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How Genesee & Wyoming Beat Its 2Q17 Earnings Guidance

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How Genesee & Wyoming Beat Its 2Q17 Earnings Guidance PART 1 OF 6

Acquisitions Propel 2Q17 Earnings Growth for Genesee & Wyoming

Genesee & Wyoming’s 2Q17 results

On August 1, 2017, the United States’ largest short-line operator, Genesee & Wyoming (GWR), reported its second quarter 2017 results. The company forced analysts to recheck their adjusted EPS (earnings per share) estimate of $0.72, surpassing it by 10.2%. GWR’s 2Q17 adjusted EPS came in at $0.80. Note that this non-Class I US railroad also beat management’s earning guidance of $0.72–$0.75 per share in the reported quarter.

However, on a YoY (year-over-year) basis, the company’s adjusted EPS fell 14.0% to $.80, from $0.93 in the second quarter 2016.

Acquisitions Propel 2Q17 Earnings Growth for Genesee &amp; Wyoming

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GWR’s acquisition spree

In 2Q17, GWR acquired Pentalver Transport from APM Terminals in the United Kingdom. With this, GWR enhanced its service capabilities in the UK intermodal logistics market. On May 31, 2017, this Connecticut-headquartered short-line operator also completed the acquisition of Heart of Georgia Railroad. With these acquisitions, Genesee & Wyoming expanded its horizon across the territories it operates.

Stock price reaction

On August 2, 2017, reacting positively to 2Q17 results, GWR stock consolidated 1.5% to close at $66 per share. The next day, the rally continued to see the stock close at $66.50 per share. In the last year, GWR has returned a mere 2.9%. Its closest peer, Kansas City Southern (KSU), returned 6.2%. Let’s take a look at the peer group’s returns:

  • CSX (CSX): 2.4%
  • Norfolk Southern (NSC): 26.4%
  • Union Pacific (UNP): 10.2%
  • Canadian Pacific Railway (CP): 4.1%
  • Canadian National Railway (CNI): 26%

Notably, the Industrial Select Sector SPDR ETF (XLI) has returned 18.5% during the same period.

Management’s insight

GWR’s 2017 adjusted EPS guidance remains unchanged at $3 per share. Buoyed by the 2Q17 results, Jack Hellmann, the company’s chair, president, and CEO (chief executive officer), said, “In the U.K./Europe, the turn-around in our financial performance became increasingly visible, a trend that we expect to continue through 2017 and beyond.”

In this post-earnings series, we’ll analyze Genesee & Wyoming’s segment-wise performance. We’ll also turn to Reuter-surveyed analysts for their recommendations on GWR and its peers.

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