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Kansas City Southern (KSU) Down 2.2% Since Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for Kansas City Southern KSU. Shares have lost about 2.2% in the past month, outperforming the market.

Will the recent negative trend continue leading up to its next earnings release, or is KSU due for a breakout? 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 drivers.

Recent Earnings

The company's fourth-quarter 2017 earnings (excluding $3.95 from non-recurring items) of $1.38 surpassed the Zacks Consensus Estimate of $1.36 per share. The bottom line also expanded 23.2% on a year-over-year basis. Results were boosted by a 5% rise in overall carload volumes.

The company reported revenues of $660.4 million, which marginally missed the Zacks Consensus Estimate of $660.6 million. However, the top line improved 10.3% on a year-over-year basis.

Also, operating income increased 13% (on a reported basis) to $238 million. Kansas City Southern’s operating ratio (operating expenses as a percentage of revenues) was 64% compared with 64.8% reported a year ago.


Segment Results

The Chemical & Petroleum segment generated revenues of $137.7 million, up 24% year over year. Volumes improved 12% year over year. Revenues per carload also increased 11% from the prior-year quarter.

The Industrial & Consumer Products segment generated revenues of $147.1 million, up 8% year over year. While business volumes improved 10%, revenues per carload decreased 1% year over year.

Total revenues at the Agriculture & Minerals segment were $121.7 million, down 1% year over year. While business volumes declined 9%, revenues per carload were up 9% both on a year-over-year basis.

The Energy segment generated revenues of $69.8 million, up 15% year over year. Impressive performances at the Frac Sand and Crude Oil boosted the segment’s results. While business volumes increased 3% year over year, revenues per carload rose 11%.

Intermodal revenues were $97.4 million, up 5% year over year. While business volumes improved 7%, revenues per carload decreased 2% in the reported quarter.

Revenues at the Automotive segment came in at $60.6 million, up 15% year over year. While business volumes improved 5%, revenues per carload increased 9%.

Other revenues totaled $26.1 million, up 16% year over year.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. There have been two revisions higher for the current quarter

Kansas City Southern Price and Consensus

 

Kansas City Southern Price and Consensus | Kansas City Southern Quote

 

VGM Scores

At this time, KSU has a nice Growth Score of B, though it is lagging a lot on the momentum front with a D. Following the exact same course, the stock was also allocated a grade of D on the value side, putting it in the bottom 40% 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.

The company's stock is suitable solely for growth based on our styles scores.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise KSU has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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