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What's in Store for Kansas City Southern (KSU) in Q2 Earnings?

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Kansas City Southern is scheduled to report second-quarter 2021 earnings on Jul 16, before market open.

The Zacks Consensus Estimate for the company’s second-quarter earnings has been revised downward to $2.19 per share in the past 90 days.  

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

 

Revenues in the Chemical and Petroleum segment are likely to have hurt the company’s top-line numbers in the quarter to be reported. The Zacks Consensus Estimate for Chemical and Petroleum revenues suggests 3.9% fall from the previous quarter’s levels. Per the consensus mark, revenues in the Energy segment are likely to have plunged 6.9% sequentially.

Network congestion is expected to have led to decline in overall carload volumes in the quarter under review.  

Revenues in the Industrial and Consumer Products segment are likely to have increased owing to uptick in economic activities. This might have had a positive impact on the company’s top-line numbers in the quarter to be reported. The Zacks Consensus Estimate for the same suggests 24.8% rise from the year-ago quarter’s levels.

Improvement in adjusted operating ratio (operating expenses, as a percentage of revenues) due to increased efficiency, courtesy of the precision-scheduled railroading model, is likely to have aided the company’s bottom-line results. The metric is predicted to be at 57% for the June quarter. The same was reported at 61% in the first quarter. Notably, the lower the value of the metric, the better it is.

Earnings Whispers

The proven Zacks model does not predict an earnings 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 -0.46%, as the Most Accurate Estimate is pegged at $2.18 and the Zacks Consensus Estimate is pegged at $2.19. 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 Q1 Earnings

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. Quarterly revenues of $706 million lagged the Zacks Consensus Estimate of $714.3 million. The top line fell 3.51% year over year.

Stocks to Consider

Investors interested in the broader Transportation  sector may also consider Southwest Airlines (LUV - Free Report) , Herc Holdings (HRI - Free Report)   and  Alaska Air Group (ALK - Free Report) . These stocks possess the right combination of elements to beat on earnings this reporting cycle.

Southwest Airlines has an Earnings ESP of +60.61% and is Zacks #3 Ranked, presently. The company will release second-quarter 2021 results on Jul 22.

Herc Holdings has an Earnings ESP of +1.85% and carries a Zacks Rank #2 at present. The company will release second-quarter 2021 results on Jul 22.

Alaska Air has an Earnings ESP of +23.94% and is currently a #3 Ranked player. The company will release second-quarter 2021 results on Jul 22.

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