Norfolk Southern Corp. (NYSE:NSC)

The analyzed financial metrics reveal several key trends over the examined periods.

Return on Assets (ROA)

The ROA showed a notable increase from March 2017, reaching a peak around the end of 2017 with values exceeding 16%. Subsequently, there was a significant decline starting in early 2019, dropping to about 5.26% by the end of 2020. From 2021 onwards, ROA demonstrated a gradual recovery, climbing back to approximately 7.81% by the end of 2021 and slightly decreasing to 7.71% in the first quarter of 2022.

Financial Leverage

Financial leverage exhibited a mostly upward trend over the periods reviewed. Beginning at 2.81 in the first quarter of 2017, it initially decreased to around 2.16 by mid-2018, then reversed to a continuous increase from 2018 onwards. By the first quarter of 2022, the leverage ratio had risen to 2.92, indicating a gradual increase in the use of debt relative to equity or assets over time.

Return on Equity (ROE)

ROE followed a pattern similar to ROA but with more pronounced fluctuations. Starting from approximately 33% towards the end of 2017, it rose to a peak of over 38% by the end of 2018. Following this peak, ROE declined sharply to just under 14% by late 2020. From 2021, there was a steady improvement, with ROE increasing to over 22% by the first quarter of 2022, suggesting enhanced profitability relative to shareholder equity.

Overall, the data indicate robust profitability around 2017-2018, followed by a period of decline in both asset and equity returns peaking in 2020. This downturn may reflect external or internal challenges before a gradual recovery phase began in 2021. Concurrently, financial leverage has steadily risen after a dip in 2018, which may suggest a higher reliance on debt financing in recent years.

The analysis of the quarterly financial data reveals several notable trends in profitability, efficiency, and financial leverage across the periods presented.

Net Profit Margin (%):

The net profit margin exhibited a significant decline from the first observed value of 51.22% in March 2018 to approximately 23.27% by March 2019. Following this sharp decrease, the margin stabilized in the low 20% range from 2019 through early 2020. From this period onward, a gradual upward trend is observed, rising from 20.27% in the final quarter of 2020 to approximately 26.58% by March 2022. This pattern suggests an initial contraction in profitability followed by a recovery phase.

Asset Turnover (ratio):

The asset turnover ratio remained relatively stable around 0.3 in the mid-2018 period, with a minor increase to 0.32 in early 2019. Subsequently, the ratio experienced a slight decline to a low point of 0.26 in late 2020 and early 2021. From that point, a gradual improvement occurred, reaching 0.29 by the first quarter of 2022. Overall, the fluctuations are modest, indicating relatively consistent asset utilization efficiency with a slight downturn during 2020, possibly reflecting operational challenges.

Financial Leverage (ratio):

Financial leverage showed a declining trend from 2.81 in March 2017 to 2.18 by the end of 2017. Following this trough, leverage steadily increased over the ensuing years, rising to 2.92 by March 2022. This upward trajectory indicates a gradual increase in the use of debt financing or other forms of leverage over the period, reaching higher levels than initially recorded.

Return on Equity (ROE) (%):

ROE followed a similar pattern to net profit margin, with values starting at approximately 33.03% in March 2018 and increasing to a peak of 38.32% by December 2018. Subsequently, there was a marked decrease to around 17-18% throughout 2019 and 2020. The metric showed a recovery commencing in late 2020, climbing steadily to about 22.55% by March 2022. This indicates that return delivered to shareholders weakened significantly after 2018 but improved in more recent quarters.

In summary, the data illustrates a phase of diminished profitability and operational efficiency from late 2018 through 2020, likely influenced by external or internal challenges. Despite stable asset turnover ratios, leverage steadily increased over time. Profitability and return metrics demonstrated a recovery during 2021 and early 2022, though they had not yet returned to the peak levels seen in 2018. The overall financial profile points to cautious improvement after a period of contraction and emphasizes the importance of monitoring leverage trends alongside operational performance.

The analysis of the quarterly financial ratios reveals several notable trends over the observed periods.

Tax Burden

The tax burden ratio began at a high level around 1.73 in early 2018 and significantly declined to approximately 0.77 by early 2019. From this point onward, it remained relatively stable, fluctuating slightly between 0.77 and 0.81 through the end of the observed period in early 2022.

Interest Burden

The interest burden maintained a consistent level close to 0.85 to 0.86 from early 2018 until late 2019. There was a modest decline to 0.8 to 0.81 during 2020, likely reflecting some cost management or changes in interest expenses, before returning to near 0.85 by early 2022.

EBIT Margin

The EBIT margin showed strong performance starting from about 34.9% in early 2018, gradually increasing to 36.4% by late 2019. A decline occurred during 2020, reaching a low around 31.4%, potentially impacted by extraordinary market conditions. After this decline, the margin rebounded impressively to exceed 40% in 2021 and remained slightly above 40% into early 2022, indicating improved operational efficiency or pricing power.

Asset Turnover

Asset turnover remained relatively stable around 0.30–0.32 from early 2018 through 2019 but declined to approximately 0.26 during 2020, suggesting a decrease in asset efficiency during that period. A mild recovery began in 2021 with turnover rising to about 0.29 by early 2022, indicating enhanced utilization of asset base.

Financial Leverage

Financial leverage displayed a steady upward trend over the entire period, rising from about 2.18 in late 2017 to near 2.92 by early 2022. This trend suggests an increasing reliance on debt financing or higher use of leverage in the capital structure over time.

Return on Equity (ROE)

ROE experienced significant volatility. It started near 33% in early 2018, but this fell sharply to around 17-18% by early 2019 and further declined to lows approximately 13-14% during 2020. Starting in 2021, ROE showed a strong recovery, climbing steadily to over 22% by early 2022. This pattern indicates a period of operational or market challenges followed by improved profitability and potentially more efficient use of equity capital.

Overall, the financial ratios indicate a period of stability in tax and interest burdens after initial adjustments, a dip in profitability and asset efficiency during 2020 likely due to adverse external factors, and a subsequent recovery with enhanced margins, better asset utilization, and increased leverage contributing to improved returns on equity through 2021 into early 2022.

The financial data reveals several noteworthy trends across the analyzed quarters.

Net Profit Margin

From the first recorded value in March 2018, the net profit margin shows a high starting level above 50%, with a general declining trend observed through the end of 2018. In 2019, the margin decreases sharply to approximately 23-24% and remains relatively stable around that level throughout the year. During 2020, a further gradual decrease is evident, reaching a low point near 20%. However, from early 2021 onward, the margin shows a consistent recovery trend, gradually rising up to roughly 27% by the first quarter of 2022.

Asset Turnover Ratio

Asset turnover starts around 0.3 in early 2018, maintaining a stable range between 0.3 and 0.31 until mid-2019. Thereafter, a decline begins, bottoming out close to 0.26 in late 2020 and early 2021. Following this dip, there is a modest recovery to around 0.29 by the first quarter of 2022. Overall, the ratio reflects a mild reduction in asset utilization efficiency over the period with some signs of improvement in the most recent quarters.

Return on Assets (ROA)

The ROA data starts at relatively high levels above 15% in 2018 and falls sharply to a range of about 7.3% to 7.5% from 2019 through early 2020. During the remainder of 2020, ROA decreases further, reaching a trough near 5.3%. Starting in 2021, a gradual recovery materializes, with ROA increasing steadily to approximately 7.8% by early 2022. This pattern indicates a significant weakening of asset profitability around 2019-2020, followed by a steady rebuilding of returns throughout 2021 and into 2022.

In summary, the period under review highlights an initial strong profitability position in early 2018, followed by a marked contraction around 2019-2020 across net profit margin and return on assets. Asset turnover mirrored this trend with a moderate decline in efficiency. From 2021 onward, the company demonstrates signs of financial recovery and improvement in key profitability and efficiency metrics.

Tax Burden

The tax burden ratio exhibits a marked shift beginning in the first quarter of 2018, dropping substantially from values near 1.73-1.74 down to around 0.77-0.81 in subsequent quarters. From 2019 through to early 2022, the tax burden remains relatively stable, fluctuating narrowly between 0.77 and 0.81, suggesting a consistent tax expense relative to pre-tax earnings during this period.

Interest Burden

The interest burden ratio shows minor variation over the analyzed quarters. It begins at approximately 0.85-0.86 in early 2018 and maintains this level through the end of 2019. A slight decline is observed in 2020, with the ratio reaching a low near 0.80, before recovering to around 0.85-0.86 by the end of 2021 and into early 2022. This indicates modest fluctuations but overall steady interest expense management relative to EBIT.

EBIT Margin

The EBIT margin remains fairly stable around 35% during 2018 and 2019, peaking slightly at 36.45% towards the end of 2019. However, there is a noticeable decline during 2020, with margins dropping to approximately 31-33%, potentially reflecting operational challenges during that year. From 2021 onwards, the EBIT margin improves significantly, reaching levels above 40% by late 2021 and early 2022, indicating enhanced profitability at the operating earnings level during this recovery phase.

Asset Turnover

Asset turnover maintains a generally consistent level between 0.30 and 0.32 through 2018 and 2019 but experiences a decrease starting in early 2020, dropping to around 0.26. Throughout 2020 and 2021, asset turnover remains subdued, only gradually increasing in late 2021 to about 0.29. This trend suggests reduced efficiency in generating sales from asset investments during the mid-period, with a partial recovery towards the end.

Return on Assets (ROA)

The return on assets exhibits a significant decline from mid-2018 through 2020. Initially, ROA ranged between 15.13% and 16.33%, but it falls sharply to below 7.5% in 2019 and further declines to near 5.3% in late 2020. Beginning in 2021, ROA demonstrates a steady recovery, rising back to approximately 7.7% by early 2022, though it remains well below the earlier peak levels. This pattern aligns with the observed fluctuations in EBIT margin and asset turnover, reflecting the combined impact of operating profit changes and asset efficiency on overall profitability.

Tax Burden

The tax burden ratio shows a distinct shift starting from March 31, 2018. Initially, values around 1.73 to 1.74 suggest a higher effective tax impact. From the first quarter of 2019 onward, the ratio declines sharply to 0.77 and remains relatively stable around this value through the period ending March 31, 2022, with only minor fluctuations between 0.77 and 0.81. This indicates a significant and sustained reduction in the tax burden over the analyzed quarters, contributing positively to after-tax profitability.

Interest Burden

The interest burden ratio remains fairly steady throughout the entire period, with values consistently around 0.85 to 0.86 until early 2019. A gradual decline is observed during 2020, reaching a low of 0.80 at the end of that year. Starting in 2021, the ratio trends upward again, returning to 0.85-0.86 by the end of the observation period. This pattern suggests moderate fluctuations in interest expenses relative to earnings before interest and taxes, but overall the company maintains stable interest coverage with slight improvement and minor deterioration phases.

EBIT Margin

The EBIT margin demonstrates an overall increasing trend from March 2017 through March 2022. Initially fluctuating in the mid-30% range (around 34-36%), it experiences a noticeable dip during 2020 to levels around 31-32%. Following this dip, a strong recovery occurs, with margins climbing steadily to peak at above 40% by late 2021 and early 2022. This recovery and growth in EBIT margin reflect improving operating profitability over the latest quarters, despite challenges in 2020.

Net Profit Margin

Net profit margin experiences significant volatility. Early 2018 quarters show high percentages above 50%, indicating exceptional net profitability or possibly accounting nuances. However, beginning in 2019, the net profit margin falls sharply to the low-to-mid 20% range and remains within that range up to March 2022. There is a slight decreasing trend in 2020, with margins around 20-21%, followed by a gradual recovery to approximately 27% by late 2021. The pattern suggests the net profitability was unusually elevated in early periods but stabilized at more typical levels after 2018, with some resilience shown post-2020 disruptions.

Summary

Overall, the financial ratios indicate a positive trajectory in operational efficiency and profitability. The significant reduction in tax burden from 2019 onward and a stable interest burden ratio provide a sound basis for enhanced profitability. EBIT margin growth after a dip in 2020 signals strong operational recovery and efficiency gains. Although net profit margin shows variability, the stabilization and moderate improvement in recent quarters reflect a steady recovery in bottom-line performance. These trends collectively suggest improved financial health and operational performance over the analyzed period.