Norfolk Southern Corp. (NYSE:NSC)

Leverage Ratios

The company's leverage ratios demonstrate a clear upward trend from 2017 to 2021. The debt to equity ratio increased steadily from 0.6 in 2017 to 1.01 by the end of 2021, indicating a growing reliance on debt financing relative to shareholders’ equity. When including operating lease liabilities, this ratio sees a slightly higher increase, reaching 1.04 in 2021, which highlights the impact of lease obligations on the company’s leverage position.

Similarly, the debt to capital ratio rose from 0.38 in 2017 to 0.50 in 2021, and including operating lease liabilities, it advanced marginally higher to 0.51. This suggests an increased proportion of debt within the overall capital structure, indicating a shift toward greater financial leverage over the analyzed period.

The debt to assets ratio also follows an upward trajectory, moving from 0.28 in 2017 to 0.36 in 2021, which further reflects the increasing share of debt in total asset funding. Including operating lease liabilities raises these values modestly, accentuating the liabilities associated with leasing activities.

Financial leverage ratio, which measures the extent of asset financing through equity, increased from 2.18 in 2017 to 2.82 in 2021. This upward trend corroborates the observed growth in the company’s leverage and indicates a progressively higher asset base being supported by equity investors.

Coverage Ratios

Interest coverage exhibited some volatility but remained relatively strong throughout the years. The ratio increased from 6.69 in 2017, peaking at 7.23 in 2018, before dropping significantly to 5.05 in 2020 and then rebounding to 7.00 in 2021. This suggests periods of higher earnings volatility or interest expenses, with notable pressure during 2020, potentially linked to broader economic factors.

Fixed charge coverage similarly followed a downtrend from 2017 to 2020, moving from 5.35 to a low of 4.22, indicating tightening coverage of fixed financial obligations. In 2021, there was a recovery to 5.82, signaling improved ability to meet fixed charges after previous years of strain.

Summary of Financial Position Trends

Over the five-year span, the company has shown a consistent increase in leverage across multiple metrics, pointing to a rising dependence on debt financing. Despite this, coverage ratios, although variable, remain at levels that suggest the company maintains adequate earnings to cover interest and fixed charges most of the time. The decline in coverage ratios around 2020 may indicate challenging operating conditions during that period, but the subsequent improvement in 2021 shows resilience in financial performance.

Inclusion of operating lease liabilities slightly amplifies the company’s leverage ratios, demonstrating the significance of lease commitments on the overall risk profile. The trend toward higher leverage and periodic fluctuations in coverage metrics warrant ongoing monitoring to ensure sustainable financial health.

The financial data reveals the evolution of debt and equity levels, along with the debt to equity ratio over a five-year period ending in 2021.

Total debt

The total debt shows a consistent upward trend, increasing from US$9,836 million in 2017 to US$13,840 million in 2021. This reflects a steady accumulation of debt, with the most significant annual increase occurring between 2020 and 2021.

Stockholders’ equity

Stockholders’ equity demonstrates a declining trajectory over the same period. Starting at US$16,359 million in 2017, it gradually decreases each year, reaching US$13,641 million by 2021. This reduction indicates a contraction in the net asset base financed by shareholders.

Debt to equity ratio

The debt to equity ratio moves upward from 0.6 in 2017 to 1.01 in 2021. This increase signifies a growing leverage position, with debt surpassing equity by the end of the period. The ratio remains below 1.0 through 2020 but crosses this threshold in 2021, suggesting a shift towards greater reliance on debt financing relative to equity.

Overall, the data points to a strategy characterized by increasing leverage, marked by rising debt levels outpacing a diminishing equity base. This trend may indicate heightened financial risk and changing capital structure dynamics, which require close monitoring in terms of interest obligations and solvency.

Total debt (including operating lease liability)

The total debt has shown a consistent upward trend over the analyzed period, increasing from $9,836 million at the end of 2017 to $14,253 million by the end of 2021. The increase was steady each year, with the largest increment observed between 2018 and 2019. This pattern indicates a growing reliance on debt financing or possibly increased investments requiring external funding.

Stockholders’ equity

Stockholders' equity has exhibited a declining trend throughout the same period, decreasing from $16,359 million at the end of 2017 to $13,641 million at the end of 2021. The decline is gradual but consistent, which could reflect factors such as retained earnings reductions, dividends paid exceeding net income, or other equity outflows.

Debt to equity (including operating lease liability)

The debt-to-equity ratio has increased progressively from 0.6 in 2017 to 1.04 in 2021. This rising ratio reflects the simultaneous increase in total debt and decrease in equity, indicating a shifting capital structure with higher financial leverage. The increase in leverage may elevate the financial risk profile of the company but could also suggest an aggressive growth or investment strategy financed through debt.

The financial data over the five-year period indicates a consistent increase in total debt, rising from $9,836 million in 2017 to $13,840 million in 2021. This upward trend suggests an increasing reliance on debt financing or the accumulation of liabilities over time.

Total capital exhibited a more moderate increase, growing from $26,195 million in 2017 to $27,481 million in 2021. The relatively stable total capital, contrasted with the rising total debt, points to a changing capital structure within the organization.

The debt to capital ratio increased steadily from 0.38 in 2017 to 0.50 in 2021. This ratio's growth confirms that debt is constituting a larger component of the company’s capital structure, reaching a level where half of the capital is financed through debt by the end of the period.

Overall, these trends reveal an increasing leverage position, with debt growing at a faster pace than total capital. This progression may impact financial risk and the company’s cost of capital, warranting further attention depending on the company’s operational performance and market conditions.

Total Debt (including operating lease liability)

The total debt has shown a consistent upward trend over the five-year period. Starting at $9,836 million in 2017, it rose steadily each year, reaching $14,253 million by the end of 2021.

Total Capital (including operating lease liability)

Total capital increased modestly from $26,195 million in 2017 to a peak of $27,918 million in 2019. It then maintained a relatively stable level, marginally fluctuating around the $27,900 million mark through 2021.

Debt to Capital Ratio (including operating lease liability)

The ratio of debt to capital illustrates an increasing leverage trend. Beginning at 0.38 in 2017, it rose progressively each year to reach 0.51 in 2021, indicating that a larger portion of the company's capital structure is financed by debt over time.

Total Debt

The total debt of the company demonstrated a consistent upward trend over the five-year period. Starting at USD 9,836 million at the end of 2017, total debt increased each subsequent year, reaching USD 13,840 million by the end of 2021. This shows a cumulative increase of approximately 40.7% over the period, indicating progressively greater leverage or financing through debt.

Total Assets

Total assets showed a moderate increase throughout the same period. Beginning at USD 35,711 million at the end of 2017, the asset base grew steadily to USD 38,493 million by the close of 2021. The growth in assets was less pronounced compared to the rise in total debt, with an overall increase of about 7.8% over the five years.

Debt to Assets Ratio

The debt to assets ratio followed an upward trajectory consistent with the increases in total debt relative to total assets. Starting from 0.28 at the end of 2017, this ratio grew each year to reach 0.36 by the end of 2021. This indicates that the proportion of assets financed through debt increased from 28% to 36%, suggesting that the company has become more leveraged over this time frame.

Summary of Trends

Overall, the data indicate a pattern of increasing leverage, with total debt rising at a faster pace than total assets. This shift in capital structure towards greater reliance on debt financing may reflect strategic capital investments, operational needs, or changing financial policies. The moderate growth in assets combined with a marked increase in liabilities could affect risk profiles and financial stability, and it may be important to monitor future implications for liquidity and solvency.

The financial data reveals several key trends related to the company’s leverage and asset base over the five-year period ending December 31, 2021.

Total debt (including operating lease liability)

The total debt has steadily increased each year, rising from US$9,836 million in 2017 to US$14,253 million in 2021. This represents an overall growth of approximately 45%, indicating a continuous accumulation of debt obligations by the company.

Total assets

The total assets have shown a more modest increase over the same period. The asset base grew from US$35,711 million in 2017 to US$38,493 million in 2021, an increase of around 7.8%. This suggests that while the asset base expanded, it did so at a much slower rate compared to total debt.

Debt to assets ratio (including operating lease liability)

The debt to assets ratio rose consistently from 0.28 in 2017 to 0.37 in 2021. This upward trend indicates a growing proportion of the company's assets being financed through debt, highlighting an increasing leverage position over time.

Overall, the data suggests that the company has been increasing its reliance on debt financing relative to its asset base. The increasing debt-to-assets ratio signals a potential shift towards higher financial leverage, which may affect the company's risk profile. However, the moderately growing asset base provides some balance to the increasing liabilities, although the rate of debt growth significantly outpaces asset growth during the period under review.

Over the five-year period ending December 31, 2021, total assets demonstrated a steady increase, rising from US$35,711 million in 2017 to US$38,493 million in 2021. This growth suggests a consistent expansion of the company's asset base.

In contrast, stockholders’ equity experienced a declining trend throughout the same period. Beginning at US$16,359 million in 2017, it decreased each year to reach US$13,641 million by 2021. This decline in equity may indicate increased liabilities or a reduction in retained earnings.

Financial leverage, measured as a ratio, showed a clear upward trajectory. Starting from 2.18 in 2017, it steadily increased to 2.82 in 2021. The rising financial leverage implies that the company has progressively relied more on debt financing relative to equity, amplifying its financial risk.

Total Assets

Consistent growth from US$35.7 billion in 2017 to US$38.5 billion in 2021, reflecting asset expansion.

Stockholders’ Equity

Continuous decline from US$16.4 billion in 2017 to US$13.6 billion in 2021, indicating potential increases in liabilities or equity reduction.

Financial Leverage

Increase from 2.18 to 2.82 over five years, suggesting higher usage of debt relative to equity and elevated financial risk.

Earnings before Interest and Tax (EBIT)

The EBIT demonstrates an overall upward trend from 2017 to 2021, with a slight interruption in 2020. Beginning at 3,678 million US dollars in 2017, EBIT increased to 4,026 million in 2018 and further to 4,095 million in 2019. There was a notable decline in 2020, dropping to 3,155 million, which may reflect external impacts during that period. However, EBIT rebounded significantly in 2021, reaching its highest value of 4,524 million US dollars.

Interest Expense on Debt

Interest expense steadily increased over the five-year period. Starting at 550 million US dollars in 2017, the expense escalated each year, reaching 646 million in 2021. The consistent rise suggests increasing debt levels or higher interest rates, contributing to greater financial obligations over time.

Interest Coverage Ratio

The interest coverage ratio, which measures the ability to cover interest expense with earnings, shows some fluctuation but remains relatively strong. The ratio rose from 6.69 in 2017 to a peak of 7.23 in 2018, then decreased to 6.78 in 2019. A significant drop to 5.05 occurred in 2020, aligning with the EBIT decline, indicating reduced ability to cover interest charges that year. Recovery is observed in 2021, with the ratio improving to 7.00, implying restored earnings strength relative to interest expenses.

The financial data reveals several notable trends in the company's earnings and fixed charge metrics over the five-year period ending December 31, 2021.

Earnings before fixed charges and tax

This metric showed a generally positive trend from 2017 through 2019, increasing from 3,847 million US dollars in 2017 to 4,271 million in 2019. However, there was a significant decline in 2020 to 3,315 million, likely indicating operational challenges or external factors impacting earnings during that year. The figure rebounded strongly in 2021 to 4,683 million, reaching the highest point in the observed period and surpassing pre-2020 levels.

Fixed charges

Fixed charges incrementally increased each year, moving from 719 million US dollars in 2017 to 805 million in 2021. This steady rise suggests increasing financial obligations, such as interest expenses or lease payments, slightly outpacing the growth in earnings except for the dip in 2020.

Fixed charge coverage ratio

The fixed charge coverage ratio, which indicates the company's ability to meet its fixed financial obligations from earnings, remained robust through most of the period. It increased from 5.35 times in 2017 to a peak of 5.56 times in 2018. The ratio was relatively stable in 2019 at 5.48 times before dropping sharply in 2020 to 4.22 times, reflecting the impact of reduced earnings that year. By 2021, the ratio had improved substantially to 5.82 times, the highest level observed, signifying a stronger capacity to cover fixed charges post-2020 downturn.

Overall, the data suggests a solid financial position characterized by generally increasing earnings and fixed charges, with a temporary setback in 2020 followed by a strong recovery in 2021. The coverage ratio indicates the company maintained sufficient earnings to comfortably meet its fixed financial commitments throughout the period, despite the downturn in 2020.