Analysis of Profitability Ratios
Profitability ratios measure the company ability to generate profitable sales from its resources (assets).
Profitability Ratios (Summary)
Return on Sales
Return on Investment
Norfolk Southern Corp., profitability 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).
The profitability profile between 2017 and 2021 exhibits significant volatility, particularly regarding bottom-line efficiency and returns on invested capital, despite relative stability in gross margins.
- Margin Performance
- Gross profit margins remained resilient, fluctuating within a narrow range between 75.41% and 78.64%, indicating a consistent ability to manage direct costs relative to revenue. Operating profit margins showed a more dynamic trajectory, reaching a period high of 39.91% in 2021 after a dip to 30.67% in 2020. Conversely, net profit margins experienced a sharp contraction from 51.22% in 2017 to 23.27% in 2018, thereafter stabilizing between 20.56% and 26.97%.
- Return Metrics
- Return on equity (ROE) and return on assets (ROA) followed a similar downward trajectory following 2017. ROE declined from 33.03% to a low of 13.61% in 2020 before recovering to 22.03% in 2021. ROA exhibited a more pronounced decline, falling from 15.13% in 2017 to 5.30% in 2020, with a modest recovery to 7.81% by the end of 2021.
- Profitability Correlation
- A notable divergence is observed between operating efficiency and net profitability. While operating margins reached their peak in 2021, net profit margins and return metrics failed to return to the elevated levels seen in 2017. This suggests that non-operating factors, such as interest expenses, taxes, or one-time financial charges, exerted a more significant influence on the final earnings and shareholder returns than core operational performance.
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Gross Profit Margin
Norfolk Southern Corp., gross profit margin 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) | ||||||
| Gross profit | 8,617) | 7,567) | 8,618) | 8,641) | 8,297) | |
| Railway operating revenues | 11,142) | 9,789) | 11,296) | 11,458) | 10,551) | |
| Profitability Ratio | ||||||
| Gross profit margin1 | 77.34% | 77.30% | 76.29% | 75.41% | 78.64% | |
| Benchmarks | ||||||
| Gross Profit Margin, Competitors2 | ||||||
| Uber Technologies Inc. | 46.43% | — | — | — | — | |
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
Gross profit margin = 100 × Gross profit ÷ Railway operating revenues
= 100 × 8,617 ÷ 11,142 = 77.34%
2 Click competitor name to see calculations.
The financial performance from 2017 to 2021 exhibits a period of volatility in both total operating revenues and resulting gross profits, characterized by a significant contraction in 2020 followed by a recovery in 2021.
- Railway Operating Revenues
- Revenues increased from US$ 10,551 million in 2017 to a peak of US$ 11,458 million in 2018. A downward trajectory followed, reaching a five-year low of US$ 9,789 million in 2020, before rebounding to US$ 11,142 million in 2021.
- Gross Profit Trends
- Gross profit mirrored the revenue fluctuations, rising from US$ 8,297 million in 2017 to US$ 8,641 million in 2018. A sharp contraction occurred in 2020, where gross profit fell to US$ 7,567 million, subsequently recovering to US$ 8,617 million by the end of 2021.
- Gross Profit Margin Analysis
- The gross profit margin experienced an initial decline from 78.64% in 2017 to a low of 75.41% in 2018. Following this trough, a consistent upward trend is observed, with the margin rising to 76.29% in 2019, 77.30% in 2020, and ending at 77.34% in 2021. This pattern indicates that the company successfully improved its cost-to-revenue efficiency over the final four years of the period, even during the revenue decline of 2020.
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Operating Profit Margin
Norfolk Southern Corp., operating profit margin 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) | ||||||
| Income from railway operations | 4,447) | 3,002) | 3,989) | 3,959) | 3,586) | |
| Railway operating revenues | 11,142) | 9,789) | 11,296) | 11,458) | 10,551) | |
| Profitability Ratio | ||||||
| Operating profit margin1 | 39.91% | 30.67% | 35.31% | 34.55% | 33.99% | |
| Benchmarks | ||||||
| Operating Profit Margin, Competitors2 | ||||||
| FedEx Corp. | 6.98% | — | — | — | — | |
| Uber Technologies Inc. | -21.97% | — | — | — | — | |
| Union Pacific Corp. | 42.83% | — | — | — | — | |
| United Airlines Holdings Inc. | -4.15% | — | — | — | — | |
| United Parcel Service Inc. | 13.17% | — | — | — | — | |
| Operating Profit Margin, Sector | ||||||
| Transportation | 9.44% | — | — | — | — | |
| Operating Profit Margin, Industry | ||||||
| Industrials | 9.24% | — | — | — | — | |
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
Operating profit margin = 100 × Income from railway operations ÷ Railway operating revenues
= 100 × 4,447 ÷ 11,142 = 39.91%
2 Click competitor name to see calculations.
The operational profitability from 2017 to 2021 is characterized by a period of steady growth, a significant contraction in 2020, and a robust recovery in 2021. While revenue experienced fluctuations, the operating profit margin demonstrated an overall upward trajectory, peaking at the end of the analyzed period.
- Railway Operating Revenues
- Revenues grew from US$ 10,551 million in 2017 to a peak of US$ 11,458 million in 2018. A subsequent decline occurred in 2020, where revenues reached a period low of US$ 9,789 million, before recovering to US$ 11,142 million by the end of 2021.
- Income from Railway Operations
- Operating income rose consistently from US$ 3,586 million in 2017 to US$ 3,989 million in 2019. This trend was interrupted by a sharp decline to US$ 3,002 million in 2020. In 2021, income experienced a substantial surge, reaching US$ 4,447 million, the highest value recorded in the five-year span.
- Operating Profit Margin
- The operating profit margin expanded gradually from 33.99% in 2017 to 35.31% in 2019. A contraction to 30.67% was observed in 2020, aligning with the decrease in operating income and revenue. However, a significant increase in operational efficiency occurred in 2021, resulting in a margin expansion to 39.91%.
The data indicates that the recovery in 2021 was not merely a return to previous levels but an improvement in operational leverage, as the increase in income significantly outpaced the increase in revenue compared to the 2017-2019 period.
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Net Profit Margin
Norfolk Southern Corp., net profit margin 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) | |
| Railway operating revenues | 11,142) | 9,789) | 11,296) | 11,458) | 10,551) | |
| Profitability Ratio | ||||||
| Net profit margin1 | 26.97% | 20.56% | 24.10% | 23.27% | 51.22% | |
| Benchmarks | ||||||
| Net Profit Margin, Competitors2 | ||||||
| FedEx Corp. | 6.23% | — | — | — | — | |
| Uber Technologies Inc. | -2.84% | — | — | — | — | |
| Union Pacific Corp. | 29.92% | — | — | — | — | |
| United Airlines Holdings Inc. | -7.97% | — | — | — | — | |
| United Parcel Service Inc. | 13.25% | — | — | — | — | |
| Net Profit Margin, Sector | ||||||
| Transportation | 9.05% | — | — | — | — | |
| Net Profit Margin, Industry | ||||||
| Industrials | 5.85% | — | — | — | — | |
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
Net profit margin = 100 × Net income ÷ Railway operating revenues
= 100 × 3,005 ÷ 11,142 = 26.97%
2 Click competitor name to see calculations.
The profitability of the entity experienced significant volatility between 2017 and 2021, characterized by an initial sharp contraction followed by a period of stabilization and a subsequent recovery in the final year of the period.
- Net Profit Margin Analysis
- A substantial decrease in the net profit margin is observed between 2017 and 2018, falling from 51.22% to 23.27%. The 2017 figure represents a significant outlier compared to the rest of the five-year period, suggesting the influence of non-recurring gains or one-time financial events. Following this decline, the margin remained relatively stable in 2019 at 24.10% before reaching a five-year low of 20.56% in 2020.
- Revenue and Income Correlation
- Net income exhibited a general downward trend from 2017 to 2020, decreasing from US$ 5,404 million to US$ 2,013 million. While railway operating revenues grew initially in 2018, a decline in revenue to US$ 9,789 million in 2020 coincided with the lowest recorded net income and profit margin for the period, indicating a tightening of profitability during that fiscal year.
- Performance Recovery
- A recovery phase is evident in 2021, with railway operating revenues rising to US$ 11,142 million and net income increasing to US$ 3,005 million. This synchronized growth in both top-line and bottom-line figures resulted in an expansion of the net profit margin to 26.97%, the highest level observed since the 2017 anomaly.
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Return on Equity (ROE)
Norfolk Southern Corp., ROE 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) | |
| Stockholders’ equity | 13,641) | 14,791) | 15,184) | 15,362) | 16,359) | |
| Profitability Ratio | ||||||
| ROE1 | 22.03% | 13.61% | 17.93% | 17.35% | 33.03% | |
| Benchmarks | ||||||
| ROE, Competitors2 | ||||||
| FedEx Corp. | 21.64% | — | — | — | — | |
| Uber Technologies Inc. | -3.43% | — | — | — | — | |
| Union Pacific Corp. | 46.06% | — | — | — | — | |
| United Airlines Holdings Inc. | -39.05% | — | — | — | — | |
| United Parcel Service Inc. | 90.44% | — | — | — | — | |
| ROE, Sector | ||||||
| Transportation | 30.78% | — | — | — | — | |
| ROE, Industry | ||||||
| Industrials | 15.38% | — | — | — | — | |
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
ROE = 100 × Net income ÷ Stockholders’ equity
= 100 × 3,005 ÷ 13,641 = 22.03%
2 Click competitor name to see calculations.
The return on equity (ROE) exhibited significant volatility between 2017 and 2021, characterized by an initial sharp decline, a period of stagnation, and a subsequent recovery. The metric peaked at 33.03% in 2017 before falling substantially and reaching a five-year low of 13.61% in 2020, followed by a rebound to 22.03% in 2021.
- Net Income Influence
- Fluctuations in ROE were primarily driven by instability in net income. A precipitous drop in earnings from 5,404 million US$ in 2017 to 2,666 million US$ in 2018 resulted in the ROE nearly halving to 17.35%. The subsequent dip in 2020 to 2,013 million US$ correlated with the lowest ROE of the period, while the increase to 3,005 million US$ in 2021 served as the primary catalyst for the recovery in profitability ratios.
- Stockholders' Equity Trend
- A consistent downward trend in stockholders' equity is observed throughout the five-year duration, decreasing from 16,359 million US$ in 2017 to 13,641 million US$ in 2021. This steady reduction in the equity base suggests a systematic reduction in retained earnings or an increase in shareholder distributions, such as buybacks or dividends.
- Return on Equity Dynamics
- The interplay between declining equity and fluctuating net income created distinct profitability phases. While the collapse in net income dominated the trend between 2017 and 2020, the 2021 recovery was amplified by the reduced equity base. The combination of rising net income and a smaller denominator of stockholders' equity accelerated the ROE increase to 22.03%, demonstrating an improved efficiency in generating profit from the remaining shareholder investment.
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Return on Assets (ROA)
Norfolk Southern Corp., ROA 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) | |
| Total assets | 38,493) | 37,962) | 37,923) | 36,239) | 35,711) | |
| Profitability Ratio | ||||||
| ROA1 | 7.81% | 5.30% | 7.18% | 7.36% | 15.13% | |
| Benchmarks | ||||||
| ROA, Competitors2 | ||||||
| FedEx Corp. | 6.32% | — | — | — | — | |
| Uber Technologies Inc. | -1.28% | — | — | — | — | |
| Union Pacific Corp. | 10.27% | — | — | — | — | |
| United Airlines Holdings Inc. | -2.88% | — | — | — | — | |
| United Parcel Service Inc. | 18.57% | — | — | — | — | |
| ROA, Sector | ||||||
| Transportation | 6.88% | — | — | — | — | |
| ROA, Industry | ||||||
| Industrials | 3.40% | — | — | — | — | |
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
ROA = 100 × Net income ÷ Total assets
= 100 × 3,005 ÷ 38,493 = 7.81%
2 Click competitor name to see calculations.
An analysis of profitability trends from 2017 to 2021 reveals a significant volatility in asset utilization efficiency, characterized by a sharp initial decline followed by a moderate recovery in the final year.
- Net Income Volatility
- Net income experienced a substantial decrease of approximately 50.6% between 2017 and 2018, falling from 5,404 million to 2,666 million. Earnings remained relatively stagnant in 2019 before declining further to a five-year low of 2,013 million in 2020. A recovery was observed in 2021, with net income rising to 3,005 million.
- Total Asset Growth
- Total assets demonstrated a consistent and steady upward trend throughout the period. The asset base grew from 35,711 million in 2017 to 38,493 million by the end of 2021, indicating continuous investment or expansion of the company's resource base.
- Return on Assets (ROA) Performance
- The ROA reflects the combined impact of fluctuating earnings and a growing asset base. A sharp contraction occurred between 2017 and 2018, with the ratio falling from 15.13% to 7.36%. The downward trend peaked in 2020, reaching a minimum of 5.30%. By 2021, the ROA improved to 7.81%, signaling an increase in operational efficiency and profitability relative to total assets, although the level remained well below the 2017 benchmark.
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