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Kansas City Southern (KSU) Down 2.9% Since Last Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for Kansas City Southern (KSU - Free Report) . Shares have lost about 2.9% in that time frame, underperforming the S&P 500.

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

Kansas City Southern Beats on Earnings & Revenues in Q1

Kansas City Southern’s  first-quarter 2019 earnings (excluding 52 cents from non-recurring items) of $1.54 beat the Zacks Consensus Estimate of $1.45. The bottom line also rose 18.5% on a year-over-year basis. Results were aided by higher revenues across most segments and a better operational performance.

The company delivered revenues of $674.8 million, surpassing the Zacks Consensus Estimate of $668 million. Moreover, the top line improved 5.7% on a year-over-year basis. Overall, carload volumes dipped 1% year over year on account of service disruption.

In the reported quarter, adjusted operating income increased 10% to $242 million. Kansas City Southern’s operating ratio (operating expenses as a percentage of revenues) improved to 64.2% from 65.8% a year ago despite operating expenses rising 22.5%.

Segmental Details

The Chemical & Petroleum segment generated revenues of $168.6 million, up 21% year over year. Volumes expanded 17% year over year. Revenues per carload also climbed 4% from the prior-year quarter.

The Industrial & Consumer Products segment generated revenues of $149.8 million, up 2% year over year. While business volumes contracted 3%, revenues per carload increased 5% year over year.

The Agriculture & Minerals segment’s total revenues were $122.9 million, up 8% year over year. While business volumes increased 9%, revenues per carload slipped 1%, both on a year-over-year basis.

The Energy segment’s revenues logged $64.6 million, up 5% year over year. While business volumes expanded 6% year over year, revenues per carload remained flat.

Intermodal revenues were $79.9 million, down 12% year over year. This downside was due to auto plant shutdowns among other factors. Moreover, business volumes and revenues per carload decreased 9% and 3%, respectively, in the quarter under review.

Revenues at the Automotive segment decreased 4% year over year to $57.6 million as a result of auto plant shutdowns among other factors. While business volumes declined 8%, revenues per carload climbed 5%, both on a year-over-year basis.

Other revenues totaled $31.4 million, up 15% year over year.

How Have Estimates Been Moving Since Then?

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

VGM Scores

At this time, Kansas City Southern has a strong Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. 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 broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Kansas City Southern has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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