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Genesee & Wyoming's 3Q17 Results: What's in Store

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Genesee & Wyoming's 3Q17 Results: What's in Store PART 1 OF 6

Genesee & Wyoming’s 3Q17 Earnings Miss and Stock Climb

Genesee & Wyoming’s 3Q17 results

On October 31, 2017, the largest short-line operator in US, Genesee & Wyoming (GWR) announced its 3Q17. The company fell 2.4% short of the analysts’ estimate of $0.83 for adjusted EPS (earnings per share) and reported $0.81 per share. The non-class-I US railroad fell short of its own earnings guidance of $0.85 per share.

On a YoY (year-over-year) basis, GWR’s adjusted EPS fell ~15.0% to $.81, down from $0.95 in 3Q16.

Genesee &amp; Wyoming&#8217;s 3Q17 Earnings Miss and Stock Climb

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Stock price reaction

Genesee & Wyoming is normally compared with US class-I railroads due to its scale of operations. In the past few quarters, the company’s same railroad operations have not been doing well in terms of revenue and volume growth. GWR is known in the US railroad industry (XLI) for its inorganic growth strategy through acquisitions of small and class-III railroads.

On November 1, 2017, the company’s stock price was marginally up by ~1% and closed at $72.38 per share. The next day, it fell further, only to bounce back on November 3, regaining the value it lost on the previous day.

Since the beginning of 2017, GWR has returned 5.5%, compared with Kansas City Southern’s (KSU) gains of 23.6% and those of its larger class-I peers:

  • CSX (CSX): 42.8%
  • Norfolk Southern (NSC): 20.6%
  • Union Pacific (UNP): 13%
  • Canadian Pacific Railway (CP): 21.2%
  • Canadian National Railway (CNI): 19.1%

Why GWR stock zoomed after 3Q17

There’s been a shift in Genesee & Wyoming’s business growth strategy. It had extensively engaged in acquisitions, but after 2Q17, GWR started fostering new partnerships. Recently, Canadian Pacific Railway declared a new partnership with GWR and Bluegrass Farms of Ohio. This agreement is expected to extend CP’s reach into main North American markets.

In September 2017, GWR and SEACOR established a joint venture to own and operate a rail ferry service between the US and Mexico. The Heart of Georgia Railroad acquisition is also expected to boost GWR’s earnings in coming quarters.

In this series, we’ll cover the 3Q17 segmental performance of GWR as well as the analysts’ recommendations for the stock.

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