Contrasting Ryder System (R) and Norfolk Southern (NSC)

Ryder System (NYSE: R) and Norfolk Southern (NYSE:NSC) are both mid-cap industrials companies, but which is the superior stock? We will contrast the two companies based on the strength of their analyst recommendations, institutional ownership, dividends, risk, earnings, profitability and valuation.

Profitability

This table compares Ryder System and Norfolk Southern’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Ryder System 2.75% 10.72% 2.04%
Norfolk Southern 17.86% 14.72% 5.29%

Risk and Volatility

Ryder System has a beta of 1.51, suggesting that its share price is 51% more volatile than the S&P 500. Comparatively, Norfolk Southern has a beta of 1.37, suggesting that its share price is 37% more volatile than the S&P 500.

Insider & Institutional Ownership

89.4% of Ryder System shares are owned by institutional investors. Comparatively, 72.4% of Norfolk Southern shares are owned by institutional investors. 2.0% of Ryder System shares are owned by insiders. Comparatively, 0.4% of Norfolk Southern shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Analyst Ratings

This is a summary of recent ratings and price targets for Ryder System and Norfolk Southern, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Ryder System 0 4 4 0 2.50
Norfolk Southern 4 13 5 0 2.05

Ryder System currently has a consensus target price of $83.83, suggesting a potential downside of 4.09%. Norfolk Southern has a consensus target price of $125.21, suggesting a potential downside of 14.81%. Given Ryder System’s stronger consensus rating and higher possible upside, research analysts clearly believe Ryder System is more favorable than Norfolk Southern.

Earnings and Valuation

This table compares Ryder System and Norfolk Southern’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Ryder System $6.79 billion 0.68 $262.47 million $3.71 23.56
Norfolk Southern $9.89 billion 4.25 $1.67 billion $6.29 23.37

Norfolk Southern has higher revenue and earnings than Ryder System. Norfolk Southern is trading at a lower price-to-earnings ratio than Ryder System, indicating that it is currently the more affordable of the two stocks.

Dividends

Ryder System pays an annual dividend of $1.84 per share and has a dividend yield of 2.1%. Norfolk Southern pays an annual dividend of $2.44 per share and has a dividend yield of 1.7%. Ryder System pays out 49.6% of its earnings in the form of a dividend. Norfolk Southern pays out 38.8% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Ryder System has raised its dividend for 7 consecutive years and Norfolk Southern has raised its dividend for 8 consecutive years.

Summary

Norfolk Southern beats Ryder System on 10 of the 17 factors compared between the two stocks.

Ryder System Company Profile

Ryder System, Inc. is engaged in offering transportation and supply chain management solutions. The Company operates through three segments: Fleet Management Solutions (FMS), which provides leasing, commercial rental, contract maintenance, and contract-related maintenance of trucks, tractors and trailers to customers principally in the United States, Canada and the United Kingdom; Dedicated Transportation Solutions (DTS), which provides vehicles and drivers as part of a dedicated transportation solution in the United States, and Supply Chain Solutions (SCS), which provides supply chain solutions, including distribution and transportation services in North America and Asia. Through its FMS business, the Company provides its customers with various fleet solutions. In addition, it provides its customers to purchase a selection of used trucks, tractors and trailers through its used vehicle sales program. Its customer base includes enterprises operating in various industries.

Norfolk Southern Company Profile

Norfolk Southern Corporation is a holding company engaged in the rail transportation business. As of December 31, 2016, the Company operated approximately 19,500 miles of road primarily in the East and Midwest. The Company is engaged in the rail transportation of raw materials, intermediate products and finished goods primarily in the Southeast, East and Midwest. The Company, through interchange with rail carriers, to and from the rest of the United States. The Company also transports overseas freight through various Atlantic and Gulf Coast ports. It provides logistics services and offers the intermodal network in the eastern half of the United States. The Company’s system reaches various manufacturing plants, electric generating facilities, mines, distribution centers and other businesses located in its service area. The Company’s intermodal market group consists of shipments moving in trailers, domestic and international containers, and RoadRailer equipment.

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