Will Norfolk Southern Stock Rebound To Its Pre-Inflation Shock Highs?

Norfolk Southern stock (NYSE: NSC) currently trades at $223 per share, around 25% below its level of $298 on Jan 2, 2022 (pre-inflation shock high), and it seems like it has little room for growth. NSC saw its stock trading at around $227 at the end of June 2022, just before the Fed started increasing rates, and is now trading around those levels. In comparison, the S&P 500 gained about 17% during this period. NSC stock has been weighed down this year owing to the derailment of a train carrying toxic materials in East Palestine, Ohio, in February of this year. Furthermore, rising concerns over deteriorating economic growth have pressured its stock.

Returning to the pre-inflation shock level means that NSC stock will have to gain more than 30% from here. However, we do not believe that will materialize any time soon, and we estimate Norfolk Southern’s valuation to be around $244 per share, just 10% above the market price. This is because the recent uncertainty in the financial sector has made investors concerned about a potential recession. Norfolk Southern’s
NSC
business will see an adverse impact on its volume if the U.S. economy were to go into recession. Also, it took a $387 million charge related to the Ohio derailment in Q1, and the overall costs could increase over time.