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Kansas City Southern (KSU) Q1 Earnings Miss, Improve Y/Y

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Kansas City Southern’s first-quarter 2018 earnings (excluding 10 cents from non-recurring items) of $1.30 fell short of the Zacks Consensus Estimate of $1.35. The bottom line, however, improved 11.1% on a year-over-year basis buoyed by volume growth. Overall carload volumes ticked up 1% in the reported quarter.

Kansas City Southern recorded revenues of $638.6 million, which missed the Zacks Consensus Estimate of $643.5 million. However, it compared favorably with the year-ago number of $609.5 million. Strong performance at the Chemical & Petroleum unit contributed to the year-over-year expansion in the top line.

Meanwhile, operating income increased 4% (on a reported basis) to $219 million. Kansas City Southern’s operating ratio (operating expenses as a percentage of revenues) deteriorated to 65.8% from 65.4% a year ago.  Operating expenses rose 5% in the quarter.

We note that lesser the value of operating ratio the better, as it implies that more cash is available to the company to reward shareholders through dividends/buybacks. Deterioration in this key metric is a negative for this Zacks Rank #3 (Hold) railroad operator. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The company still expects current-year volume growth in mid-single digits.

Kansas City Southern Price, Consensus and EPS Surprise

 

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

Segmental Results

The Chemical & Petroleum segment generated revenues of $139.7 million, up 10% year over year. Volumes improved 2% year over year. Revenues per carload also increased 8% from a year ago.

The Industrial & Consumer Products segment raked in revenues of $146.3 million, up 4% year over year. Business volumes and revenues per carload climbed a respective 1% and 3% year over year.

Total revenues at the Agriculture & Minerals segment were $113.4 million, down 2% year over year. While business volumes declined 5%, revenues per carload were up 3%, both on a year-over-year basis.

The Energy segment generated revenues of $61.3 million, down 11% year over year. Dismal performance at the Utility Coal and Coal & Petroleum Coke dented results. While business volumes contracted 20% year over year, revenues per carload rose 11%.

Intermodal revenues totaled $90.9 million, up 9% year over year. While business volumes improved 8%, revenues per carload were flat in the reported quarter.

Revenues at the Automotive segment came in at $59.8 million, up 17% year over year. While business volumes improved 6%, revenues per carload increased 10%.

Other revenues totaled $27.2 million, up 19% year over year.

Upcoming Releases

Investors interested in the railroad space are keenly awaiting first-quarter earnings reports from key players such as Canadian National Railway Company (CNI - Free Report) , Norfolk Southern Corporation (NSC - Free Report) and Union Pacific Corporation (UNP - Free Report) . While Canadian National will report first-quarter earnings on Apr 23, Norfolk Southern and Union Pacific will announce the same on Apr 25 and Apr 26, respectively.

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