Genesee & Wyoming (GWR) Q4 Earnings Top Estimates, Rise Y/Y

Genesee & Wyoming Inc.’s (NYSE:GWR) 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 (69.7%) 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’.

Genesee & Wyoming’s outperformance in the fourth quarter pleased investors. Evidently, shares of the company gained more than 2% at the close of business on Feb 6.

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.

During 2018, Genesee & Wyoming repurchased 6 million shares worth $460.1 million.

Genesee & Wyoming, Inc. Price, Consensus and EPS Surprise

Genesee & Wyoming, Inc. Price, Consensus and EPS Surprise | Genesee & Wyoming, Inc. Quote

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 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. The Zacks Consensus Estimate for the same stands at $4.52. Additionally, operating revenues are estimated to be $2.36 billion in the ongoing year. However, the Zacks Consensus Estimate for the same is pegged higher at $2.46 billion. 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.

Zacks Rank & Key Picks

Genesee & Wyoming carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the same space are CSX Corporation (NASDAQ:CSX) , Canadian Pacific Railway Limited (NYSE:CP) and Union Pacific Corporation (NYSE:UNP) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Shares of CSX, Canadian Pacific and Union Pacific have rallied more than 34%, 16% and 28%, respectively, in a year.

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