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Kansas City Southern (KSU) Up 2.8% Since Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for Kansas City Southern . Shares have added about 2.8% in that time frame, outperforming the market.

Will the recent positive trend continue leading up to the stock’s next earnings release, or is it due for a pullback? 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 catalysts.

Fourth Quarter results

Kansas City Southern's  earnings (on an adjusted basis) of $1.12 per share, missed the Zacks Consensus Estimate of $1.17. Earnings decreased 9% on a year-over-year basis. Kansas City Southern reported revenues of $598.5 million which fell short of the Zacks Consensus Estimate of $608.1 million. Revenues were flat on a year-over-year basis.

Results were hurt by a 10% drop in revenues at the Energy segment. Moreover, weakness of the Mexican peso versus the US dollar also contributed to the lackluster performance.

In the reported quarter, operating income declined 4% to $211 million. Operating ratio (operating expenses as a percentage of revenues) stood at 64.8% in the reported quarter as against 63.4% in the year-ago quarter. Carload volumes were flat on a year-over-year basis.

Segment Results

The Chemical & Petroleum segment generated revenues of $111.4 million, down 7% year over year. However, volumes deteriorated 9% year over year. Revenues per carload improved 1% from the prior-year quarter.

The Industrial & Consumer Products generated revenues of $136 million, up 5% year over year. Business volumes increased 6%, whereas revenues per carload decreased 1% from the prior-year quarter.

The Agriculture & Minerals segment revenues totaled $122.5 million, up 13% year over year. Business volumes climbed 10%, whereas revenues per carload were up 2%, both on a year-over-year basis.

The Energy segment generated revenues of $60.7 million, down 10% year over year. Below par performances of Utility Coal and crude oil hurt the segment’s results. Business volumes dropped 10% year over year, while revenues per carload deteriorated 1%.

Intermodal revenues were $92.5 million, down 1% year over year. Business volumes dropped 1%, while revenues per carload improved 1% year over year.

The Automotive segment accounted for $52.9 million of the total revenue, down 3% year over year. Business volumes improved 19%, whereas revenues per carload plunged 18%.

Other revenues totaled $22.5 million, down 4% year over year.

How Have Estimates Been Moving Since Then?

Following the release, investors have witnessed an upward trend in fresh estimate. There have been two revisions higher for the current quarter compared to one lower.

Kansas City Southern Price and Consensus

 

Kansas City Southern Price and Consensus | Kansas City Southern Quote

VGM Scores

At this time, Kansas City Southern's stock has a subpar Growth Score of 'D', though it is lagging a bit on the momentum front with an 'F'. However, the stock was allocated a grade of 'B' on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregte VGM Score of 'D'. If you aren't focused on one strategy, this score is the one you should be interested in.

The company's stock is suitable solely for value based on our styles scores.

Outlook

Estimates have been trending upward for the stock. The magnitude of these revisions also looks promising. Notably, the stock has a Zacks Rank #3 (Hold). We are looking for an inline return from the stock in the next few months.

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