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Challenges Hound Kansas City Southern: Time to Offload?
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Shares of Kansas City Southern have underperformed the industry it belongs to in the last six months on multiple headwinds. The stock has gained 2.6% compared with the industry’s 4.8% rise.
The company has been plagued by high costs for quite some time. Continuing from the previous quarter, high operating expenses are likely to hurt the company's bottom line in the first quarter of 2018 as well. Last quarter, the metric increased 9%, mainly due to rise in fuel costs, which grew 20.5%.
Declining volumes at the Agriculture & Minerals unit might further hamper results in the first quarter. We remind investors that volumes at this sector contracted 9% in fourth-quarter 2017 on weaknesses in grain and food products.
The uncertainty over the North American Free Trade Agreement (NAFTA) negotiations is a major overhang on the stock. This is because the railroad operator draws a significant portion of its revenues from U.S.-Mexico shipments.
Kansas City Southern's trailing 12-month return on equity (ROE) undercuts its growth potential. Not only has the company’s ROE of 12.1% gradually decreased over the past year, it also compares unfavorably with the ROE of 20.4% for its industry and 16% for the S&P 500 Index.
The negativity revolving around the stock is evident from the Zacks Consensus Estimate for first-quarter earnings being revised 1.4% downward in the last 60 days.
The company’s Momentum Score of F further highlights its short-term unattractiveness.
The stock carries a Zacks Rank #4 (Sell). Going by the Zacks proven model, the Sell-rated stocks (4 or 5) are likely to underperform the broader market over the next one to three months.
In light of these downsides, it is advisable for investors to discard the stock from their portfolio for now.
Key Picks
Some better-ranked stocks in the broader Transportation sector are Atlas Air Worldwide Holdings , International Consolidated Airlines Group SA (ICAGY - Free Report) and Cathay Pacific Airways Ltd. (CPCAY - Free Report) . While Atlas Air Worldwide and International Consolidated Airlines sport a Zacks Rank #1 (Strong Buy), Cathay Pacific Airways carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Shares of Atlas Air Worldwide, International Consolidated Airlines and Cathay Pacific Airways have rallied more than 12%, 32% and 19%, respectively, in a year.
Can Hackers Put Money INTO Your Portfolio?
Earlier this year, credit bureau Equifax announced a massive data breach affecting 2 out of every 3 Americans. The cybersecurity industry is expanding quickly in response to this and similar events. But some stocks are better investments than others.
Zacks has just released Cybersecurity! An Investor’s Guide to help Zacks.com readers make the most of the $170 billion per year investment opportunity created by hackers and other threats. It reveals 4 stocks worth looking into right away.
Image: Bigstock
Challenges Hound Kansas City Southern: Time to Offload?
Shares of Kansas City Southern have underperformed the industry it belongs to in the last six months on multiple headwinds. The stock has gained 2.6% compared with the industry’s 4.8% rise.
The company has been plagued by high costs for quite some time. Continuing from the previous quarter, high operating expenses are likely to hurt the company's bottom line in the first quarter of 2018 as well. Last quarter, the metric increased 9%, mainly due to rise in fuel costs, which grew 20.5%.
Declining volumes at the Agriculture & Minerals unit might further hamper results in the first quarter. We remind investors that volumes at this sector contracted 9% in fourth-quarter 2017 on weaknesses in grain and food products.
The uncertainty over the North American Free Trade Agreement (NAFTA) negotiations is a major overhang on the stock. This is because the railroad operator draws a significant portion of its revenues from U.S.-Mexico shipments.
Kansas City Southern's trailing 12-month return on equity (ROE) undercuts its growth potential. Not only has the company’s ROE of 12.1% gradually decreased over the past year, it also compares unfavorably with the ROE of 20.4% for its industry and 16% for the S&P 500 Index.
The negativity revolving around the stock is evident from the Zacks Consensus Estimate for first-quarter earnings being revised 1.4% downward in the last 60 days.
The company’s Momentum Score of F further highlights its short-term unattractiveness.
The stock carries a Zacks Rank #4 (Sell). Going by the Zacks proven model, the Sell-rated stocks (4 or 5) are likely to underperform the broader market over the next one to three months.
In light of these downsides, it is advisable for investors to discard the stock from their portfolio for now.
Key Picks
Some better-ranked stocks in the broader Transportation sector are Atlas Air Worldwide Holdings , International Consolidated Airlines Group SA (ICAGY - Free Report) and Cathay Pacific Airways Ltd. (CPCAY - Free Report) . While Atlas Air Worldwide and International Consolidated Airlines sport a Zacks Rank #1 (Strong Buy), Cathay Pacific Airways carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Shares of Atlas Air Worldwide, International Consolidated Airlines and Cathay Pacific Airways have rallied more than 12%, 32% and 19%, respectively, in a year.
Can Hackers Put Money INTO Your Portfolio?
Earlier this year, credit bureau Equifax announced a massive data breach affecting 2 out of every 3 Americans. The cybersecurity industry is expanding quickly in response to this and similar events. But some stocks are better investments than others.
Zacks has just released Cybersecurity! An Investor’s Guide to help Zacks.com readers make the most of the $170 billion per year investment opportunity created by hackers and other threats. It reveals 4 stocks worth looking into right away.
Download the new report now>>