Norfolk Southern train derailment likely to have minimal impact on shareholders

Buttigieg's inexperience exposed as train derailment questions remain unanswered: Johnson

House Energy & Commerce Committee member Rep. Bill Johnson discusses the latest on the train derailment tragedy in East Palestine, Ohio, on "The Evening Edit."

Despite a roughly 6% drop in share price since a Norfolk Southern train derailed in a plume of smoke near the Ohio and Pennsylvania border on Feb. 3, the company’s value is predicted to quickly rebound for investors.

In an interview with FOX Business, Lee Klaskow, a senior transportation analyst with Bloomberg Intelligence, said, "The financial impact is unknown at the moment, but Norfolk Southern is self-insured for up to $75 million, which comes out to about 25 cents per share."

"The company is expected to generate $13.72 in EPS this year according to consensus," he added. "So, the earnings impact may not be that meaningful."

A man takes photos as a black plume rises over East Palestine, Ohio, as a result of a controlled detonation of a portion of the derailed Norfolk Southern train on Feb. 6, 2023. (AP Photo / Gene J. Puskar / AP Newsroom)

A Bank of America report on the incident said that the accident’s impact would likely be reduced given Norfolk’s insurances.

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The company even has third-party coverage for third-party damage above $75 million and below $800 million as well as self-property damage above $75 million and below $275 million, the report stated.

Bank analysts also expect damages to remain beneath coverage levels for the incident, and based on similar non-fatal accidents, costs should be well below self-insurance limits.

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The Environmental Protection Agency said that Norfolk Southern may be responsible for cleanup in and around the village of East Palestine, near the border with Pennsylvania.

Based on prior incidents, Bank of America believes the transportation giant could experience a $40 million to $50 million casualty charge ($0.13-$0.17/sh) and a 1% impact to 2023 EPS. Norfolk Southern will also face class-action lawsuits.

The cleanup of portions of a Norfolk Southern freight train that derailed Friday night, Feb. 3, in East Palestine, Ohio, continues on Thursday, Feb. 9. (AP Photo / Gene J. Puskar / AP Newsroom)

Edward Moya, a senior market analyst for OANDA in New York, said, "Wall Street is only expecting a one-time charge that might impact a couple percentage points of its full-year profit."

"This might be an environmental emergency, but the financial impact does not seem like it will be crippling for Norfolk shareholders," he said.

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Norfolk Southern declined comment to FOX Business but issued an update, saying the company had completed more than 400 in-home air tests, implemented an extensive outdoor air-monitoring program, is actively sampling the of East Palestine's drinking water, distributed more than $1.5 million in direct financial assistance to more than 1,000 families, and established a $1 million fund available immediately to the community.

A Norfolk Southern freight train passes through East Palestine, Ohio, on Feb. 9, 2023, as cleanup continues following the Feb. 3 train derailment. Residents were allowed back into their homes after being forced to evacuate following the derailment. (AP Photo / Gene J. Puskar / AP Newsroom)

According to the Bank of America report, the train was carrying 141 cars and three locomotives, had 50 cars derail in East Palestine, Ohio, 10 of which were carrying hazardous materials that resulted in a town-wide evacuation.

Hazardous materials spilled in the derailment included vinyl chloride, butyl acrylate, ethylhexyl acrylate and ethylene glycol monobutyl ether.

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Despite the magnitude of the accident, there were no injuries to first responders or the 4,800 town residents.