Back to top

Image: Bigstock

Why is Kansas City Southern (KSU) Stock Down 9% in a Year?

Read MoreHide Full Article

Shares of Kansas City Southern have declined 9.2% in a year against the industry’s 16.2% rise.



 

Reasons Behind the Price Fall

The company has been grappling with high operating expenses for quite some time. Operating expenses increased 4.2% in the first nine months of 2018, mainly due to a 9.2% rise in fuel costs. High operating expenses unless controlled has potential to limit bottom-line growth going forward. Congestion in the U.S. rail network is another cause for concern.

Moreover, declining revenues at the Energy segment might hinder top-line growth. Notably, revenues at the segment dropped 11% year over year during the first nine months of the year.

The company’s struggles on the top- and the bottom-line front can be traced from third-quarter 2018 earnings report wherein it delivered lower-than-expected earnings and revenues.

Further, the company’s trailing 12-month return on equity (ROE) undercuts its growth potential. Its 12% ROE compares unfavorably with the ROE of 21.9% for its industry and 18.1% for the S&P 500 index.

The negativity surrounding the stock is evident from the Zacks Consensus Estimate for current-quarter earnings being revised 3.1% downward in the last 60 days. Also, the same for full-year earnings has been moved 1.3% south over the given time frame.

The company’s VGM Score of D also highlights its sluggish growth prospects. Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of all three factors.

Zacks Rank & Key Picks

Kansas City Southern carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the broader Transportation sector are Air France-KLM (AFLYY - Free Report) , CSX Corporation (CSX - Free Report) and Norfolk Southern Corporation (NSC - Free Report) . While Air France-KLM and CSX sport a Zacks Rank #1 (Strong Buy), Norfolk Southern holds a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Shares of Air France-KLM have surged more than 32% in the past six months while CSX and Norfolk Southern stocks have rallied more than 12%.

Wall Street’s Next Amazon

Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.

Click for details >>


See More Zacks Research for These Tickers


Normally $25 each - click below to receive one report FREE:


CSX Corporation (CSX) - free report >>

Norfolk Southern Corporation (NSC) - free report >>

Air France-KLM SA (AFLYY) - free report >>

Published in