Genesee & Wyoming Beats Q3 2018 Estimates, Stock Up 5.2%

GWR’s third-quarter earnings

Genesee & Wyoming (GWR) is the largest short line carrier in North America, and it reported its third-quarter earnings today before the market opened. GWR beat analysts’ third-quarter adjusted EPS estimate of $1.15 by 6.2%. The company’s adjusted EPS of $1.23 in Q3 2018 were 51.8% higher than its $0.81 in the third quarter last year.

Today, GWR stock opened at $78.20 but immediately declined to $77.0. Later on, the stock surged, reaching $82.34, and it moved sideways after that. At the close of the session, the stock was trading at $80.49. Markets gave the thumbs-up to the company’s strong earnings and revenue growth in the quarter.

Genesee & Wyoming Beats Q3 2018 Estimates, Stock Up 5.2%

GWR’s Q3 revenue and key stats

In the third quarter, Genesee & Wyoming reported revenue of $603.3 million, up 4.6% YoY from $576.9 million in Q3 2017. Operating revenue from GWR’s North American operations jumped 11.5% to $355.7 million from $318.9 million. However, the company’s 51.1% owned Australian operations recorded a 5.6% YoY slump in operating revenues to $76.7 million from $81.3 million. Operating revenue from GWR’s United Kingdom and European operations slumped 3.3% to $170.9 million in the quarter from $176.7 million in the corresponding period last year.

Genesee & Wyoming’s reported operating profit grew 16.4% YoY to $127.8 million in the quarter, whereas its adjusted operating income rose 14.3% to $130.5 million. Adjusted operating income in the company’s North American operations expanded 23.4% YoY to $102.6 million. Adjusted operating income from GWR’s Australian operations declined 9.2% YoY to $19.8 million. Adjusted operating income in the UK and Europe declined to $8.1 million from $9.3 million in Q3 2017.

Management’s outlook

GWR’s chairman, president, and CEO, Jack Hellmann, said, “Our commercial outlook remains positive in all three of our geographic segments, however, we expect our fourth quarter financial results to be adversely impacted by three items. In North America, Hurricane Michael struck our Bay Line Railroad and customer facilities in Panama City, Florida in October, which will result in higher expenses and lower shipment levels.”

Hellmann also stated, “In Australia, we expect delays in certain coal shipments in New South Wales that will shift into early 2019. And in the U.K., where our restructuring is proceeding on plan, our ability to staff new and existing business is being constrained by near-term locomotive driver shortages, which will squeeze fourth quarter margins as we further ramp up training and hiring.”

Peers’ Q3 revenue growth

In the third quarter, GWR and Kansas City Southern (KSU) were the only railroads to report mid-single-digit revenue growth. Major Class I railroads (XLI) Norfolk Southern (NSC), Canadian Pacific Railway (CP), and Canadian National Railway (CNI) reported double-digit YoY revenue growth in the quarter.