Will Low Volumes Mar Kansas City Southern (KSU) Q4 Earnings?
Zacks Investment Research | Jan 13, 2020 09:35PM ET
Kansas City Southern (NYSE:KSU) is scheduled to report fourth-quarter 2019 earnings numbers on Jan 17, before the market opens.
The Zacks Consensus Estimate for the company’s fourth-quarter earnings has been revised downward by 3 cents in the past 60 days.
Let’s unearth the factors that might have induced this bleak prediction.
Persistent sluggishness in freight volumes is likely to have affected the company’s top line in the fourth quarter. Volume softness at key divisions might get reflected in overall volumes. While weakness in the U.S. market is expected to have hurt intermodal volumes, unscheduled plant shutdown might have weighed on automotive volumes. Meanwhile, volumes at the Energy segment might have taken a hit due to weaknesses in the crude oil and frac sand sub-groups.
The Zacks Consensus Estimate for intermodal volumes suggests a 5.2% decline from the year-ago reported number. The same for automotive volumes indicates a 3.5% dip from that reported in the fourth quarter of 2018.
However, improved operational efficiency, courtesy of the precision scheduled railroading model, is expected to have driven earnings in the soon-to-be-reported quarter. This apart, the bottom line is expected to have been boosted by the company’s cost-cutting measures. Cost-reduction efforts are also likely to get reflected in the company’s operating ratio (operating expenses as a percentage of revenues).
The Zacks Consensus Estimate for the company’s operating ratio implies a 100-basis point improvement from the year-ago reported figure.
Kansas City Southern Price and EPS Surprise
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