging from US$ 503 million to US$ 873 million from 2018 through 2021. The lowest recorded amount was US$ 517 million in 2020, followed by a noticeable increase to US$ 873 million in 2021. This pattern suggests the entity transitioned from a tax recovery position in 2017 to consistent tax expenses in subsequent years, with some fluctuations potentially influenced by operational or regulatory factors.

Cash Operating Taxes

Cash operating taxes showed a declining trend from US$ 784 million in 2017 to US$ 509 million in 2020. In 2018, the amount decreased slightly to US$ 753 million and further dropped to US$ 570 million in 2019. The 2020 figure marks the lowest during the period analyzed. However, in 2021, cash operating taxes increased sharply to US$ 827 million, reaching the highest level in the dataset. This increase may indicate higher taxable income, changes in tax legislation, or operational adjustments impacting taxable cash flows.

Overall, the data reveals a shift from a significant income tax benefit in 2017 to ongoing tax expenses in later years, alongside a generally declining trend in cash operating taxes until 2020, followed by a marked rise in 2021. These trends could reflect changes in profitability, tax strategy, or external fiscal conditions impacting the company's tax obligations.

The financial data indicates notable trends in debt, equity, and invested capital over the five-year period ending in 2021.

Total reported debt & leases

This item shows a consistent upward trend throughout the period. Debt increased steadily from $10,336 million in 2017 to $14,253 million in 2021. The increase appears continuous year over year, with the most significant growth occurring between 2020 and 2021.

Stockholders’ equity

Stockholders’ equity exhibits a declining pattern over the same timeframe. Equity decreased from $16,359 million in 2017 to $13,641 million in 2021. The decline is relatively gradual but consistent each year, reflecting potential shareholder value diminution or increased liabilities.

Invested capital

Invested capital shows a moderate increase from $33,382 million in 2017 to $35,469 million in 2021. However, the growth is not linear; the capital rose annually until 2020, after which it exhibits minimal change between 2020 and 2021. This trend suggests that investments or total capital expenditures slowed or stabilized towards the end of the period.

Overall, the capital structure reflects a rising reliance on debt financing accompanied by declining equity, while the total invested capital has grown modestly but appears to plateau in the most recent year. These movements could indicate a strategic shift towards leveraging debt and managing capital investment more conservatively.

Economic Profit

The economic profit showed a consistently negative trend over the five-year period. Although the negative value decreased from -$2,039 million in 2017 to -$1,711 million in 2021, there was a significant deterioration in 2020, with the value deepening to -$2,741 million. This indicates persistent challenges in generating positive returns above the cost of capital, with a notable setback during 2020 perhaps reflective of unusual or adverse conditions in that year.

Invested Capital

Invested capital steadily increased from $33,382 million in 2017 to $35,469 million in 2021. This growth was relatively moderate and consistent, indicating a gradual expansion in the asset base or capital employed. The increase was most pronounced between 2018 and 2019, but remained stable thereafter, suggesting ongoing investment or asset accumulation despite the economic profit remaining negative.

Economic Spread Ratio

The economic spread ratio was negative throughout the entire period, reflecting the cost of capital exceeding returns consistently. Although the ratio improved from -6.11% in 2017 to -4.82% in 2021, the year 2020 saw a substantial worsening to -7.74%. This sharp decline corresponds with the economic profit drop in 2020 and indicates a challenging operating environment during that year. The gradual improvement post-2020 suggests some recovery or more efficient capital utilization, yet the persistent negative ratio underscores ongoing issues generating sufficient economic value.

Overall Insights

The data reveals a pattern of ongoing economic losses despite growth in invested capital. The deterioration in 2020 serves as a critical point of concern, possibly tied to external economic disruptions. While there is a recovery trend visible in 2021, the continued negative economic profit and spread ratio indicate that the company has yet to achieve value creation above its cost of capital. This suggests the need for strategic focus on improving profitability or capital efficiency to enhance shareholder value.

Economic Profit

Economic profit exhibited a generally negative trend over the five-year period. Starting at -2039 million USD in 2017, the value showed a gradual improvement until 2019, reaching -1830 million USD. However, a significant deterioration occurred in 2020, with economic profit falling sharply to -2741 million USD. By 2021, there was a recovery to -1711 million USD, though the figure remained negative, indicating persistent economic losses despite some improvements.

Railway Operating Revenues

Operating revenues showed a moderate upward trend from 2017 through 2019, increasing from 10551 million USD to 11296 million USD. In 2020, revenues declined markedly to 9789 million USD, likely reflecting challenging economic or industry conditions. Revenues rebounded in 2021 to 11142 million USD, nearing the levels observed before the 2020 decline, indicating a recovery in top-line performance.

Economic Profit Margin

The economic profit margin was consistently negative throughout the period, indicating ongoing inefficiencies or challenges in generating returns over costs. The margin improved slightly from -19.32% in 2017 to -16.2% in 2019. However, a severe decline occurred in 2020, with the margin falling to -28%, reflecting substantial loss relative to revenue during that year. In 2021, there was a significant improvement to -15.36%, suggesting better operational or cost management though profitability remained below zero.

Overall Trends and Insights

The data reflects a company facing sustained economic losses despite fluctuations in revenue. The sharp decline in economic profit and margin during 2020 corresponds with a revenue drop, possibly due to external disruptions affecting the industry. The subsequent recovery in 2021 across all measured parameters points to an improving business environment or effective corrective actions. Nonetheless, the persistent negative economic profit and margin reveal ongoing structural or operational challenges that need to be addressed to achieve positive economic returns.