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Genesee & Wyoming (GWR) Up 0.9% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Genesee & Wyoming (GWR - Free Report) . Shares have added about 0.9% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Genesee & Wyoming due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Genesee & Wyoming Outperforms in Q4

Genesee & Wyoming's fourth-quarter earnings (excluding 6 cents from non-recurring items) of $1 per share surpassed the Zacks Consensus Estimate of 90 cents. The bottom line also improved 29.9% on a year-over-year basis. Results were aided by an impressive performance at the North American segment.

Operating revenues inched up 0.7% year over year to $575.6 million, which outpaced the Zacks Consensus Estimate of $569.9 million. Freight revenues accounting for bulk of the top line rose 2.3% to $401.22 million. Meanwhile, freight-related revenues contributing to 24.8% of the top line slid 2.2% to $142.55 million. The balance came from ‘other revenues’.

Total operating expenses (on a reported basis) rose 1% to $469.94 million, mainly due to higher labor-related costs. Operating income (on a reported basis) was down slightly to $105.65 million in the reported quarter. The metric, on an adjusted basis, increased 5.6% to $109.9 million.
 

Segmental Results

Geographically, operating revenues from North American operations increased 5.5% in the quarter under discussion. However, the same from the company’s Australian (51.1% owned) and U.K./European operations decreased 5.8% and 5.3%, respectively. Notably, North American, Australian and U.K./European operations represented 58.7%, 12.4% and 28.9% each of the total operating revenues in the quarter under review.

At the North American unit, adjusted operating ratio (operating expenses as a percentage of revenues) improved 280 basis points to 73.6% in the fourth quarter. Notably, lower the value of the metric, the better. At its Australian operations, the same deteriorated 490 basis points to 75.1%. Also, at the U.K./European operations, adjusted operating ratio decreased 160 basis points to 98.3%. On a consolidated basis, the metric stood at 80.9% compared with 81.8% a year ago.

2019 Outlook

The company expects adjusted earnings to grow in double digits during the current year. Earnings per share are envisioned in the range of $4.30-$4.50 in 2019. Additionally, operating revenues are estimated to be $2.36 billion in the ongoing year. Operating ratio is forecast between 80% and 81% in 2019. Adjusted free cash flow is predicted to be $300 million. Meanwhile, tax rate is estimated to be 27% for the full year. Also, total capital expenditures in 2019 are projected to be $280 million compared with $251 million in 2018.

Operating revenues in the North American segment are anticipated in the band of $1,380-$1,400 billion. Meanwhile, the same for Australian and U.K./Europe operations are forecast to be within $285-$295 million and $670-$690 million, respectively.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

Currently, Genesee & Wyoming has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. Notably, Genesee & Wyoming has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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