Norfolk Southern Corp. (NYSE:NSC)

The financial data reveals several important trends and insights concerning profitability, capital costs, and economic performance over the five-year period under review.

Net Operating Profit After Taxes (NOPAT)

The net operating profit after taxes showed a generally upward trend from 2017 to 2021, increasing from $2,921 million in 2017 to $3,711 million in 2021. However, there was a noticeable dip in 2020, where NOPAT declined to $2,658 million, likely reflecting a temporary setback before recovering strongly in the following year.

Cost of Capital

The cost of capital remained relatively stable throughout the period, fluctuating narrowly between 14.87% and 15.32%. This stability suggests a consistent risk perception and financing environment for the company.

Invested Capital

Invested capital showed a steady increase from $33,382 million in 2017 to $35,469 million in 2021. The gradual rise indicates ongoing investments or asset growth, although the incremental change is modest year-over-year, reflecting a potentially cautious expansion strategy or capital management approach.

Economic Profit

Economic profit was negative for all years, ranging from -$2,042 million in 2017 to -$1,714 million in 2021. While the negative economic profit suggests that the returns did not cover the cost of capital, the magnitude of the losses decreased over the period, except for a notable deterioration in 2020. This decline in 2020 aligns with the drop in NOPAT seen the same year, likely due to extraordinary circumstances impacting performance, followed by a recovery in 2021.

In summary, the company demonstrated improving operational profitability and a consistent cost of capital environment. Despite steady invested capital increases, economic profit remained below zero, although the losses moderated over time. The 2020 performance downturn indicates sensitivity to adverse conditions, with a robust rebound in 2021 supporting improved economic profit figures.

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 reported consistently negative values throughout the period. There was a general improvement trend from 2017 to 2019, with negative values reducing from -2042 million US dollars in 2017 to -1833 million US dollars in 2019. However, in 2020, a significant deterioration occurred, with economic profit declining sharply to -2744 million US dollars, followed by a partial recovery in 2021 to -1714 million US dollars, which represents the most favorable position recorded within the analyzed timeframe.

Invested Capital

Invested capital exhibited a steady increase over the entire period, rising from 33,382 million US dollars at the end of 2017 to 35,469 million US dollars by the end of 2021. The growth was relatively gradual, with no periods of decline, indicating ongoing investment or growth in capital employed in the business.

Economic Spread Ratio

The economic spread ratio remained negative throughout the period, mirroring the trend observed in economic profit. Starting at -6.12% in 2017, it improved slightly each year until 2019. In 2020, it worsened markedly to -7.75%, aligning with the sharp drop in economic profit that year. By 2021, the ratio had improved again to -4.83%, the least negative value observed, suggesting a better economic return relative to invested capital compared to previous years.

Overall Trends and Insights

The data reveals a persistently negative economic performance, as indicated by both economic profit and economic spread ratio metrics. The invested capital growth suggests the company continued to allocate resources despite negative economic returns. The year 2020 marked a significant disruption in financial performance, likely reflecting an external shock or extraordinary condition, with substantial declines in profitability measures. Recovery signs are evident in 2021, but economic profit and spread ratio remain below zero, indicating ongoing challenges in generating returns above the cost of capital.

Economic Profit

The economic profit remained negative in all reported years, indicating persistent losses relative to the cost of capital. The value improved slightly from -2042 million USD in 2017 to -1714 million USD in 2021, despite a significant deterioration in 2020 where it dropped to -2744 million USD. This fluctuation suggests challenges in maintaining profitability, with a notable impact likely arising during the 2020 period.

Railway Operating Revenues

Revenues from railway operations showed an overall increasing trend from 10,551 million USD in 2017 to 11,142 million USD in 2021. However, there was a decline in 2020 to 9,789 million USD, which corresponds with the drop in economic profit during the same period. This dip may be attributed to external factors affecting the transportation sector in that year. The recovery in revenues in 2021 indicates a partial rebound in operational performance.

Economic Profit Margin

The economic profit margin remained negative throughout the five-year period, confirming continued economic losses relative to total revenues. The margin improved moderately from -19.35% in 2017 to -15.39% in 2021. Again, 2020 stands out with the worst margin of -28.03%, highlighting a substantial reduction in profitability during that year, followed by recovery in the subsequent year.