Stock Analysis on Net
Stock Analysis on Net
Microsoft Excel LibreOffice Calc

Norfolk Southern Corp. (NYSE:NSC)

Economic Value Added (EVA)

Advanced level

EVA is registered trademark of Stern Stewart.

Economic value added or economic profit is the difference between revenues and costs,where costs include not only expenses, but also cost of capital.


Economic Profit

Norfolk Southern Corp., economic profit calculation

US$ in millions

Microsoft Excel LibreOffice Calc
12 months ended: Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Net operating profit after taxes (NOPAT)1 3,546  3,300  2,921  2,278  2,245 
Cost of capital2 13.44% 13.49% 13.09% 12.90% 11.65%
Invested capital3 35,233  34,104  33,382  32,718  32,163 
 
Economic profit4 (1,190) (1,302) (1,449) (1,943) (1,501)

Based on: 10-K (filing date: 2020-02-06), 10-K (filing date: 2019-02-08), 10-K (filing date: 2018-02-05), 10-K (filing date: 2017-02-06), 10-K (filing date: 2016-02-08).

1 NOPAT. See details »

2 Cost of capital. See details »

3 Invested capital. See details »

4 2019 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 3,54613.44% × 35,233 = -1,190

Item Description The company
Economic profit Economic profit is a measure of corporate performance computed by taking the spread between the return on invested capital and the cost of capital, and multiplying by the invested capital. Norfolk Southern Corp.’s economic profit increased from 2017 to 2018 and from 2018 to 2019.

Net Operating Profit after Taxes (NOPAT)

Norfolk Southern Corp., NOPAT calculation

US$ in millions

Microsoft Excel LibreOffice Calc
12 months ended: Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Net income 2,722  2,666  5,404  1,668  1,556 
Deferred income tax expense (benefit)1 330  173  (2,859) 227  320 
Increase (decrease) in allowance for doubtful accounts2 —  (3)
Increase (decrease) in equity equivalents3 332  173  (2,856) 228  317 
Interest expense on debt 604  557  550  563  545 
Interest expense, operating lease liability4 19  27  24  25  27 
Adjusted interest expense on debt 623  584  574  588  572 
Tax benefit of interest expense on debt5 (131) (123) (201) (206) (200)
Adjusted interest expense on debt, after taxes6 492  461  373  382  372 
Net operating profit after taxes (NOPAT) 3,546  3,300  2,921  2,278  2,245 

Based on: 10-K (filing date: 2020-02-06), 10-K (filing date: 2019-02-08), 10-K (filing date: 2018-02-05), 10-K (filing date: 2017-02-06), 10-K (filing date: 2016-02-08).

1 Elimination of deferred tax expense. See details »

2 Addition of increase (decrease) in allowance for doubtful accounts.

3 Addition of increase (decrease) in equity equivalents to net income.

4 2019 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 538 × 3.52% = 19

5 2019 Calculation
Tax benefit of interest expense on debt = Adjusted interest expense on debt × Statutory income tax rate
= 623 × 21.00% = 131

6 Addition of after taxes interest expense to net income.

Item Description The company
NOPAT Net operating profit after taxes is income from operations, but after removement of taxes calculated on cash basis that are relevant to operating income. Norfolk Southern Corp.’s NOPAT increased from 2017 to 2018 and from 2018 to 2019.

Cash Operating Taxes

Norfolk Southern Corp., cash operating taxes calculation

US$ in millions

Microsoft Excel LibreOffice Calc
12 months ended: Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Income taxes 769  803  (2,276) 914  886 
Less: Deferred income tax expense (benefit) 330  173  (2,859) 227  320 
Add: Tax savings from interest expense on debt 131  123  201  206  200 
Cash operating taxes 570  753  784  893  766 

Based on: 10-K (filing date: 2020-02-06), 10-K (filing date: 2019-02-08), 10-K (filing date: 2018-02-05), 10-K (filing date: 2017-02-06), 10-K (filing date: 2016-02-08).

Item Description The company
Cash operating taxes Cash operating taxes are estimated by adjusting income tax expense for changes in deferred taxes and tax benefit from the interest deduction. Norfolk Southern Corp.’s cash operating taxes decreased from 2017 to 2018 and from 2018 to 2019.

Invested Capital

Norfolk Southern Corp., invested capital calculation (financing approach)

US$ in millions

Microsoft Excel LibreOffice Calc
Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Short-term debt —  —  100  100  200 
Current maturities of long-term debt 316  585  600  550  500 
Long-term debt, excluding current maturities 11,880  10,560  9,136  9,562  9,393 
Operating lease liability1 538  567  500  466  492 
Total reported debt & leases 12,734  11,712  10,336  10,678  10,585 
Stockholders’ equity 15,184  15,362  16,359  12,409  12,188 
Net deferred tax (assets) liabilities2 6,815  6,460  6,324  9,140  8,942 
Allowance for doubtful accounts3
Equity equivalents4 6,824  6,467  6,331  9,144  8,945 
Accumulated other comprehensive (income) loss, net of tax5 491  563  356  487  445 
Adjusted stockholders’ equity 22,499  22,392  23,046  22,040  21,578 
Invested capital 35,233  34,104  33,382  32,718  32,163 

Based on: 10-K (filing date: 2020-02-06), 10-K (filing date: 2019-02-08), 10-K (filing date: 2018-02-05), 10-K (filing date: 2017-02-06), 10-K (filing date: 2016-02-08).

1 Addition of capitalized operating leases.

2 Elimination of deferred taxes from assets and liabilities. See details »

3 Addition of allowance for doubtful accounts receivable.

4 Addition of equity equivalents to stockholders’ equity.

5 Removal of accumulated other comprehensive income.

Item Description The company
Invested capital Capital is an approximation of the economic book value of all cash invested in going-concern business activities. Norfolk Southern Corp.’s invested capital increased from 2017 to 2018 and from 2018 to 2019.

Cost of Capital

Norfolk Southern Corp., cost of capital calculations

Capital (fair value)1 Weights Cost of capital
Equity2 54,838  54,838  ÷ 70,182  = 0.78 0.78 × 16.22% = 12.67%
Debt3 14,806  14,806  ÷ 70,182  = 0.21 0.21 × 4.49% × (1 – 21.00%) = 0.75%
Operating lease liability4 538  538  ÷ 70,182  = 0.01 0.01 × 3.52% × (1 – 21.00%) = 0.02%
Total: 70,182  1.00 13.44%

Based on: 10-K (filing date: 2020-02-06).

1 US$ in millions

2 Equity. See details »

3 Debt. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 45,858  45,858  ÷ 58,628  = 0.78 0.78 × 16.22% = 12.69%
Debt3 12,203  12,203  ÷ 58,628  = 0.21 0.21 × 4.69% × (1 – 21.00%) = 0.77%
Operating lease liability4 567  567  ÷ 58,628  = 0.01 0.01 × 4.69% × (1 – 21.00%) = 0.04%
Total: 58,628  1.00 13.49%

Based on: 10-K (filing date: 2019-02-08).

1 US$ in millions

2 Equity. See details »

3 Debt. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 39,365  39,365  ÷ 51,736  = 0.76 0.76 × 16.22% = 12.34%
Debt3 11,871  11,871  ÷ 51,736  = 0.23 0.23 × 4.82% × (1 – 35.00%) = 0.72%
Operating lease liability4 500  500  ÷ 51,736  = 0.01 0.01 × 4.82% × (1 – 35.00%) = 0.03%
Total: 51,736  1.00 13.09%

Based on: 10-K (filing date: 2018-02-05).

1 US$ in millions

2 Equity. See details »

3 Debt. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 34,829  34,829  ÷ 47,021  = 0.74 0.74 × 16.22% = 12.01%
Debt3 11,726  11,726  ÷ 47,021  = 0.25 0.25 × 5.27% × (1 – 35.00%) = 0.85%
Operating lease liability4 466  466  ÷ 47,021  = 0.01 0.01 × 5.27% × (1 – 35.00%) = 0.03%
Total: 47,021  1.00 12.90%

Based on: 10-K (filing date: 2017-02-06).

1 US$ in millions

2 Equity. See details »

3 Debt. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 21,020  21,020  ÷ 32,836  = 0.64 0.64 × 16.22% = 10.38%
Debt3 11,324  11,324  ÷ 32,836  = 0.34 0.34 × 5.40% × (1 – 35.00%) = 1.21%
Operating lease liability4 492  492  ÷ 32,836  = 0.01 0.01 × 5.40% × (1 – 35.00%) = 0.05%
Total: 32,836  1.00 11.65%

Based on: 10-K (filing date: 2016-02-08).

1 US$ in millions

2 Equity. See details »

3 Debt. See details »

4 Operating lease liability. See details »


Economic Spread Ratio

Norfolk Southern Corp., economic spread ratio calculation, comparison to benchmarks

Microsoft Excel LibreOffice Calc
Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Selected Financial Data (US$ in millions)
Economic profit1 (1,190) (1,302) (1,449) (1,943) (1,501)
Invested capital2 35,233  34,104  33,382  32,718  32,163 
Performance Ratio
Economic spread ratio3 -3.38% -3.82% -4.34% -5.94% -4.67%
Benchmarks
Economic Spread Ratio, Competitors4
CSX Corp. 0.19% -0.09% -3.91% -4.10% -1.63%
FedEx Corp. -7.78% -1.34% -1.37% -4.49% -8.88%
Union Pacific Corp. 0.96% 0.36% -0.74% -1.44% -0.03%
United Parcel Service Inc. 2.73% 7.32% 10.81% 6.82% 17.12%

Based on: 10-K (filing date: 2020-02-06), 10-K (filing date: 2019-02-08), 10-K (filing date: 2018-02-05), 10-K (filing date: 2017-02-06), 10-K (filing date: 2016-02-08).

1 Economic profit. See details »

2 Invested capital. See details »

3 2019 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × -1,190 ÷ 35,233 = -3.38%

4 Click competitor name to see calculations.

Performance ratio Description The company
Economic spread ratio The ratio of economic profit to invested capital, also equal to the difference between return on invested capital (ROIC) and cost of capital. Norfolk Southern Corp.’s economic spread ratio improved from 2017 to 2018 and from 2018 to 2019.

Economic Profit Margin

Norfolk Southern Corp., economic profit margin calculation, comparison to benchmarks

Microsoft Excel LibreOffice Calc
Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Selected Financial Data (US$ in millions)
Economic profit1 (1,190) (1,302) (1,449) (1,943) (1,501)
Railway operating revenues 11,296  11,458  10,551  9,888  10,511 
Performance Ratio
Economic profit margin2 -10.54% -11.36% -13.73% -19.66% -14.28%
Benchmarks
Economic Profit Margin, Competitors3
CSX Corp. 0.55% -0.26% -11.24% -11.90% -4.22%
FedEx Corp. -5.92% -1.09% -1.09% -3.91% -6.79%
Union Pacific Corp. 2.54% 0.90% -1.92% -3.88% -0.08%
United Parcel Service Inc. 1.34% 3.25% 4.77% 2.24% 5.60%

Based on: 10-K (filing date: 2020-02-06), 10-K (filing date: 2019-02-08), 10-K (filing date: 2018-02-05), 10-K (filing date: 2017-02-06), 10-K (filing date: 2016-02-08).

1 Economic profit. See details »

2 2019 Calculation
Economic profit margin = 100 × Economic profit ÷ Railway operating revenues
= 100 × -1,190 ÷ 11,296 = -10.54%

3 Click competitor name to see calculations.

Performance ratio Description The company
Economic profit margin The ratio of economic profit to sales. It is the company’s profit margin covering income efficiency and asset management. Economic profit margin is not biased in favor of capital-intensive business models, because any added capital is a cost to the economic profit margin. Norfolk Southern Corp.’s economic profit margin improved from 2017 to 2018 and from 2018 to 2019.