Analysis of Solvency Ratios
Solvency ratios also known as long-term debt ratios measure a company ability to meet long-term obligations.
Solvency Ratios (Summary)
Debt Ratios
Coverage Ratios
Norfolk Southern Corp., solvency ratios
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).
A consistent upward trend in leverage is observed across all solvency metrics between 2017 and 2021, indicating a systematic increase in the company's reliance on debt financing relative to its equity and asset base.
- Capital Structure and Leverage
- The debt to equity ratio increased steadily from 0.60 in 2017 to 1.01 in 2021, marking a significant shift in the balance between creditor-supplied and shareholder-supplied capital. When operating lease liabilities are included, this ratio reaches 1.04 by 2021, suggesting that lease obligations further amplify the leverage profile. Similarly, the debt to capital ratio rose from 0.38 to 0.50, and the debt to assets ratio grew from 0.28 to 0.36 over the same period.
- Financial Leverage and Asset Utilization
- Financial leverage exhibits a continuous climb from 2.18 in 2017 to 2.82 in 2021. This trend confirms that a larger proportion of the company's assets is being financed through debt, which increases the potential return on equity but also elevates the company's long-term financial risk profile.
- Coverage Ratios and Debt Serviceability
- The interest coverage and fixed charge coverage ratios demonstrate a different pattern characterized by fluctuation rather than a linear trend. Interest coverage peaked in 2018 at 7.23 before experiencing a significant contraction to 5.05 in 2020, subsequently recovering to 7.00 in 2021. Fixed charge coverage followed an identical trajectory, dipping to its lowest point of 4.22 in 2020 before rebounding to 5.82 in 2021. These movements suggest a temporary period of reduced earnings or increased fixed obligations in 2020, though the overall capacity to service debt remained robust throughout the period.
In summary, while the company's overall solvency position has weakened due to a persistent increase in leverage and total debt relative to assets and equity, the coverage ratios indicate that the entity maintains a sufficient margin to meet its interest and fixed charge obligations.
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Debt to Equity
Norfolk Southern Corp., debt to equity calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| 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) | |
| Total debt | 13,840) | 12,681) | 12,196) | 11,145) | 9,836) | |
| Stockholders’ equity | 13,641) | 14,791) | 15,184) | 15,362) | 16,359) | |
| Solvency Ratio | ||||||
| Debt to equity1 | 1.01 | 0.86 | 0.80 | 0.73 | 0.60 | |
| Benchmarks | ||||||
| Debt to Equity, Competitors2 | ||||||
| FedEx Corp. | 0.86 | — | — | — | — | |
| Uber Technologies Inc. | 0.66 | — | — | — | — | |
| Union Pacific Corp. | 2.10 | — | — | — | — | |
| United Airlines Holdings Inc. | 7.03 | — | — | — | — | |
| United Parcel Service Inc. | 1.54 | — | — | — | — | |
| Debt to Equity, Sector | ||||||
| Transportation | 1.63 | — | — | — | — | |
| Debt to Equity, Industry | ||||||
| Industrials | 1.37 | — | — | — | — | |
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 2021 Calculation
Debt to equity = Total debt ÷ Stockholders’ equity
= 13,840 ÷ 13,641 = 1.01
2 Click competitor name to see calculations.
A sustained shift in the solvency profile of the organization is evident between 2017 and 2021. The financial position is characterized by a simultaneous increase in total liabilities and a reduction in shareholder equity, resulting in a progressive rise in financial leverage.
- Total Debt Trends
- Total debt exhibited a consistent year-over-year increase throughout the five-year period. Starting at 9,836 million US$ in 2017, obligations rose to 13,840 million US$ by the end of 2021, representing a total increase of approximately 40.7%.
- Stockholders' Equity Trends
- Conversely, stockholders' equity experienced a steady decline over the same interval. Equity decreased from 16,359 million US$ in 2017 to 13,641 million US$ in 2021, reflecting a total contraction of approximately 16.6%.
- Debt to Equity Ratio Analysis
- The debt to equity ratio climbed steadily from 0.60 in 2017 to 1.01 in 2021. This upward trajectory indicates an increasing reliance on debt financing relative to equity. The crossing of the 1.0 threshold in 2021 marks a significant transition where total debt has surpassed the total equity of the company, indicating a higher risk profile regarding long-term solvency.
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Debt to Equity (including Operating Lease Liability)
Norfolk Southern Corp., debt to equity (including operating lease liability) calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| 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) | |
| Total debt | 13,840) | 12,681) | 12,196) | 11,145) | 9,836) | |
| Current operating lease liability | 82) | 89) | 97) | —) | —) | |
| Non-current operating lease liability | 331) | 344) | 441) | —) | —) | |
| Total debt (including operating lease liability) | 14,253) | 13,114) | 12,734) | 11,145) | 9,836) | |
| Stockholders’ equity | 13,641) | 14,791) | 15,184) | 15,362) | 16,359) | |
| Solvency Ratio | ||||||
| Debt to equity (including operating lease liability)1 | 1.04 | 0.89 | 0.84 | 0.73 | 0.60 | |
| Benchmarks | ||||||
| Debt to Equity (including Operating Lease Liability), Competitors2 | ||||||
| FedEx Corp. | 1.51 | — | — | — | — | |
| Uber Technologies Inc. | 0.79 | — | — | — | — | |
| Union Pacific Corp. | 2.22 | — | — | — | — | |
| United Airlines Holdings Inc. | 8.17 | — | — | — | — | |
| United Parcel Service Inc. | 1.79 | — | — | — | — | |
| Debt to Equity (including Operating Lease Liability), Sector | ||||||
| Transportation | 2.02 | — | — | — | — | |
| Debt to Equity (including Operating Lease Liability), Industry | ||||||
| Industrials | 1.54 | — | — | — | — | |
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 2021 Calculation
Debt to equity (including operating lease liability) = Total debt (including operating lease liability) ÷ Stockholders’ equity
= 14,253 ÷ 13,641 = 1.04
2 Click competitor name to see calculations.
Between 2017 and 2021, a consistent deterioration in the solvency position is observed. The capital structure shifted significantly as total debt increased while stockholders' equity declined, leading to a steady rise in financial leverage.
- Total Debt Trends
- Total debt, including operating lease liabilities, exhibited a continuous upward trajectory over the analyzed period. Obligations rose from US$ 9,836 million in 2017 to US$ 14,253 million in 2021, representing a substantial increase in the company's total liabilities.
- Stockholders' Equity Trends
- A concurrent downward trend is observed in stockholders' equity, which decreased every year from a peak of US$ 16,359 million in 2017 to US$ 13,641 million by December 31, 2021. This contraction in equity reduces the internal capital buffer available to support the company's debt obligations.
- Debt to Equity Ratio Analysis
- The debt to equity ratio increased monotonically from 0.60 in 2017 to 1.04 in 2021. This progression indicates a systematic shift toward higher leverage. A critical threshold was crossed in 2021, where the ratio exceeded 1.0, signifying that total debt now outweighs the total equity of the organization.
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Debt to Capital
Norfolk Southern Corp., debt to capital calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| 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) | |
| Total debt | 13,840) | 12,681) | 12,196) | 11,145) | 9,836) | |
| Stockholders’ equity | 13,641) | 14,791) | 15,184) | 15,362) | 16,359) | |
| Total capital | 27,481) | 27,472) | 27,380) | 26,507) | 26,195) | |
| Solvency Ratio | ||||||
| Debt to capital1 | 0.50 | 0.46 | 0.45 | 0.42 | 0.38 | |
| Benchmarks | ||||||
| Debt to Capital, Competitors2 | ||||||
| FedEx Corp. | 0.46 | — | — | — | — | |
| Uber Technologies Inc. | 0.40 | — | — | — | — | |
| Union Pacific Corp. | 0.68 | — | — | — | — | |
| United Airlines Holdings Inc. | 0.88 | — | — | — | — | |
| United Parcel Service Inc. | 0.61 | — | — | — | — | |
| Debt to Capital, Sector | ||||||
| Transportation | 0.62 | — | — | — | — | |
| Debt to Capital, Industry | ||||||
| Industrials | 0.58 | — | — | — | — | |
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 2021 Calculation
Debt to capital = Total debt ÷ Total capital
= 13,840 ÷ 27,481 = 0.50
2 Click competitor name to see calculations.
An examination of solvency metrics from 2017 to 2021 reveals a consistent upward trend in leverage. The capital structure has shifted toward a higher proportion of debt, indicating an increasing reliance on borrowed funds relative to the total capital base.
- Total Debt Expansion
- Total debt increased steadily every year throughout the analyzed period, rising from 9,836 million US dollars in 2017 to 13,840 million US dollars in 2021. This trajectory represents a cumulative increase of approximately 40.7% over five years.
- Total Capital Stagnation
- In contrast to the growth in debt, total capital remained relatively stagnant. The figure moved from 26,195 million US dollars in 2017 to 27,481 million US dollars in 2021, showing minimal growth and suggesting that the expansion of debt was not accompanied by a proportional increase in equity.
- Debt to Capital Ratio Progression
- The debt to capital ratio exhibited a linear increase, starting at 0.38 in 2017 and reaching 0.50 by the end of 2021. This progression indicates that by 2021, debt accounted for 50% of the total capital structure, reflecting a weakened solvency position compared to the baseline of 2017.
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Debt to Capital (including Operating Lease Liability)
Norfolk Southern Corp., debt to capital (including operating lease liability) calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| 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) | |
| Total debt | 13,840) | 12,681) | 12,196) | 11,145) | 9,836) | |
| Current operating lease liability | 82) | 89) | 97) | —) | —) | |
| Non-current operating lease liability | 331) | 344) | 441) | —) | —) | |
| Total debt (including operating lease liability) | 14,253) | 13,114) | 12,734) | 11,145) | 9,836) | |
| Stockholders’ equity | 13,641) | 14,791) | 15,184) | 15,362) | 16,359) | |
| Total capital (including operating lease liability) | 27,894) | 27,905) | 27,918) | 26,507) | 26,195) | |
| Solvency Ratio | ||||||
| Debt to capital (including operating lease liability)1 | 0.51 | 0.47 | 0.46 | 0.42 | 0.38 | |
| Benchmarks | ||||||
| Debt to Capital (including Operating Lease Liability), Competitors2 | ||||||
| FedEx Corp. | 0.60 | — | — | — | — | |
| Uber Technologies Inc. | 0.44 | — | — | — | — | |
| Union Pacific Corp. | 0.69 | — | — | — | — | |
| United Airlines Holdings Inc. | 0.89 | — | — | — | — | |
| United Parcel Service Inc. | 0.64 | — | — | — | — | |
| Debt to Capital (including Operating Lease Liability), Sector | ||||||
| Transportation | 0.67 | — | — | — | — | |
| Debt to Capital (including Operating Lease Liability), Industry | ||||||
| Industrials | 0.61 | — | — | — | — | |
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 2021 Calculation
Debt to capital (including operating lease liability) = Total debt (including operating lease liability) ÷ Total capital (including operating lease liability)
= 14,253 ÷ 27,894 = 0.51
2 Click competitor name to see calculations.
The solvency position from 2017 to 2021 is characterized by a steady increase in financial leverage. While total capital remained relatively stable throughout the period, total debt grew consistently, resulting in a progressive rise in the debt-to-capital ratio.
- Total Debt Expansion
- Total debt, including operating lease liabilities, experienced an uninterrupted upward trend, increasing from US$ 9,836 million in 2017 to US$ 14,253 million by 2021. This indicates a consistent increase in total obligations over the five-year interval.
- Total Capital Stability
- Total capital, including operating lease liabilities, exhibited limited volatility. Following an initial increase from US$ 26,195 million in 2017 to a peak of US$ 27,918 million in 2019, the figure remained nearly stagnant, concluding the period at US$ 27,894 million in 2021.
- Debt to Capital Ratio Trend
- The debt to capital ratio climbed consistently from 0.38 in 2017 to 0.51 in 2021. This upward trajectory is driven primarily by the growth in total debt rather than fluctuations in total capital, reflecting a heightened reliance on debt financing within the capital structure.
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Debt to Assets
Norfolk Southern Corp., debt to assets calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| 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) | |
| Total debt | 13,840) | 12,681) | 12,196) | 11,145) | 9,836) | |
| Total assets | 38,493) | 37,962) | 37,923) | 36,239) | 35,711) | |
| Solvency Ratio | ||||||
| Debt to assets1 | 0.36 | 0.33 | 0.32 | 0.31 | 0.28 | |
| Benchmarks | ||||||
| Debt to Assets, Competitors2 | ||||||
| FedEx Corp. | 0.25 | — | — | — | — | |
| Uber Technologies Inc. | 0.25 | — | — | — | — | |
| Union Pacific Corp. | 0.47 | — | — | — | — | |
| United Airlines Holdings Inc. | 0.52 | — | — | — | — | |
| United Parcel Service Inc. | 0.32 | — | — | — | — | |
| Debt to Assets, Sector | ||||||
| Transportation | 0.36 | — | — | — | — | |
| Debt to Assets, Industry | ||||||
| Industrials | 0.30 | — | — | — | — | |
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 2021 Calculation
Debt to assets = Total debt ÷ Total assets
= 13,840 ÷ 38,493 = 0.36
2 Click competitor name to see calculations.
An analysis of the solvency position from 2017 to 2021 reveals a consistent increase in financial leverage. While both total debt and total assets experienced growth over the five-year period, the rate of debt accumulation significantly exceeded the rate of asset expansion, leading to a steady rise in the debt-to-assets ratio.
- Total Debt Trajectory
- Total debt exhibited an uninterrupted upward trend, rising from 9,836 million US dollars in 2017 to 13,840 million US dollars by 2021. This represents a total increase of approximately 40.7% over the analyzed period, indicating an increasing reliance on borrowed funds to support operations or investments.
- Total Asset Growth
- Total assets grew at a more moderate pace, increasing from 35,711 million US dollars in 2017 to 38,493 million US dollars in 2021. The growth was relatively slow, particularly between 2019 and 2020, where asset value remained nearly stagnant, moving from 37,923 million to 37,962 million US dollars.
- Debt to Assets Ratio Analysis
- The debt to assets ratio climbed incrementally every year, starting at 0.28 in 2017 and reaching 0.36 by 2021. This progression indicates that the proportion of assets financed by debt grew from 28% to 36% over five years. The consistent year-over-year increase suggests a strategic shift toward higher leverage or a necessity to increase debt to maintain asset levels, resulting in a marginally weakened solvency profile relative to the 2017 baseline.
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Debt to Assets (including Operating Lease Liability)
Norfolk Southern Corp., debt to assets (including operating lease liability) calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| 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) | |
| Total debt | 13,840) | 12,681) | 12,196) | 11,145) | 9,836) | |
| Current operating lease liability | 82) | 89) | 97) | —) | —) | |
| Non-current operating lease liability | 331) | 344) | 441) | —) | —) | |
| Total debt (including operating lease liability) | 14,253) | 13,114) | 12,734) | 11,145) | 9,836) | |
| Total assets | 38,493) | 37,962) | 37,923) | 36,239) | 35,711) | |
| Solvency Ratio | ||||||
| Debt to assets (including operating lease liability)1 | 0.37 | 0.35 | 0.34 | 0.31 | 0.28 | |
| Benchmarks | ||||||
| Debt to Assets (including Operating Lease Liability), Competitors2 | ||||||
| FedEx Corp. | 0.44 | — | — | — | — | |
| Uber Technologies Inc. | 0.29 | — | — | — | — | |
| Union Pacific Corp. | 0.50 | — | — | — | — | |
| United Airlines Holdings Inc. | 0.60 | — | — | — | — | |
| United Parcel Service Inc. | 0.37 | — | — | — | — | |
| Debt to Assets (including Operating Lease Liability), Sector | ||||||
| Transportation | 0.45 | — | — | — | — | |
| Debt to Assets (including Operating Lease Liability), Industry | ||||||
| Industrials | 0.34 | — | — | — | — | |
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 2021 Calculation
Debt to assets (including operating lease liability) = Total debt (including operating lease liability) ÷ Total assets
= 14,253 ÷ 38,493 = 0.37
2 Click competitor name to see calculations.
A consistent increase in financial leverage is evident from 2017 through 2021. Total debt, including operating lease liabilities, grew from 9,836 million US dollars to 14,253 million US dollars over the five-year period. In contrast, total assets experienced more modest growth, rising from 35,711 million US dollars to 38,493 million US dollars. This divergence indicates that debt accumulation significantly outpaced asset expansion.
- Debt to Assets Ratio Trend
- The debt to assets ratio exhibited a steady upward trajectory, increasing every year from 0.28 in 2017 to 0.37 by the end of 2021. This progression demonstrates a systematic increase in the proportion of assets financed through debt.
- Comparative Growth Analysis
- The growth rate of total debt far exceeded that of total assets. Between 2017 and 2021, total debt increased by approximately 45%, while total assets grew by approximately 7.8%. This imbalance is the primary driver behind the rising solvency ratio.
- Solvency Implications
- The rise in the ratio from 0.28 to 0.37 suggests a shift in the capital structure toward higher leverage. While the growth was gradual, the consistent year-over-year increase indicates a sustained trend of increasing financial obligations relative to the company's asset base.
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Financial Leverage
Norfolk Southern Corp., financial leverage calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Total assets | 38,493) | 37,962) | 37,923) | 36,239) | 35,711) | |
| Stockholders’ equity | 13,641) | 14,791) | 15,184) | 15,362) | 16,359) | |
| Solvency Ratio | ||||||
| Financial leverage1 | 2.82 | 2.57 | 2.50 | 2.36 | 2.18 | |
| Benchmarks | ||||||
| Financial Leverage, Competitors2 | ||||||
| FedEx Corp. | 3.43 | — | — | — | — | |
| Uber Technologies Inc. | 2.68 | — | — | — | — | |
| Union Pacific Corp. | 4.49 | — | — | — | — | |
| United Airlines Holdings Inc. | 13.56 | — | — | — | — | |
| United Parcel Service Inc. | 4.87 | — | — | — | — | |
| Financial Leverage, Sector | ||||||
| Transportation | 4.48 | — | — | — | — | |
| Financial Leverage, Industry | ||||||
| Industrials | 4.52 | — | — | — | — | |
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 2021 Calculation
Financial leverage = Total assets ÷ Stockholders’ equity
= 38,493 ÷ 13,641 = 2.82
2 Click competitor name to see calculations.
Between the end of fiscal year 2017 and 2021, a consistent increase in financial leverage was observed, indicating a systematic shift in the capital structure toward a higher proportion of debt relative to equity.
- Total Asset Growth
- Total assets exhibited a steady upward trajectory, increasing from US$ 35,711 million in 2017 to US$ 38,493 million by the end of 2021. This progression reflects a continuous expansion of the company's resource base over the five-year period.
- Stockholders' Equity Contraction
- Conversely, stockholders' equity experienced a continuous decline, falling from US$ 16,359 million in 2017 to US$ 13,641 million in 2021. The steady reduction in equity suggests a decrease in the proportion of assets funded by shareholders.
- Financial Leverage Ratio Trend
- The financial leverage ratio rose progressively from 2.18 in 2017 to 2.82 in 2021. This upward trend is the result of the divergence between increasing total assets and decreasing stockholders' equity, signifying a heightened reliance on external liabilities to finance the organization's asset base.
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Interest Coverage
Norfolk Southern Corp., interest coverage calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net income | 3,005) | 2,013) | 2,722) | 2,666) | 5,404) | |
| Add: Income tax expense | 873) | 517) | 769) | 803) | (2,276) | |
| Add: Interest expense on debt | 646) | 625) | 604) | 557) | 550) | |
| Earnings before interest and tax (EBIT) | 4,524) | 3,155) | 4,095) | 4,026) | 3,678) | |
| Solvency Ratio | ||||||
| Interest coverage1 | 7.00 | 5.05 | 6.78 | 7.23 | 6.69 | |
| Benchmarks | ||||||
| Interest Coverage, Competitors2 | ||||||
| FedEx Corp. | 9.42 | — | — | — | — | |
| Uber Technologies Inc. | -1.20 | — | — | — | — | |
| Union Pacific Corp. | 8.33 | — | — | — | — | |
| United Airlines Holdings Inc. | -0.62 | — | — | — | — | |
| United Parcel Service Inc. | 24.91 | — | — | — | — | |
| Interest Coverage, Sector | ||||||
| Transportation | 6.98 | — | — | — | — | |
| Interest Coverage, Industry | ||||||
| Industrials | 5.14 | — | — | — | — | |
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 2021 Calculation
Interest coverage = EBIT ÷ Interest expense
= 4,524 ÷ 646 = 7.00
2 Click competitor name to see calculations.
The analysis of solvency metrics between 2017 and 2021 reveals a period of overall stability in debt-servicing capacity, characterized by a significant volatility event in 2020 followed by a robust recovery. While operating earnings experienced fluctuations, the ability to cover interest obligations remained well above critical thresholds throughout the five-year period.
- Earnings Before Interest and Tax (EBIT) Trends
- Operating earnings demonstrated growth from 2017 to 2019, rising from 3,678 million US$ to 4,095 million US$. A notable contraction occurred in 2020, where EBIT fell to 3,155 million US$, representing the lowest point in the observed period. This was followed by a sharp increase in 2021, reaching a five-year peak of 4,524 million US$, indicating a strong recovery in operational profitability.
- Interest Expense Trajectory
- Interest expenses on debt exhibited a consistent upward trend throughout the reporting period. Costs rose steadily from 550 million US$ in 2017 to 646 million US$ by 2021. This incremental increase suggests a gradual expansion of the debt load or a rise in the weighted average cost of borrowing over time.
- Interest Coverage Ratio Performance
- The interest coverage ratio fluctuated in alignment with EBIT movements. The ratio peaked in 2018 at 7.23 before declining to a period low of 5.05 in 2020, driven by the simultaneous decrease in operating earnings and the increase in interest obligations. By 2021, the ratio recovered to 7.00, reflecting a restored margin of safety. The maintenance of a ratio consistently above 5.0 indicates a strong capacity to meet interest payments without risking insolvency.
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Fixed Charge Coverage
Norfolk Southern Corp., fixed charge coverage calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net income | 3,005) | 2,013) | 2,722) | 2,666) | 5,404) | |
| Add: Income tax expense | 873) | 517) | 769) | 803) | (2,276) | |
| Add: Interest expense on debt | 646) | 625) | 604) | 557) | 550) | |
| Earnings before interest and tax (EBIT) | 4,524) | 3,155) | 4,095) | 4,026) | 3,678) | |
| Add: Operating lease expense | 159) | 160) | 176) | 204) | 169) | |
| Earnings before fixed charges and tax | 4,683) | 3,315) | 4,271) | 4,230) | 3,847) | |
| Interest expense on debt | 646) | 625) | 604) | 557) | 550) | |
| Operating lease expense | 159) | 160) | 176) | 204) | 169) | |
| Fixed charges | 805) | 785) | 780) | 761) | 719) | |
| Solvency Ratio | ||||||
| Fixed charge coverage1 | 5.82 | 4.22 | 5.48 | 5.56 | 5.35 | |
| Benchmarks | ||||||
| Fixed Charge Coverage, Competitors2 | ||||||
| FedEx Corp. | 2.83 | — | — | — | — | |
| Uber Technologies Inc. | -0.36 | — | — | — | — | |
| Union Pacific Corp. | 6.81 | — | — | — | — | |
| United Airlines Holdings Inc. | -0.01 | — | — | — | — | |
| United Parcel Service Inc. | 12.66 | — | — | — | — | |
| Fixed Charge Coverage, Sector | ||||||
| Transportation | 3.86 | — | — | — | — | |
| Fixed Charge Coverage, Industry | ||||||
| Industrials | 3.44 | — | — | — | — | |
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 2021 Calculation
Fixed charge coverage = Earnings before fixed charges and tax ÷ Fixed charges
= 4,683 ÷ 805 = 5.82
2 Click competitor name to see calculations.
The solvency profile exhibits a strong capacity to meet fixed obligations, characterized by a coverage ratio that remained well above critical thresholds throughout the observed period. While a temporary contraction in coverage occurred in 2020, the subsequent recovery in 2021 indicates a strengthened financial position.
- Earnings before fixed charges and tax
- Earnings exhibited a period of growth from 2017 to 2019, followed by a significant decline in 2020 to 3,315 million. A robust recovery was recorded in 2021, with earnings reaching a five-year peak of 4,683 million, suggesting an improved ability to generate funds before meeting fixed obligations.
- Fixed charges
- A consistent upward trend is observed in fixed charges, which increased steadily from 719 million in 2017 to 805 million in 2021. This incremental rise indicates a gradual expansion of the company's fixed financial commitments over the five-year duration.
- Fixed charge coverage ratio
- The coverage ratio fluctuated in alignment with earnings volatility. After remaining stable between 5.35 and 5.56 from 2017 to 2019, the ratio dropped to 4.22 in 2020 due to the contraction in earnings. By 2021, the ratio climbed to 5.82, marking the highest level of coverage in the period and demonstrating a significant increase in the margin of safety for servicing fixed charges.
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