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Kansas City Southern (KSU) Stock Gains on Q2 Earnings Beat
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Kansas City Southern’s second-quarter 2019 earnings (excluding 36 cents from non-recurring items) of $1.64 beat the Zacks Consensus Estimate by 4 cents. The bottom line also rose 6.5% on a year-over-year basis. Results were aided by a better operational performance. This outperformance on the earnings front seems to have found favor with investors. As a result, the stock gained in pre-market trading.
The company delivered revenues of $714 million, surpassing the Zacks Consensus Estimate of $703.9 million. Moreover, the top line improved 4.6% on a year-over-year basis mainly owing to strong performance at the Chemicals and Petroleum unit.
Overall, carload volumes were flat year over year as growth in the Chemical and Petroleum unit was mitigated by declines in the Industrial and Consumer products, Agriculture and Minerals, Energy, and Intermodal segments.
In the reported quarter, operating income (on a reported basis) decreased 15.4% to $208 million. However, operating income (excluding restructuring charges pertaining to Precision Scheduled Railroading initiatives) increased 5.4% to $259 million.
Kansas City Southern’s adjusted operating ratio (operating expenses as a percentage of revenues) improved to 63.7% from 64% a year ago despite higher adjusted operating expenses. Notably, adjusted operating ratio was negatively impacted to the tune of 130 basis points owing to the loss of the Mexican Fuel Excise Tax credit. Lower the value of operating ratio the better.
Kansas City Southern Price, Consensus and EPS Surprise
The Chemical & Petroleum segment generated revenues of $188.3 million, up 19% year over year. Volumes expanded 18% year over year. Revenues per carload also inched up 1% from the prior-year quarter.
The Industrial & Consumer Products segment generated revenues of $150.3 million, down 2% year over year. While business volumes contracted 7%, revenues per carload increased 6% year over year.
The Agriculture & Minerals segment’s total revenues were $122.4 million, down 2% year over year. Both business volumes and revenues per carload decreased 1% on a year-over-year basis.
The Energy segment’s revenues logged $53.9 million, down 5% year over year. While business volumes contracted 5% year over year, revenues per carload remained flat.
Intermodal revenues were $92.6 million, down 1% year over year. While business volumes contracted 3%, revenues per carload increased 2% year over year.
Revenues at the Automotive segment increased 5% year over year to $70.9 million. While business volumes were flat, revenues per carload climbed 5%, on a year-over-year basis.
Other revenues totaled $35.6 million, up 22% year over year.
Outlook
For full-year 2019, volume growth is expected to be flat to slightly down. Moreover, this Zacks Rank #4 (Sell) railroad operator anticipates current year revenue growth between 5% and 7%. Capital expenditures are anticipated below $600 million in 2019.
Additionally, Kansas City Southern expects operating ratio at the lower end of the 60-61% range by 2021. Adjusted earnings per share are projected in the low-to-mid-teens band (compound annual growth rate for the 2019-2021 time frame).
Investors interested in the broader Transportation sector are keenly awaiting second-quarter 2019 earnings reports from key players like Canadian National Railway (CNI - Free Report) Norfolk Southern Corp. (NSC - Free Report) and United Parcel Service (UPS - Free Report) . While Canadian National will report second-quarter earnings on Jul 23, Norfolk Southern and UPS will announce the same on Jul 24.
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Kansas City Southern (KSU) Stock Gains on Q2 Earnings Beat
Kansas City Southern’s second-quarter 2019 earnings (excluding 36 cents from non-recurring items) of $1.64 beat the Zacks Consensus Estimate by 4 cents. The bottom line also rose 6.5% on a year-over-year basis. Results were aided by a better operational performance. This outperformance on the earnings front seems to have found favor with investors. As a result, the stock gained in pre-market trading.
The company delivered revenues of $714 million, surpassing the Zacks Consensus Estimate of $703.9 million. Moreover, the top line improved 4.6% on a year-over-year basis mainly owing to strong performance at the Chemicals and Petroleum unit.
Overall, carload volumes were flat year over year as growth in the Chemical and Petroleum unit was mitigated by declines in the Industrial and Consumer products, Agriculture and Minerals, Energy, and Intermodal segments.
In the reported quarter, operating income (on a reported basis) decreased 15.4% to $208 million. However, operating income (excluding restructuring charges pertaining to Precision Scheduled Railroading initiatives) increased 5.4% to $259 million.
Kansas City Southern’s adjusted operating ratio (operating expenses as a percentage of revenues) improved to 63.7% from 64% a year ago despite higher adjusted operating expenses. Notably, adjusted operating ratio was negatively impacted to the tune of 130 basis points owing to the loss of the Mexican Fuel Excise Tax credit. Lower the value of operating ratio the better.
Kansas City Southern Price, Consensus and EPS Surprise
Kansas City Southern price-consensus-eps-surprise-chart | Kansas City Southern Quote
Segmental Details
The Chemical & Petroleum segment generated revenues of $188.3 million, up 19% year over year. Volumes expanded 18% year over year. Revenues per carload also inched up 1% from the prior-year quarter.
The Industrial & Consumer Products segment generated revenues of $150.3 million, down 2% year over year. While business volumes contracted 7%, revenues per carload increased 6% year over year.
The Agriculture & Minerals segment’s total revenues were $122.4 million, down 2% year over year. Both business volumes and revenues per carload decreased 1% on a year-over-year basis.
The Energy segment’s revenues logged $53.9 million, down 5% year over year. While business volumes contracted 5% year over year, revenues per carload remained flat.
Intermodal revenues were $92.6 million, down 1% year over year. While business volumes contracted 3%, revenues per carload increased 2% year over year.
Revenues at the Automotive segment increased 5% year over year to $70.9 million. While business volumes were flat, revenues per carload climbed 5%, on a year-over-year basis.
Other revenues totaled $35.6 million, up 22% year over year.
Outlook
For full-year 2019, volume growth is expected to be flat to slightly down. Moreover, this Zacks Rank #4 (Sell) railroad operator anticipates current year revenue growth between 5% and 7%. Capital expenditures are anticipated below $600 million in 2019.
Additionally, Kansas City Southern expects operating ratio at the lower end of the 60-61% range by 2021. Adjusted earnings per share are projected in the low-to-mid-teens band (compound annual growth rate for the 2019-2021 time frame).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Upcoming Releases
Investors interested in the broader Transportation sector are keenly awaiting second-quarter 2019 earnings reports from key players like Canadian National Railway (CNI - Free Report) Norfolk Southern Corp. (NSC - Free Report) and United Parcel Service (UPS - Free Report) . While Canadian National will report second-quarter earnings on Jul 23, Norfolk Southern and UPS will announce the same on Jul 24.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
See the pot trades we're targeting>>