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Kansas City Southern (KSU) Q2 Earnings: What's in the Cards?

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Kansas City Southern (KSU - Free Report) , a leading railroad operator, is scheduled to report second-quarter 2017 results on Jul 21, before the market opens.

The company posted mixed results in the last quarter. Earnings were in line with the Zacks Consensus Estimate, while revenues beat the same. Quarterly earnings and revenues improved 13.6% and 8.3%, respectively, on a year-over-year basis.

However, things might be looking up for the company in the second quarter. The positive sentiment surrounding the stock can be gauged from the fact that the Zacks Consensus Estimate for the second quarter has inched up 1.6% in the last one month.

Shares of Kansas City Southern have shown an uptrend of late, outperforming the Zacks categorized Transportation - Rail industry over the last three months. The stock has rallied 16.35%, while the industry has gained 9.11% in the same period.

Why a Likely Positive Surprise? 

Our proven model shows that Kansas City Southern is likely to beat on earnings this quarter because it has the perfect combination of the two key ingredients.

Zacks ESP:  Earnings ESP for Kansas City Southern is +0.79% as the Most Accurate estimate is pegged at $1.27, while the Zacks Consensus Estimate stands at $1.26. A positive ESP serves as a leading indicator of a likely positive earnings surprise. 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 #2 (Buy). Note that stocks with Zacks Rank #1 (Strong Buy), 2 or 3 (Hold) have a significantly higher chance of beating earnings estimates.

Conversely, the Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement.

The combination of Kansas City Southern’s favorable Zacks Rank and positive ESP makes us reasonably confident of an earnings beat.

Kansas City Southern Price and EPS Surprise

 

Kansas City Southern Price and EPS Surprise | Kansas City Southern Quote

Factors at Play

The company’s cost controlling efforts are impressive. This is expected to improve the operating ratio in its second quarter. We also expect the company’s Energy segment to perform strongly in the second quarter driven by an improvement in the coal-related scenario. The Chemical & Petroleum segment is also expected to perform well on the back of increased volumes.

The company’s efforts to reward shareholders through dividend payments also raise optimism. In May 2017, the company announced a regular dividend of 25 cents per share for its outstanding 4% non-cumulative preferred stock.

However, headwinds like dipping revenues at the intermodal segment which hurt Kansas City Southern’s first-quarter results are expected to affect its second quarter as well.

Other Stocks to Consider

Here are some other companies you may consider, as our model shows that they have the right combination of elements to come up with an earnings beat this quarter:

American Airlines Group, Inc. (AAL - Free Report) has an Earnings ESP of +2.75% and a Zacks Rank #1. The company will release its second-quarter results on Jul 28. You can see the complete list of today’s Zacks #1 Rank stocks here.

Allegiant Travel Company (ALGT - Free Report) has an Earnings ESP of +1.36% and a Zacks Rank #2. The company will release its second-quarter results on Jul 26.

Alaska Air Group, Inc. (ALK - Free Report) has an Earnings ESP of +0.80% and a Zacks Rank #2. The company will announce its second-quarter results on Jul 26.

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