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Analysts Predict Double-Digit Growth in Kansas City’s Q4 EPS

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Fourth-quarter expectations

Kansas City Southern (KSU) is slated to report fourth-quarter results on January 18. For the quarter, Wall Street analysts project EPS to grow 13% YoY to $1.56, mainly driven by higher revenues and lower taxes. However, increased operating expenses are likely to partially offset the growth in bottom-line results.

Analysts forecast fourth-quarter revenues to increase ~5% YoY to $693.2 million mainly due to higher carload volumes. According to weekly rail traffic data released by the company, Kansas City Southern has reported improvement in volumes in almost every week of the fourth quarter. A strong economy has been driving rail traffic volumes.

Furthermore, the effective tax rate for the company is anticipated to be slightly lower than the year-ago quarter. For the upcoming quarter, analysts forecast the tax rate to come in at 29.5%, down from 32.6% in the fourth quarter of 2017.

Nonetheless, rising operating expenses may negatively impact the company’s bottom-line results. For the fourth quarter, analysts expect operating expenses to increase 4.9% YoY to $443.2 million.

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Full-year projections

For the full year, Wall Street analysts project the company to report EPS of $5.97, 13.7% higher than the $5.25 it earned in 2017. Revenue for the year is expected to increase 5% YoY to $2.7 billion, while tax rates are expected to come down to 29.1% from 33.5% in 2017.

The 2018 EPS of major US railroad companies (IYT) Union Pacific (UNP), Norfolk Southern (NSC), and CSX (CSX) are expected to increase 35.6%, 40%, 55%, respectively, on a YoY basis.

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