Will Kansas City Southern (KSU) Disappoint In Q4 Earnings?
Zacks Investment Research | Jan 15, 2019 07:40AM ET
Kansas City Southern (NYSE:KSU) is scheduled to report fourth-quarter 2018 results on Jan 18, before the market opens.
Last reported quarter, the company came up with a negative earnings surprise of 0.6%. Revenues also fell short of the Zacks Consensus Estimate. However, both the top and the bottom line improved on a year-over-year basis owing to 4% expansion in overall carload volumes.
With the Zacks Consensus Estimate for fourth-quarter earnings being lowered 1.9% in the last 60 days, the company might suffer a similar fate this reporting cycle.
Factors at Play
Rising operating expenses might hamper Kansas City Southern’s bottom line in the fourth quarter. In fact, the company’s operating ratio (operating expenses as a percentage of revenues), a key measure of efficiency, could also be pressurized on the same ground. Notably, the Zacks Consensus Estimate for fourth-quarter operating ratio stands at 64% compared with 62% in the third quarter. Essentially, a lower operating ratio is more desirable.
Additionally, going by the last three quarters’ performances, the Energy segment might repeat its dismal performance in the final quarter. This in turn, could affect the company’s top-line growth. The Zacks Consensus Estimate for fourth-quarter Energy segment revenues stands at $63 million, lower than $73 million reported in the third quarter.
Further, congestion in the U.S. rail network, though largely cleared in November, might still an impact on fourth-quarter results.
However, as has been the case in the last three quarters, overall carload volumes are anticipated to aid results in the fourth quarter as well. Additionally, the Chemical & Petroleum, Agriculture & Minerals and Intermodal segments are expected to perform well in the to-be-reported quarter, boosting overall results in turn.
The Zacks Consensus Estimate for Chemical & Petroleum segment revenues stands at $168 million, above $161 million in the third quarter. The consensus mark for Agriculture & Minerals segment revenues is pegged at $127 million compared with $116 million in the last reported quarter. The same for Intermodal segment revenues stands at $102 million, higher than $100 million in the third quarter.
Kansas City Southern Price and EPS Surprise
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