A month has gone by since the last earnings report for Kansas City Southern (NYSE:KSU) . Shares have lost about 1.3% in that time frame.
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 the most recent earnings report in order to get a better handle on the important drivers.
First-Quarter Results
Kansas City Southern’s first-quarter 2018 earnings (excluding 10 cents from non-recurring items) of $1.30 fell short of the Zacks Consensus Estimate of $1.35. The bottom line, however, improved 11.1% on a year-over-year basis buoyed by volume growth. Overall carload volumes ticked up 1% in the quarter.
Kansas City Southern recorded revenues of $638.6 million, which missed the Zacks Consensus Estimate of $643.5 million. However, it compared favorably with the year-ago number of $609.5 million. Strong performance at the Chemical & Petroleum unit contributed to the year-over-year expansion in the top line.
Meanwhile, operating income increased 4% (on a reported basis) to $219 million. Kansas City Southern’s operating ratio (operating expenses as a percentage of revenues) deteriorated to 65.8% from 65.4% a year ago. Operating expenses rose 5% in the quarter.
The company still expects current-year volume growth in mid-single digits.
Segmental Results
The Chemical & Petroleum segment generated revenues of $139.7 million, up 10% year over year. Volumes improved 2% year over year. Revenues per carload also increased 8% from a year ago.
The Industrial & Consumer Products segment raked in revenues of $146.3 million, up 4% year over year. Business volumes and revenues per carload climbed a respective 1% and 3% year over year.
Total revenues at the Agriculture & Minerals segment were $113.4 million, down 2% year over year. While business volumes declined 5%, revenues per carload were up 3%, both on a year-over-year basis.
The Energy segment generated revenues of $61.3 million, down 11% year over year. Dismal performance at the Utility Coal and Coal & Petroleum Coke dented results. While business volumes contracted 20% year over year, revenues per carload rose 11%.
Intermodal revenues totaled $90.9 million, up 9% year over year. While business volumes improved 8%, revenues per carload were flat in the reported quarter.
Revenues at the Automotive segment came in at $59.8 million, up 17% year over year. While business volumes improved 6%, revenues per carload increased 10%.
Other revenues totaled $27.2 million, up 19% year over year.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. There has been one revision higher for the current quarter compared to three lower.
Kansas City Southern Price and Consensus
VGM Scores
At this time, KSU has a poor Growth Score of F, however its Momentum is doing a lot better 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 D. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for momentum investors than value investors.
Outlook
Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. Notably, KSU has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Kansas City Southern (KSU): Free Stock Analysis Report
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