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What's in Store for Kansas City Southern (KSU) in Q4 Earnings?

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Kansas City Southern (KSU - Free Report) is scheduled to report fourth-quarter 2020 earnings on Jan 22, before market open.

The Zacks Consensus Estimate for the company’s fourth-quarter earnings has been revised downward by 2.5% in the past 60 days. Also, the Zacks Consensus Estimate for fourth-quarter revenues indicates a 3.7% fall from the year-ago quarter’s reported figure.

Against this backdrop, let’s discuss the factors that might have impacted Kansas City Southern’s performance in the December quarter 

Kansas City Southern Price and EPS Surprise

Kansas City Southern Price and EPS Surprise

Kansas City Southern price-eps-surprise | Kansas City Southern Quote

Volumes are expected to have been low in the industrial and consumer business unit due to significant weakness in the company’s metals business. This anticipated weakness in volumes is likely to get reflected in Industrial and Consumer Products revenues. The consensus mark for Industrial and Consumer Products revenues suggests a 12.3% decline from fourth-quarter 2019 reported figure.

Low crude shipments are also expected to have put pressure on the company’s energy business. The Zacks Consensus Estimate for Energy revenues reflects 11.1% fall from the year-ago quarter’s reported figure. Per the consensus, revenues in the Automotive and Intermodal segments plunged 9.7% and 11.3%, respectively, on a year-over-year basis.

Meanwhile, revenues in the Chemical and Petroleum segment are likely to have aided the company’s top-line numbers in the quarter to be reported. The Zacks Consensus Estimate for Chemical and Petroleum revenues suggests 5.9% rise from the year-ago quarter’s levels.

Additionally, Kansas City Southern’s fourth-quarter performance is expected to have benefited from reduced costs and increased efficiency owing to the precision-scheduled railroading model.

Earnings Whispers

The proven Zacks model does not predict a beat for Kansas City Southern this time around. Notably, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. However, this is not the case here as elaborated below. You can see the complete list of today’s Zacks #1 Rank stocks here.

Earnings ESP: Kansas City Southern has an Earnings ESP of -1.34% as the Most Accurate Estimate is pegged at $1.90, lower than the Zacks Consensus Estimate of $1.93. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Kansas City Southern carries a Zacks Rank #3.

Highlights of Q3 Earnings

Kansas City Southern’s third-quarter 2020 earnings (excluding 5 cents from non-recurring items) of $1.96 per share beat the Zacks Consensus Estimate of $1.88. The bottom line also increased year over year despite coronavirus-related woes. Meanwhile, quarterly revenues of $659.6 million lagged the Zacks Consensus Estimate of $662.4 million. Moreover, the top line fell 11.8% year over year due to weak volumes stemming from coronavirus-induced soft demand, lower commodity prices, lower fuel surcharge and currency-related headwinds.

Stocks to Consider

Investors interested in the broader Transportation sector may consider Canadian Pacific Railway Limited (CP - Free Report) , CSX Corporation (CSX - Free Report) and C.H. Robinson Worldwide, Inc. (CHRW - Free Report) as these stocks possess the right combination of elements to beat on earnings this reporting cycle.

Canadian Pacific has an Earnings ESP of +0.12% and is Zacks #3 Ranked, presently. The company will release fourth-quarter 2020 results on Jan 27.

CSX has an Earnings ESP of +0.47% and a Zacks Rank of 3 at present. The company will release fourth-quarter 2020 results on Jan 21.

C.H. Robinson has an Earnings ESP of +1.01% and a Zacks Rank of 3 at present. The company will release fourth-quarter 2020 results on Jan 26.

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