Zacks_Analysts' Blog : Norfolk Expands Rutherford Facility - Analyst Blog

One of the leading U.S. railroads, Norfolk Southern (NSC) announced that it will expand the intermodal facility at Rutherford near Harrisburg in Pennsylvania. The company plans to begin the project in early 2012 and targets completion by 2014. The total investment is expected to be approximately $60 million. Norfolk has also received a $15 million TIGER III grant for the upcoming project from U.S. Department of Transportation.

Apart from creating approximately 400 new jobs in Harrisburg, the expansion will offer more fuel efficient freight transportation in this area along with environmental benefits. Intermodal consumes approximately one gallon of fuel to carry a ton of freight 484 miles, representing approximately 75% less greenhouse gas emission compared to truck.

Norfolk continues to make investments in key projects and business opportunities to improve its long-term fundamentals and gain competitive advantage over peers like Union Pacific Corporation (UNP) and CSX Corp. (CSX). Norfolk’s already executed major Intermodal corridor terminals like Heartland, Crescent, Meridian and Titusville remain accretive to its profits. 

In 2011, the company expects its investments to be around $2.2 billion of which approximately 50% is dedicated toward intermodal facilities, including three new Crescent Corridor terminals in Tennessee, Alabama and Pennsylvania. The company estimates capital expenditure of approximately $242 million for substantial completion of work on these projects by 2013. The total amount includes planned capital expenditures of $48 million in the remainder of this year.

Norfolk is also focused on improving rail safety measures along with expanding networks. The company expects capital expenditure of approximately $1 billion from 2012 through 2015 for the implementation of positive train control (PTC). In addition, $146 million will be spent this year on upgrading systems and track structure, required for the Federal Railroad Administration approved implementation of PTC.

We are currently maintaining our long-term Neutral rating on the stock. For the short term (1–3 months), the stock retains the Zacks #3 (Hold) Rank.