It has been about a month since the last earnings report for Genesee & Wyoming (GWR - Free Report) . Shares have added about 7.8% in that time frame, outperforming 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 the most recent earnings report in order to get a better handle on the important catalysts.
Genesee & Wyoming Underperforms in Q1
Genesee & Wyoming's first-quarter 2019 adjusted earnings of 78 cents per share missed the Zacks Consensus Estimate of 83 cents. However, the bottom line skyrocketed 11.4% on a year-over-year basis. Results were partly affected by bad weather conditions.
Operating revenues slipped 2.9% year over year to $558 million and also lagged the Zacks Consensus Estimate of $569 million. Freight revenues accounting for bulk (69.7%) of the top line dipped 2.7% to $388.79 million. Freight-related revenues contributing to 24.4% of the top line also slid 3.5% to $136.26 million. The balance came from ‘other revenues’.
Total operating expenses (on a reported basis) decreased 1.9% to $478.38 million. Operating income (on a reported basis) was down 8.3% to $79.71 million in the reported quarter. The metric, on an adjusted basis, inched up 0.5% to $87.8 million, despite severe weather conditions.
During the first quarter of 2019, the company repurchased 64,860 shares worth $4.8 million.
Geographically, operating revenues from North American operations increased 2.1% in the quarter under discussion. However, the same from the company’s Australian (51.1% owned) and U.K./European operations decreased 13% and 7.8%, respectively. Notably, North American, Australian and U.K./European operations represented 59.6%, 11.7% and 28.8% 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) deteriorated to 78.9% compared with 77.5% in the first quarter of 2018. Notably, lower the value of the metric, the better. At its Australian operations, the same improved to78.4% compared with 78.6% in the year-ago period. Also, at the U.K./European operations, adjusted operating ratio improved to 97.9% compared with 101.2% in first-quarter 2018. On a consolidated basis, the metric (reported) stood at 85.7% compared with 84.9% a year ago.
Q2 &2019 Outlook
Operating revenues are estimated to be $570-$590 million in the ongoing quarter. Meanwhile, operating revenues for North America, Australia and U.K./Europe operations are expected in the ranges of $340-$350 million, $70-$75 million and $160-$170 million respectively. Consolidated operating ratio is forecast between 80% and 81% in the second quarter. Tax rate is projected to be 28% in the current quarter. Additionally, earnings per share are forecast between $1 and $1.10 in the period. The company retains its earnings per share view in the band of $4.30-$4.50 for 2019.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
At this time, Genesee & Wyoming has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, 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 C. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Genesee & Wyoming has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.