Norfolk Southern Corp. (NYSE:NSC)

Return on Assets (ROA)

The Return on Assets declined significantly from early 2018 through 2020, dropping from a peak of approximately 16.33% in late 2018 to a low point around 5.26%-5.3% in late 2020. Following this trough, a gradual recovery is observed through 2021 and early 2022, with ROA increasing to approximately 7.71% by March 2022. Despite improvement, ROA in 2022 remains notably lower than the levels seen in 2018.

Financial Leverage

Financial Leverage showed a consistent upward trend over the entire period. Starting at 2.2 in March 2018, it steadily increased each quarter, reaching 2.92 by March 2022. This indicates a progressive rise in the company's use of debt relative to equity, suggesting an increased reliance on leverage over time.

Return on Equity (ROE)

ROE followed a pattern similar to ROA but on a higher scale. It peaked at 38.32% in September 2018, then declined sharply through 2020 to roughly 13.44%-13.61%. From early 2021 onward, ROE demonstrated a notable recovery, rising steadily to approximately 22.55% by March 2022. Despite this rebound, ROE remains below the high levels recorded in 2018.

The financial analysis over the given periods reveals several key trends and insights across profitability, asset efficiency, leverage, and shareholder returns.

Net Profit Margin

The net profit margin displayed considerable fluctuations. Initially, it was above 50% in early 2018, peaking at approximately 52.82%. However, a significant decline occurred by the end of 2018, dropping to about 23.27%, signaling a reduction in profitability relative to sales. Through 2019 and 2020, the margin stabilized around 20-24%, reflecting a period of subdued profitability. From 2021 onwards, a recovery trend is evident, with the margin increasing gradually to approximately 26.58% by March 2022, indicating improved profitability.

Asset Turnover

Asset turnover remained relatively stable yet low throughout the period, fluctuating mildly around 0.3 ratio. The metric shows a slight decline from 0.3-0.32 in early years towards a lower ratio near 0.26 in 2020, indicating a decrease in the efficiency of asset utilization to generate revenue during this period. Gradual improvement followed in 2021 and early 2022, reaching 0.29, suggesting a modest enhancement in asset efficiency.

Financial Leverage

Financial leverage demonstrated a steady upward trend over the period. Starting at 2.2 in early 2018, it increased consistently each quarter, reaching nearly 2.92 by March 2022. This incremental rise in leverage implies an increasing use of debt relative to equity, which may elevate financial risk but also potentially enhance returns.

Return on Equity (ROE)

Return on equity exhibited a pattern influenced by the previous observations. ROE was strong in early 2018, peaking at 38.32%, then experienced a sharp decline to around 17-18% in late 2018 and 2019. The downturn continued in 2020 with ROE falling to approximately 13.44%, the lowest point. From 2021 onwards, ROE recovered steadily, climbing to 22.55% by March 2022, indicative of enhanced profitability relative to shareholder equity despite increasing financial leverage.

Overall, the data reflects a period of profitability normalization after an initial high margin phase, with concurrent declines in asset turnover and ROE during 2019-2020, likely influenced by external or operational challenges. A gradual recovery is observed in profitability and returns in 2021 and early 2022, alongside a consistent increase in leverage, pointing to a strategic balance between growth financing and financial performance optimization.

The analysis of the financial ratios over the series of quarterly periods reveals notable trends in operational efficiency, profitability, and financial structure.

Tax Burden

The tax burden ratio remained relatively stable across most periods, fluctuating slightly around 0.77 to 0.8 from the beginning of 2019 through early 2022. A higher value was observed in 2018, near 1.73 to 1.74, indicating changes in tax impact or effective tax rates during that year compared to subsequent periods.

Interest Burden

This ratio showed minor variation, generally maintaining values around 0.85 to 0.86 from March 2018 through March 2022. A slight dip was visible between March and December 2020, with the lowest points around 0.8, signaling a marginal increase in interest expenses burdening earnings during that period.

EBIT Margin

The EBIT margin exhibited a generally strong performance with margins above 34% through 2018 and 2019. There was a noticeable decline starting in early 2020, bottoming out around 31.37% in September 2020, likely influenced by adverse economic conditions during that time. From March 2021 onward, a robust recovery occurred, with margins climbing steadily to exceed 40% by late 2021, and slightly moderating to about 40.13% by March 2022.

Asset Turnover

The asset turnover ratio was stable near 0.3 during the initial periods and through 2019. A decline was observed from March 2020 to December 2020, dropping to approximately 0.26, indicating decreased efficiency in utilizing assets to generate revenues amid challenging conditions. From early 2021, the ratio gradually improved, reaching 0.29 by March 2022 but did not fully return to previous peak levels.

Financial Leverage

A steady upward trend in financial leverage was evident, rising from approximately 2.2 in early 2018 to nearly 2.92 by March 2022. This increase suggests a growing reliance on debt or other forms of financial obligations relative to equity, which may have implications for financial risk and capital structure management.

Return on Equity (ROE)

ROE demonstrated considerable fluctuation, peaking at over 38% in September 2018 before a sharp decline to near 13.44% in September 2020, reflecting a significant impact on profitability around that period. Subsequently, from March 2021 to March 2022, ROE recovered steadily, climbing back over 22%, corresponding with improvements in operating margins and leverage adjustments.

In summary, the company experienced a period of disruption around 2020, with declines in EBIT margin, asset turnover, and return on equity, likely linked to external economic pressures. Since then, a financial recovery trend is observed with improving profitability metrics and increased leverage, suggesting strategic adjustments to enhance returns despite somewhat diminished asset efficiency compared to pre-2020 levels.

The analysis of the quarterly financial metrics reveals several noteworthy trends over the examined periods.

Net Profit Margin

The net profit margin exhibited a strong position at the beginning of the observed timeline, consistently exceeding 50% through the first three quarters of 2018. However, a significant contraction occurred in the fourth quarter of 2018, where it declined sharply to around 23%. Post this decline, the margin stabilized around the mid-20% range with minor fluctuations. From 2019 to early 2022, the margin mostly remained between approximately 20% and 27%, demonstrating modest improvement in 2021 and early 2022 compared to the pandemic-impacted period around 2020, but without reaching the high levels observed in early 2018.

Asset Turnover

Asset turnover ratios remained relatively stable throughout the period, hovering around 0.3. Minor declines were noted starting mid-2019, with the ratio decreasing to approximately 0.26 during most of 2020 and 2021. Towards the latest quarter in early 2022, there is a slight recovery observed, with the ratio rising back towards 0.29. Overall, the asset turnover indicates consistent usage of assets to generate revenue, though with some reduction in efficiency during the pandemic period.

Return on Assets (ROA)

The return on assets shows a pattern closely aligned with net profit margin movements, albeit at much lower absolute values. Beginning with a peak above 16% in early to mid-2018, ROA experienced a meaningful drop in the final quarter of 2018, falling to around 7%. Thereafter, it continued a downward trend through 2020, reaching a low near 5.3%. Starting in 2021, the ROA demonstrates a gradual upward trajectory, reaching close to 7.7% in the first quarter of 2022. This indicates improving asset profitability following the period of reduced efficiency coinciding with the onset and continuation of the COVID-19 pandemic.

In summary, the data portrays a company that experienced a sharp decline in profitability at the end of 2018, with subsequent stabilization at a lower but relatively steady profit margin. Asset utilization efficiency slipped somewhat during the pandemic but has shown signs of recovery recently. While ROA dropped significantly during the crisis, it has started to improve slightly, suggesting enhancing returns on asset investment as conditions normalize. The overall financial performance reflects resilience with cautious recovery amidst challenging economic circumstances.

Tax Burden

The tax burden ratio demonstrated relative stability from March 2018 to June 2019, maintaining around 1.73 to 1.74 before experiencing a significant decrease at the end of 2018 to approximately 0.77 to 0.78. This lower level persisted from the first quarter of 2019 through to March 2022, indicating a consistent reduction in tax burden throughout the latter period.

Interest Burden

The interest burden ratio remained fairly stable throughout the entire period, fluctuating slightly between 0.85 and 0.86 in the earlier quarters (2018-2019) and experiencing a moderate decline during 2020, reaching a low of around 0.80 before returning to approximately 0.86 by March 2022. This shows a temporary weakening in interest coverage during 2020, followed by recovery.

EBIT Margin

There was a clear upward trend in EBIT margin from 2018 through early 2019, peaking around 36.45%. However, a notable decline occurred during 2020, with margins dropping to the low thirties, reflecting a challenging period. From 2021 onward, the EBIT margin improved significantly, reaching above 40% by late 2021 and early 2022, indicating enhanced operational profitability in the recent quarters.

Asset Turnover

Asset turnover gradually declined from 0.32 in late 2018 down to about 0.26 in 2020, marking reduced efficiency in utilizing assets to generate revenue during that time. From 2021 onward, there was a modest recovery to around 0.29 by the first quarter of 2022, suggesting some improvement in asset utilization efficiency.

Return on Assets (ROA)

Return on assets showed a strong positive performance in 2018, with values above 15%, but sharply declined to around 7.36% by the end of that year. The ROA remained subdued throughout 2019 and 2020, reaching a low near 5.26%. Starting in 2021, there was a gradual recovery in ROA, climbing to approximately 7.81% by late 2021, and slightly declining to 7.71% in early 2022. This indicates a sustained recovery in asset profitability after a significant dip.

Tax Burden

The tax burden shows a significant decline from over 1.7 in the early periods of 2018 to approximately 0.77 by the end of 2018. From 2019 through early 2022, the tax burden remains stable around the 0.77 to 0.8 range, indicating a consistent tax impact on earnings during this time frame.

Interest Burden

The interest burden remains relatively stable throughout the entire period, starting around 0.85 to 0.86 in 2018 and hovering closely around these values with a slight dip to 0.8 during the mid-2020 periods. By 2021 and into early 2022, it returns to approximately 0.85 to 0.86, indicating consistent interest expenses relative to earnings before interest and taxes.

EBIT Margin

The EBIT margin exhibits a generally high level around 35% in 2018 and early 2019, then experiences a decline in the 2020 period reaching a low near 31%. This reduction may reflect operational or market challenges during that time. Subsequently, the EBIT margin recovers strongly in 2021, increasing steadily to exceed 40% by late 2021 and early 2022, highlighting improved operational profitability.

Net Profit Margin

The net profit margin displays significant variability throughout the timeframe. It begins at a very high level over 50% in 2018, then declines sharply to roughly 24% by end of 2018 and remains near that level throughout 2019. During 2020, the margin decreases further to approximately 20%, consistent with the broader earnings compression experienced in that year. From 2021 onward, there is a gradual recovery in net profit margin, rising back towards 27% by early 2022, indicating improving bottom-line profitability.