Norfolk Southern Corp. (NYSE:NSC)

Net Operating Profit After Taxes (NOPAT)

The net operating profit after taxes shows a generally increasing trend over the analyzed period, rising from 2921 million US dollars in 2017 to 3711 million US dollars in 2021. There was a dip observed in 2020, where NOPAT decreased to 2658 million US dollars, likely influenced by external factors affecting profitability in that year. However, by 2021 the profit rebounded strongly, surpassing the previous years.

Cost of Capital

The cost of capital remained relatively stable throughout the period, fluctuating marginally between 14.86% and 15.31%. This stability indicates consistent expectations of returns required by investors and creditors during these years, with no significant changes in the perceived risk or financing conditions.

Invested Capital

Invested capital showed a steady increase from 33,382 million US dollars in 2017 to 35,469 million US dollars in 2021. The growth was gradual and modest, suggesting ongoing capital expenditures or accumulation of assets to support business activities, despite minor year-to-year changes.

Economic Profit

The economic profit was negative across all years, indicating that the returns generated did not exceed the cost of capital. While there was a slight improvement from -2039 million US dollars in 2017 to -1711 million US dollars in 2021, the negative values reflect persistent challenges in creating value above the cost of invested capital. The most significant decline was seen in 2020, with economic profit dropping to -2741 million US dollars, which coincides with the dip in NOPAT and may suggest higher operational pressures or lower efficiency during that year.

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 shows a consistent negative value across the five-year period, indicating the company has been experiencing economic losses. Starting at -2039 million US dollars in 2017, there is a gradual improvement observed until 2019 at -1830 million. However, in 2020, the economic profit deteriorated markedly to -2741 million before partially recovering to -1711 million in 2021. This fluctuation suggests that the company faced significant challenges in 2020 but managed some recovery thereafter.

Invested Capital

The invested capital demonstrates a steady increase over the years, rising from 33,382 million US dollars in 2017 to 35,469 million in 2021. The growth is gradual and consistent, reflecting ongoing investment or asset accumulation. Despite the growth in invested capital, the negative economic profit indicates that these investments have not yet translated into positive returns.

Economic Spread Ratio

The economic spread ratio remains negative throughout the period, indicating that the company’s return on invested capital is below its cost of capital. Starting at -6.11% in 2017, the ratio improves slightly to -5.19% by 2019 but then worsens substantially to -7.74% in 2020. By 2021, the ratio recovers somewhat to -4.82%. This pattern aligns with the trends observed in economic profit, highlighting the impact of external or internal factors on the company’s profitability and cost efficiency especially during 2020.

Economic Profit

The economic profit exhibited a negative trend throughout the five-year period, indicating consistent economic losses each year. The losses decreased marginally from 2017 to 2019, moving from -2039 million US dollars to -1830 million US dollars. However, in 2020, economic profit sharply declined to -2741 million US dollars, representing the most significant loss within the timeframe. In 2021, the economic loss improved notably to -1711 million US dollars, suggesting some recovery from the previous year's downturn.

Railway Operating Revenues

Operating revenues demonstrated a general upward movement, albeit with some volatility. From 2017 to 2018, revenues increased from 10,551 million US dollars to 11,458 million US dollars. In 2019, there was a slight decline to 11,296 million US dollars, followed by a more significant decrease in 2020 to 9,789 million US dollars. The year 2021 saw a recovery with revenues rising again to 11,142 million US dollars, close to the peak levels of 2018 and 2019.

Economic Profit Margin

The economic profit margin, consistently negative throughout the period, mirrored the trend observed in economic profit. It showed improvement from -19.33% in 2017 to -16.2% in 2019, indicating a reduction in losses relative to revenues. However, in 2020, the margin worsened sharply to -28%, reflecting a significant decline in profitability amid reduced revenue and increased losses. Following this dip, the margin improved markedly in 2021 to -15.36%, the best performance in the five-year span.

Summary

Overall, the financial data reveals a challenging economic environment with persistent losses as measured by economic profit and economic profit margin. Despite fluctuations in railway operating revenues, the company struggled to achieve positive economic profit. The sharp decline in 2020 in both revenue and profitability suggests external factors impacting operations negatively in that year. The subsequent recovery in 2021 points to improved operational conditions or strategic adjustments leading to better financial outcomes, although economic profit remained negative.