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Here's Why You Should Discard Kansas City Southern (KSU) Now
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Kansas City Southern shares have declined 3.3% in the past month compared with a 2.4% fall of the industry it belongs to.
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Kansas City Southern reported lower-than-expected earnings per share in each of the first two quarters of 2021. The company is suffering from headwinds like network congestion. Disruptions in the flow of refined products into Mexico is hurting the company's operations significantly as Kansas City Southern has significant Mexican exposure. Network congestion hurt second-quarter operating ratio to the tune of 200 basis points.
Despite gradual increase in economic activities, some segments are persistently experiencing weakness. In the industrial and consumer business unit, the company’s metals business is still weak. With regard to the energy business, the company is seeing continued softness in crude shipments. In 2020, segmental volumes fell 14%. Despite second-quarter 2021 results being aided by easy year-over-year comparisons, crude oil revenues and revenue per carload declined 14% and 27%, respectively, in first-half 2021. Additionally, food product (in the agriculture and minerals segment) revenues and volumes declined 10% year over year each in the first half of 2021.
The stock has seen the Zacks Consensus Estimate for current-year earnings has been revised downward to the tune of 3.2% in the past 60 days. Kansas City Southern, currently carrying a Zacks Rank# 4 (Sell), has a Momentum Score of F. This reflects on the stock’s short-term unattractiveness. In view of the above-mentioned headwinds, we believe that investors should get rid of the stock from their respective portfolios.
Long-term expected earnings per share (three to five years) growth rate for Schneider National, Landstar and TFI International is pegged at 17.9%, 12% and 31.6%, respectively.
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Here's Why You Should Discard Kansas City Southern (KSU) Now
Kansas City Southern shares have declined 3.3% in the past month compared with a 2.4% fall of the industry it belongs to.
Kansas City Southern reported lower-than-expected earnings per share in each of the first two quarters of 2021. The company is suffering from headwinds like network congestion. Disruptions in the flow of refined products into Mexico is hurting the company's operations significantly as Kansas City Southern has significant Mexican exposure. Network congestion hurt second-quarter operating ratio to the tune of 200 basis points.
Despite gradual increase in economic activities, some segments are persistently experiencing weakness. In the industrial and consumer business unit, the company’s metals business is still weak. With regard to the energy business, the company is seeing continued softness in crude shipments. In 2020, segmental volumes fell 14%. Despite second-quarter 2021 results being aided by easy year-over-year comparisons, crude oil revenues and revenue per carload declined 14% and 27%, respectively, in first-half 2021. Additionally, food product (in the agriculture and minerals segment) revenues and volumes declined 10% year over year each in the first half of 2021.
The stock has seen the Zacks Consensus Estimate for current-year earnings has been revised downward to the tune of 3.2% in the past 60 days. Kansas City Southern, currently carrying a Zacks Rank# 4 (Sell), has a Momentum Score of F. This reflects on the stock’s short-term unattractiveness. In view of the above-mentioned headwinds, we believe that investors should get rid of the stock from their respective portfolios.
Stocks to Consider
Some better-ranked stocks in the broader Zacks Transportation sector are Schneider National, Inc. (SNDR - Free Report) , Landstar System, Inc. (LSTR - Free Report) and TFI International Inc. (TFII - Free Report) . All the stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Long-term expected earnings per share (three to five years) growth rate for Schneider National, Landstar and TFI International is pegged at 17.9%, 12% and 31.6%, respectively.