Stock Analysis on Net

Norfolk Southern Corp. (NYSE:NSC)

This company has been moved to the archive! The financial data has not been updated since April 27, 2022.

Economic Value Added (EVA)

Microsoft Excel

Economic Profit

Norfolk Southern Corp., economic profit calculation

US$ in millions

Microsoft Excel
12 months ended: Dec 31, 2021 Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017
Net operating profit after taxes (NOPAT)1 3,711  2,658  3,546  3,300  2,921 
Cost of capital2 12.86% 12.83% 12.85% 12.90% 12.52%
Invested capital3 35,469  35,427  35,233  34,104  33,382 
 
Economic profit4 (851) (1,887) (983) (1,101) (1,257)

Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).

1 NOPAT. See details »

2 Cost of capital. See details »

3 Invested capital. See details »

4 2021 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 3,71112.86% × 35,469 = -851

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. economic profit decreased from 2019 to 2020 but then increased from 2020 to 2021 exceeding 2019 level.

Net Operating Profit after Taxes (NOPAT)

Norfolk Southern Corp., NOPAT calculation

US$ in millions

Microsoft Excel
12 months ended: Dec 31, 2021 Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017
Net income 3,005  2,013  2,722  2,666  5,404 
Deferred income tax expense (benefit)1 184  142  330  173  (2,859)
Increase (decrease) in allowance for doubtful accounts2 (3) — 
Increase (decrease) in equity equivalents3 186  139  332  173  (2,856)
Interest expense on debt 646  625  604  557  550 
Interest expense, operating lease liability4 13  15  19  27  24 
Adjusted interest expense on debt 659  640  623  584  574 
Tax benefit of interest expense on debt5 (138) (134) (131) (123) (201)
Adjusted interest expense on debt, after taxes6 520  506  492  461  373 
Net operating profit after taxes (NOPAT) 3,711  2,658  3,546  3,300  2,921 

Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).

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 2021 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 413 × 3.04% = 13

5 2021 Calculation
Tax benefit of interest expense on debt = Adjusted interest expense on debt × Statutory income tax rate
= 659 × 21.00% = 138

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. NOPAT decreased from 2019 to 2020 but then increased from 2020 to 2021 exceeding 2019 level.

Cash Operating Taxes

Norfolk Southern Corp., cash operating taxes calculation

US$ in millions

Microsoft Excel
12 months ended: Dec 31, 2021 Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017
Income taxes 873  517  769  803  (2,276)
Less: Deferred income tax expense (benefit) 184  142  330  173  (2,859)
Add: Tax savings from interest expense on debt 138  134  131  123  201 
Cash operating taxes 827  509  570  753  784 

Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).

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. cash operating taxes decreased from 2019 to 2020 but then increased from 2020 to 2021 exceeding 2019 level.

Invested Capital

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

US$ in millions

Microsoft Excel
Dec 31, 2021 Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017
Short-term debt —  —  —  —  100 
Current maturities of long-term debt 553  579  316  585  600 
Long-term debt, excluding current maturities 13,287  12,102  11,880  10,560  9,136 
Operating lease liability1 413  433  538  567  500 
Total reported debt & leases 14,253  13,114  12,734  11,712  10,336 
Stockholders’ equity 13,641  14,791  15,184  15,362  16,359 
Net deferred tax (assets) liabilities2 7,165  6,922  6,815  6,460  6,324 
Allowance for doubtful accounts3
Equity equivalents4 7,173  6,928  6,824  6,467  6,331 
Accumulated other comprehensive (income) loss, net of tax5 402  594  491  563  356 
Adjusted stockholders’ equity 21,216  22,313  22,499  22,392  23,046 
Invested capital 35,469  35,427  35,233  34,104  33,382 

Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).

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. invested capital increased from 2019 to 2020 and from 2020 to 2021.

Cost of Capital

Norfolk Southern Corp., cost of capital calculations

Capital (fair value)1 Weights Cost of capital
Equity2 64,841  64,841  ÷ 82,287  = 0.79 0.79 × 15.47% = 12.19%
Debt3 17,033  17,033  ÷ 82,287  = 0.21 0.21 × 4.06% × (1 – 21.00%) = 0.66%
Operating lease liability4 413  413  ÷ 82,287  = 0.01 0.01 × 3.04% × (1 – 21.00%) = 0.01%
Total: 82,287  1.00 12.86%

Based on: 10-K (reporting date: 2021-12-31).

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 61,862  61,862  ÷ 78,959  = 0.78 0.78 × 15.47% = 12.12%
Debt3 16,664  16,664  ÷ 78,959  = 0.21 0.21 × 4.17% × (1 – 21.00%) = 0.70%
Operating lease liability4 433  433  ÷ 78,959  = 0.01 0.01 × 3.50% × (1 – 21.00%) = 0.02%
Total: 78,959  1.00 12.83%

Based on: 10-K (reporting date: 2020-12-31).

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 54,838  54,838  ÷ 70,182  = 0.78 0.78 × 15.47% = 12.08%
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 12.85%

Based on: 10-K (reporting date: 2019-12-31).

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 × 15.47% = 12.10%
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 12.90%

Based on: 10-K (reporting date: 2018-12-31).

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 × 15.47% = 11.77%
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 12.52%

Based on: 10-K (reporting date: 2017-12-31).

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
Dec 31, 2021 Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017
Selected Financial Data (US$ in millions)
Economic profit1 (851) (1,887) (983) (1,101) (1,257)
Invested capital2 35,469  35,427  35,233  34,104  33,382 
Performance Ratio
Economic spread ratio3 -2.40% -5.33% -2.79% -3.23% -3.77%
Benchmarks
Economic Spread Ratio, Competitors4
American Airlines Group Inc. -9.33% -39.37% 2.23% 0.52% 1.01%
CSX Corp. 0.07% -2.11% 0.32% 0.04% -3.77%
Delta Air Lines Inc. -4.43% -40.30% 2.66% 2.65% 3.84%
FedEx Corp. 0.29% -4.89% -7.48% -0.99% -1.02%
Union Pacific Corp. 0.69% -0.92% 0.46% -0.15% -1.26%
United Airlines Holdings Inc. -9.34% -24.77% 3.40% -0.42% 0.74%
United Parcel Service Inc. 22.14% -8.00% 3.39% 8.01% 11.49%

Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).

1 Economic profit. See details »

2 Invested capital. See details »

3 2021 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × -851 ÷ 35,469 = -2.40%

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. economic spread ratio deteriorated from 2019 to 2020 but then improved from 2020 to 2021 exceeding 2019 level.

Economic Profit Margin

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

Microsoft Excel
Dec 31, 2021 Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017
Selected Financial Data (US$ in millions)
Economic profit1 (851) (1,887) (983) (1,101) (1,257)
Railway operating revenues 11,142  9,789  11,296  11,458  10,551 
Performance Ratio
Economic profit margin2 -7.64% -19.27% -8.70% -9.61% -11.91%
Benchmarks
Economic Profit Margin, Competitors3
American Airlines Group Inc. -9.09% -71.40% 1.73% 0.39% 0.93%
CSX Corp. 0.23% -7.50% 0.94% 0.12% -10.85%
Delta Air Lines Inc. -6.90% -101.49% 2.69% 2.57% 4.11%
FedEx Corp. 0.22% -4.07% -5.69% -0.81% -0.82%
Union Pacific Corp. 1.84% -2.74% 1.21% -0.38% -3.26%
United Airlines Holdings Inc. -19.04% -69.98% 2.93% -0.41% 0.76%
United Parcel Service Inc. 10.10% -3.14% 1.66% 3.56% 5.07%

Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).

1 Economic profit. See details »

2 2021 Calculation
Economic profit margin = 100 × Economic profit ÷ Railway operating revenues
= 100 × -851 ÷ 11,142 = -7.64%

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 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. economic profit margin deteriorated from 2019 to 2020 but then improved from 2020 to 2021 exceeding 2019 level.