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Kansas City Southern's (KSU) Q1 Earnings Lag on Volume Woes
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Kansas City Southern’s first-quarter 2021 earnings (excluding 23 cents from non-recurring items) of $1.91 per share missed the Zacks Consensus Estimate of $2. Moreover, the bottom line declined 2.6% on a year-over-year basis despite adjusted operating expenses declining 1%. Results were hurt by below-par revenues.
Notably, quarterly revenues of $706 million lagged the Zacks Consensus Estimate of $714.3 million. Moreover, the top line fell 3.51% year over year due to lackluster volumes, lower fuel surcharge and adverse foreign currency movements. Network congestion contributed to the decline in overall carload volumes in the quarter, which dipped 1% year over year.
In the reported quarter, operating income (on a reported basis) increased 12.4% to $253 million. Meanwhile, operating income (on an adjusted basis) declined 7.6% to $272.3 million. Kansas City Southern’s adjusted operating ratio (operating expenses as a percentage of revenues) deteriorated to 61.4% from 59.7% a year ago. Lower the value of the metric, the better. The deterioration was due to revenue woes.
Kansas City Southern Price, Consensus and EPS Surprise
The Chemical & Petroleum segment generated revenues worth $231.3 million, up 16% year over year. While volumes climbed 12% year over year, revenues per carload improved 4% from the prior-year quarter.
The Industrial & Consumer Products segment’s revenues logged $134 million, down 16% year over year due to the disappointing performances of the metals and scrap and forest products sub-groups. Business volumes and revenues per carload decreased 13% and 3%, respectively, on a year-over-year basis.
The Agriculture & Minerals segment’s total revenues decreased 8% to $124.4 million. Business volumes and revenues per carload slipped 4% each on a year-over-year basis.
The Energy segment’s revenues of $57.5 million were up 2% year over year, riding on the 34% rise in revenues of the Utility Coal sub-group. While business volumes increased 7% year over year, revenues per carload dipped 5%.
Intermodal revenues were $81.3 million, down 8% year over year. While business volumes were flat year over year, revenues per carload fell 8% year over year.
Revenues in the Automotive segment declined 18% year over year to $44.1 million. While business volumes slumped 18%, revenues per carload were flat on a year-over-year basis.
Other revenues totaled $33.4 million, down 18% year over year.
Total capital expenses were $100 million in the reported quarter compared with $87 million in first-quarter 2020. The increase was due to higher capacity investments in first-quarter 2021.
The company returned $124 million to its shareholders in the March quarter through dividend payments ($49 million) and share repurchases ($75 million). In first-quarter 2020, the company had rewarded its shareholders with $232 million through dividend payments ($38 million) and share buybacks ($194 million). The company generated free cash flow of $112 million in first-quarter 2021, up 18% year over year.
Outlook
The railroad operator reiterated its outlook. This currently Zacks Rank #3 (Hold) company still expects its 2021 revenues to grow in double digits from the 2020 levels. Additionally, its operating ratio estimate is retained at 57.5% for the current year. Further, the metric is still projected in the 55-56% range for 2022. The company continues to anticipate its current-year earnings per share to be $9 or better. The Zacks Consensus Estimate for 2021 earnings currently stands at $9.
Earnings per share view for next year is maintained in the $10.5-$11 band. The Zacks Consensus Estimate for 2022 earnings currently stands at $10.65 per share {below the mid-point ($10.75) of the guided range}. Capital expenditures for 2021 and 2022 are reaffirmed to be roughly 17% of the company’s top line each. Free cash flow is still envisioned to be approximately $700 million for both the current year and the next.
Investors interested in the Zacks Transportation – Rail industry will be keenly awaiting the first-quarter 2021 earnings reports of key players, namely Canadian National Railway Company (CNI - Free Report) , NorfolkSouthernCorporation (NSC - Free Report) and CanadianPacific Railway Limited (CP - Free Report) .
While Canadian National will announce first-quarter 2021 results on Apr 26, Norfolk Southern will release earnings on Apr 28. Meanwhile, Canadian Pacific Railway Limited will report financial numbers on Apr 21.
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The only question is “Will you get into the right stocks early when their growth potential is greatest?”
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Kansas City Southern's (KSU) Q1 Earnings Lag on Volume Woes
Kansas City Southern’s first-quarter 2021 earnings (excluding 23 cents from non-recurring items) of $1.91 per share missed the Zacks Consensus Estimate of $2. Moreover, the bottom line declined 2.6% on a year-over-year basis despite adjusted operating expenses declining 1%. Results were hurt by below-par revenues.
Notably, quarterly revenues of $706 million lagged the Zacks Consensus Estimate of $714.3 million. Moreover, the top line fell 3.51% year over year due to lackluster volumes, lower fuel surcharge and adverse foreign currency movements. Network congestion contributed to the decline in overall carload volumes in the quarter, which dipped 1% year over year.
In the reported quarter, operating income (on a reported basis) increased 12.4% to $253 million. Meanwhile, operating income (on an adjusted basis) declined 7.6% to $272.3 million. Kansas City Southern’s adjusted operating ratio (operating expenses as a percentage of revenues) deteriorated to 61.4% from 59.7% a year ago. Lower the value of the metric, the better. The deterioration was due to revenue woes.
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 worth $231.3 million, up 16% year over year. While volumes climbed 12% year over year, revenues per carload improved 4% from the prior-year quarter.
The Industrial & Consumer Products segment’s revenues logged $134 million, down 16% year over year due to the disappointing performances of the metals and scrap and forest products sub-groups. Business volumes and revenues per carload decreased 13% and 3%, respectively, on a year-over-year basis.
The Agriculture & Minerals segment’s total revenues decreased 8% to $124.4 million. Business volumes and revenues per carload slipped 4% each on a year-over-year basis.
The Energy segment’s revenues of $57.5 million were up 2% year over year, riding on the 34% rise in revenues of the Utility Coal sub-group. While business volumes increased 7% year over year, revenues per carload dipped 5%.
Intermodal revenues were $81.3 million, down 8% year over year. While business volumes were flat year over year, revenues per carload fell 8% year over year.
Revenues in the Automotive segment declined 18% year over year to $44.1 million. While business volumes slumped 18%, revenues per carload were flat on a year-over-year basis.
Other revenues totaled $33.4 million, down 18% year over year.
Total capital expenses were $100 million in the reported quarter compared with $87 million in first-quarter 2020. The increase was due to higher capacity investments in first-quarter 2021.
The company returned $124 million to its shareholders in the March quarter through dividend payments ($49 million) and share repurchases ($75 million). In first-quarter 2020, the company had rewarded its shareholders with $232 million through dividend payments ($38 million) and share buybacks ($194 million). The company generated free cash flow of $112 million in first-quarter 2021, up 18% year over year.
Outlook
The railroad operator reiterated its outlook. This currently Zacks Rank #3 (Hold) company still expects its 2021 revenues to grow in double digits from the 2020 levels. Additionally, its operating ratio estimate is retained at 57.5% for the current year. Further, the metric is still projected in the 55-56% range for 2022. The company continues to anticipate its current-year earnings per share to be $9 or better. The Zacks Consensus Estimate for 2021 earnings currently stands at $9.
Earnings per share view for next year is maintained in the $10.5-$11 band. The Zacks Consensus Estimate for 2022 earnings currently stands at $10.65 per share {below the mid-point ($10.75) of the guided range}. Capital expenditures for 2021 and 2022 are reaffirmed to be roughly 17% of the company’s top line each. Free cash flow is still envisioned to be approximately $700 million for both the current year and the next.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Upcoming Railroad Releases
Investors interested in the Zacks Transportation – Rail industry will be keenly awaiting the first-quarter 2021 earnings reports of key players, namely Canadian National Railway Company (CNI - Free Report) , Norfolk Southern Corporation (NSC - Free Report) and Canadian Pacific Railway Limited (CP - Free Report) .
While Canadian National will announce first-quarter 2021 results on Apr 26, Norfolk Southern will release earnings on Apr 28. Meanwhile, Canadian Pacific Railway Limited will report financial numbers on Apr 21.
Infrastructure Stock Boom to Sweep America
A massive push to rebuild the crumbling U.S. infrastructure will soon be underway. It’s bipartisan, urgent, and inevitable. Trillions will be spent. Fortunes will be made.
The only question is “Will you get into the right stocks early when their growth potential is greatest?”
Zacks has released a Special Report to help you do just that, and today it’s free. Discover 7 special companies that look to gain the most from construction and repair to roads, bridges, and buildings, plus cargo hauling and energy transformation on an almost unimaginable scale.
Download FREE: How to Profit from Trillions on Spending for Infrastructure >>