We recently compiled a list of the 10 Best Transportation Stocks to Buy According to Hedge Funds. In this article, we are going to take a look at where Norfolk Southern Corporation (NYSE:NSC) stands against the other transportation stocks.
Transportation stocks are those of companies classified as industrial businesses, which range from heavy equipment manufacturers to transportation service providers.
According to the Business Research Company, the transport market has expanded significantly in recent years. It is projected to rise from $6941.93 billion in 2024 to $7522.07 billion in 2025, with a compound annual growth rate of 8.4%. Economic expansion, population increase, technical improvements, and consumer behavior are all factors that contributed to historical growth. Meanwhile, the transportation sector is anticipated to boom significantly in the next few years. It will reach $9968.7 billion in 2029, with a compound annual growth rate of 7.3%. Regionally, Western Europe had the largest transport market in 2024. Asia-Pacific was the second-largest inland water transport market.
As of February 22, 2025, the broader market’s transportation industry had returned 3.14% in the previous year, 5.25% in the previous five years, and 4.85% over the last ten. However, performance was negative, at 2.24% year to date and 0.80% over three years.
According to S&P Global’s report, despite a minor slowdown in GDP growth to 2.0% from 2.7% in 2024, the transportation infrastructure industry in the United States is anticipated to experience consistent demand and expansion in 2025. While volume growth in enplanements, port containers, transit ridership, and automobile traffic may moderate, most modes of transportation will continue to grow through 2027. Public transit ridership is projected to stay at 90% of pre-pandemic levels unless external factors, such as reduced remote work or congestion pricing, boost demand. Meanwhile, enplanements, port container traffic, and vehicle travel are likely to stay above pre-pandemic levels, resulting in stable financial performance for this market.
Looking forward, as per Harris William’s report, the transportation and logistics sector is expected to grow rapidly in 2025, propelled by M&A activity and economic recovery. The automotive and heavy-duty aftermarkets remain resilient due to higher maintenance demand as new car prices rise. Investors are attracted to non-discretionary services such as repairs and fleet management. Third-party logistics (3PL) is evolving with technologically advanced solutions to optimize supply chains. Transportation infrastructure services (TIS) continue to draw investment due to their critical role in maritime, rail, and road networks. Companies that provide important, high-demand solutions have growth potential, making the sector a prime target for capital deployment and innovation.
Frank Mountcastle Head of M&A Group, Head Managing Director, commented:
“The transportation and logistics industry’s mix of established and emerging growth drivers will continue to attract a wide set of investors,” “The future is bright for businesses that embrace technology to create efficiencies and add more value while bringing specialized capabilities and a broader array of solutions to their customers.”
According to the PWC’s Transportation and Logistics: US Deals 2025 outlook, the U.S. transportation and logistics industry saw $51.5 billion in deal value across 71 announced transactions in the six months ended November 15, 2024, up from $39.5 billion and 69 agreements in the previous period. This growth shows that investor confidence is rising in line with improved profitability. The transportation and logistics (T&L) sector is seeing an increase in dealmaking due to strong economic conditions and investor confidence. Following the Federal Reserve’s first rate decrease in over four years and the next administration’s deregulatory agenda, M&A activity is expected to revive. While financial purchasers’ participation has slowed, strategic participants are driving transactions, particularly as freight rates and profitability stabilize. Trucking consolidation, railroad logistics innovation, and technological developments in logistics are all key themes to keep an eye on. To profit on the expected market rebound, dealmakers will need agility in fundraising, talent retention, and a strong M&A playbook.
Darach Chapman, US Transportation and Logistics Deals Leader, stated:
“T&L deals activity is set to rebound, driven by demand recovery and supply rationalization. However, macro factors such as trade policy and deregulation will continue to shape M&A opportunities.”
Methodology
We sifted through holdings of Transportation ETFs and online rankings to form an initial list of 20 transportation stocks. From the resultant dataset, we chose 10 stocks with the highest number of hedge fund investors, using Insider Monkey’s database of over 1,000 hedge funds in Q4 2024 to gauge hedge fund sentiment for stocks. We have used the stock’s Market Cap as of February 22 as a tie-breaker in case two or more stocks have the same number of hedge funds invested.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
A bird’s eye view of a long freight train rumbling along the tracks.
Norfolk Southern Corporation (NYSE:NSC)
Number of Hedge Fund Investors: 63
Market Capitalization as of February 22: $56.10 billion
Norfolk Southern Corporation (NYSE:NSC) is a rail transportation firm that transports both raw materials and finished commodities. From the beginning of the rail renaissance in 2004 to 2008, the company had the highest margins among US Class I railroads. Its operational ratio (expenses/revenue) declined in 2009 during the Great Recession and maintained between 69% and 73% from 2010 to 2015. This fell short of the improvements made by Union Pacific and Canadian Pacific, who did not have Norfolk’s exposure to Appalachian coal. However, by 2017, the business was back on pace, with an adjusted 60.1% OR in 2021, due to improved pricing execution and the adoption of precision railroading concepts, which resulted in more effective use of locomotive assets and labor.
Norfolk Southern Corporation (NYSE:NSC)’s fourth-quarter 2024 revenue declined 1.5% year on year due to lower fuel surcharges and softer benchmark coal rates (which reduced yields), slightly offset by core merchandise pricing increases and slightly higher overall traffic. Despite reduced revenues, consolidated profitability improved significantly. Q4 earnings per share grew to $3.23 from $2.32 in the previous year. Norfolk Southern operates “tighter and faster.” The operating ratio rose to 65.8% for the full year. The stock has surged by more than 5% so far in 2025, making it one of the Best Transportation Stocks. The company has a strong capital expenditure plan of $2.2 billion for 2025, and while share buybacks were paused because of the East Palestine issue, they will resume as well.
RBC Capital boosted Norfolk Southern Corporation (NYSE:NSC)’s price objective to $286 from $275, keeping an Outperform rating on the stock. The company’s Q4 results were in line with expectations, but the firm was encouraged by its strong operating momentum, which allowed the firm to exceed its previous guidance on efficiency, according to an analyst in a research note. RBC reiterates that the company’s continuing operating progress leads to a fundamental shift in how its cost structure is regarded, followed by a significant share re-rating.
Overall NSC ranks 9th on our list of the best transportation stocks to buy according to hedge funds. While we acknowledge the potential for NSC as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than NSC but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
