Norfolk Southern Corporation’s (NYSE:NSC) steep post-earnings plunge offers an opportunity to investors, according to analysts at Deutsche Bank.
Following an earnings report that included extensive commentary on headwinds facing the rail industry in 2023, shares of the Atlanta-based railroad operator sank over 5%. Those declines were extended on Thursday with the stock slumping another 2.2%.
However, according to Deutsche Bank, the magnitude of the post-earnings drop may not be fair.
“Rail stocks have underperformed this week on the back of 4Q results and initial 2023 outlooks. In most cases, our 2023 estimates have not been revised lower, so the decline in equity value is entirely attributable to multiple compression,” the team explained. “While this is understandable in the context of macro uncertainty, we see opportunity for upside over the course of 2023 as valuation more appropriately reflects the resiliency we see in earnings.”
As such, taking into account the team’s faith in company management, Deutsche Bank raised its rating on Norfolk Southern (NSC) to Buy from Hold. By contrast, Union Pacific (NYSE:UNP) was downgraded to Hold after its own lackluster results earlier in the week.