A month has gone by since the last earnings report for Kansas City Southern . Shares have lost about 0.2% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Kansas City Southern due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Kansas City Southern Misses on Earnings in Q4
Kansas City Southern’s fourth-quarter 2020 earnings (excluding 9 cents from non-recurring items) of $1.89 per share missed the Zacks Consensus Estimate of $1.91. However, the bottom line inched up 3.9% year over year, driven by lower costs. Notably, the company is constantly looking to increase efficiencies and reduce costs by virtue of its precision-scheduled railroading (PSR) model.
Meanwhile, quarterly revenues of $693.4 million lagged the Zacks Consensus Estimate of $700.6 million. Moreover, the top line fell 5% year over year due to weak volumes, mainly as a result of service disruptions at the Mexican port of Lazaro Cardenas following teachers' protests.
Notably, Kansas City Southern’s main line to Mexico’s busiest port was blocked due to protests of teacher’s union. Lower fuel surcharge and fluctuations in foreign currency also hurt the company’s overall carload volumes in the quarter, which declined 3% year over year.
In the reported quarter, operating income (on a reported basis) increased 11.1% to $262.3 million. Moreover, operating income (on an adjusted basis) rose marginally to $275.9 million. Kansas City Southern’s adjusted operating ratio (operating expenses as a percentage of revenues) also improved to 60.2% from 62.4% a year ago. Lower the value of the metric, the better. Operating expenses (adjusted) in the quarter declined 8.3% year over year, thereby leading to an improved adjusted operating ratio despite revenue woes.
Segmental Details
The Chemical & Petroleum segment generated revenues worth $214.8 million, up 15% year over year. While volumes climbed 18% year over year, revenues per carload slid 2% from the prior-year quarter.
The Industrial & Consumer Products segment’s revenues logged $131.7 million, down 15% year over year. Business volumes and revenues per carload decreased 6% and 9%, respectively, on a year-over-year basis.
The Agriculture & Minerals segment’s total revenues inched up 3% to $131.2 million. Business volumes increased 4% while revenues per carload slipped 1% on a year-over-year basis.
The Energy segment’s revenues of $52.6 million were down 16% year over year. While business volumes decreased 12% year over year, revenues per carload dipped 5%.
Intermodal revenues were $77.8 million, down 20% year over year. While business volumes declined 7%, revenues per carload fell 14% year over year.
Revenues in the Automotive segment declined 12% year over year to $54.7 million. While business volumes fell 4%, revenues per carload dropped 8% on a year-over-year basis.
Other revenues totaled $30.6 million, down 23% year over year.
Outlook
The company expects its 2021 revenues to grow in double digits from the 2020 levels. Additionally, its operating ratio is predicted to be 57.5% for the current year. The metric is expected in the 55-56% range for 2022. The company expects current-year earnings per share to be $9 or better, way above the $6.96 reported in 2020.
Earnings per share for next year are anticipated in the $10.5-$11 band. Capital expenditures for 2021 and 2022 are expected to be roughly 17% of the company’s top line. Free cash flow is estimated to be approximately $700 million for both the current year and the next. PSR initiatives are projected to result in incremental savings of $50 million in 2021.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision.
VGM Scores
At this time, Kansas City Southern has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Kansas City Southern has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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Kansas City Southern (KSU) Down 0.2% Since Last Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for Kansas City Southern . Shares have lost about 0.2% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Kansas City Southern due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Kansas City Southern Misses on Earnings in Q4
Kansas City Southern’s fourth-quarter 2020 earnings (excluding 9 cents from non-recurring items) of $1.89 per share missed the Zacks Consensus Estimate of $1.91. However, the bottom line inched up 3.9% year over year, driven by lower costs. Notably, the company is constantly looking to increase efficiencies and reduce costs by virtue of its precision-scheduled railroading (PSR) model.
Meanwhile, quarterly revenues of $693.4 million lagged the Zacks Consensus Estimate of $700.6 million. Moreover, the top line fell 5% year over year due to weak volumes, mainly as a result of service disruptions at the Mexican port of Lazaro Cardenas following teachers' protests.
Notably, Kansas City Southern’s main line to Mexico’s busiest port was blocked due to protests of teacher’s union. Lower fuel surcharge and fluctuations in foreign currency also hurt the company’s overall carload volumes in the quarter, which declined 3% year over year.
In the reported quarter, operating income (on a reported basis) increased 11.1% to $262.3 million. Moreover, operating income (on an adjusted basis) rose marginally to $275.9 million. Kansas City Southern’s adjusted operating ratio (operating expenses as a percentage of revenues) also improved to 60.2% from 62.4% a year ago. Lower the value of the metric, the better. Operating expenses (adjusted) in the quarter declined 8.3% year over year, thereby leading to an improved adjusted operating ratio despite revenue woes.
Segmental Details
The Chemical & Petroleum segment generated revenues worth $214.8 million, up 15% year over year. While volumes climbed 18% year over year, revenues per carload slid 2% from the prior-year quarter.
The Industrial & Consumer Products segment’s revenues logged $131.7 million, down 15% year over year. Business volumes and revenues per carload decreased 6% and 9%, respectively, on a year-over-year basis.
The Agriculture & Minerals segment’s total revenues inched up 3% to $131.2 million. Business volumes increased 4% while revenues per carload slipped 1% on a year-over-year basis.
The Energy segment’s revenues of $52.6 million were down 16% year over year. While business volumes decreased 12% year over year, revenues per carload dipped 5%.
Intermodal revenues were $77.8 million, down 20% year over year. While business volumes declined 7%, revenues per carload fell 14% year over year.
Revenues in the Automotive segment declined 12% year over year to $54.7 million. While business volumes fell 4%, revenues per carload dropped 8% on a year-over-year basis.
Other revenues totaled $30.6 million, down 23% year over year.
Outlook
The company expects its 2021 revenues to grow in double digits from the 2020 levels. Additionally, its operating ratio is predicted to be 57.5% for the current year. The metric is expected in the 55-56% range for 2022. The company expects current-year earnings per share to be $9 or better, way above the $6.96 reported in 2020.
Earnings per share for next year are anticipated in the $10.5-$11 band. Capital expenditures for 2021 and 2022 are expected to be roughly 17% of the company’s top line. Free cash flow is estimated to be approximately $700 million for both the current year and the next. PSR initiatives are projected to result in incremental savings of $50 million in 2021.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision.
VGM Scores
At this time, Kansas City Southern has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Kansas City Southern has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.