Will Kansas City Southern's (KSU) Q1 Earnings Be A Let Down?
Zacks Investment Research | Apr 15, 2018 10:29PM ET
Kansas City Southern (NYSE:KSU) is scheduled to report first-quarter 2018 results on Apr 20, before the market opens.
Last quarter, the company delivered a positive earnings surprise of 1.5%. Moreover, the company has an impressive earnings history, having outperformed the Zacks Consensus Estimate in three of the preceding four quarters with an average beat of 2.3%.
However, things do not look up for the company this quarter. As a result, the stock has seen the Zacks Consensus Estimate for first-quarter earnings being revised 3.5% downward in the last 60 days.
Factors at Play
High operating expenses are expected to hurt the company's bottom line in the first quarter as was the case previously.
The uncertainty over the North American Free Trade Agreement (NAFTA) might also hamper results in the to-be-reported quarter. This is because the railroad operator draws a significant portion of its revenues from U.S.-Mexico shipments.
Kansas City Southern's trailing 12-month return on equity (ROE) undercuts its growth potential. The company’s ROE of 12.1% compares unfavorably with its industry’s 20.4% ROE and the S&P 500 index’s 16% tally.
However, overall volume growth is anticipated to aid results in the first quarter. Additionally, the growth of intermodal volume augurs well for the company and is anticipated to drive intermodal revenues.
The new tax law should also boost profits for the company, leading to bottom-line growth in the first quarter. Its efforts to reward shareholders through dividend payments and buybacks are a further positive.
Earnings Whispers
Our proven model does not conclusively show that Kansas City Southern is likely to beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP Filter .
Zacks Rank: Kansas City Southern carries a Zacks Rank #3, which increases the predictive power of ESP. However, the company’s negative ESP leaves surprise prediction inconclusive.
We caution against Sell-rated stocks (#4 or 5) going into an earnings announcement, especially when the company is seeing negative estimate revisions.
Kansas City Southern Price and EPS Surprise
Zacks Investment Research
Get The News You Want
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.