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Kansas Southern (KSU) Q4 Earnings: Stock to Disappoint?

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Leading railroad operator, Kansas City Southern is scheduled to report fourth-quarter 2016 results on Jan 20, before the market opens. Though the company missed earnings estimates in the third quarter of 2016, it outpaced earnings estimates in three of the last four quarters with an average earnings beat of 7.16%. It remains to be seen how the company performs this quarter.

Factors to Consider

Kansas City Southern’s vast network is likely to support growth. The company has an impressive shareholder return policy and is expected see higher volumes as the U.S. economy strengthens after several quarters.

However, the company faces headwinds like lower coal volumes and weather-related challenges. Coal has hurt the revenues of railroads such as CSX Corp. (CSX - Free Report) and Union Pacific Corp. (UNP - Free Report) . The company’s performance is also likely to be impacted by the weak Mexican peso as the bulk of its revenues comes from the region.

We note that the company’s stock has underperformed the broader Zacks categorized Transportation-Rail industry over the past three months. The company declined 11.42%, while the industry gained 9.80% over the same period.

Earnings Whispers

Our proven model does not conclusively show that Kansas City Southern is likely to beat the Zacks Consensus Estimate this quarter. This is because stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold) for this to happen. This is not the case for the company, as elaborated below.

Zacks ESP: The Most Accurate estimate stands at $1.17 and Zacks Consensus Estimate is pegged at $1.18. Thus, the ESP is -0.85%. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.

Zacks Rank: Kansas City Southern carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.

Please note, we caution against stocks with a Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions. 

Kansas City Southern Price and EPS Surprise

 

Kansas City Southern Price and EPS Surprise | Kansas City Southern Quote

A Stock That Warrants a Look

While it remains to be seen as to how Kansas City Southern performs this quarter, there is a transportation stock that you may want to consider, as our model shows that it has the right combination for an earnings beat this quarter:

JetBlue Airways Corp. (JBLU - Free Report) has a Zacks Rank #3 and an Earnings ESP of +2.08%. The company is scheduled to report fourth-quarter results on Jan 26.

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