Shares of Kansas City Southern KSU have declined 9.2% in a year against the industry 's 16.2% rise.
Reasons Behind the Price Fall
The company has been grappling with high operating expenses for quite some time. Operating expenses increased 4.2% in the first nine months of 2018, mainly due to a 9.2% rise in fuel costs. High operating expenses unless controlled has potential to limit bottom-line growth going forward. Congestion in the U.S. rail network is another cause for concern.
Moreover, declining revenues at the Energy segment might hinder top-line growth. Notably, revenues at the segment dropped 11% year over year during the first nine months of the year.
The company's struggles on the top- and the bottom-line front can be traced from third-quarter 2018 earnings report wherein it delivered lower-than-expected earnings and revenues.
Further, the company's trailing 12-month return on equity (ROE) undercuts its growth potential. Its 12% ROE compares unfavorably with the ROE of 21.9% for its industry and 18.1% for the S&P 500 index.
The negativity surrounding the stock is evident from the Zacks Consensus Estimate for current-quarter earnings being revised 3.1% downward in the last 60 days. Also, the same for full-year earnings has been moved 1.3% south over the given time frame.
The company's VGM Score of D also highlights its sluggish growth prospects. Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of all three factors.
Zacks Rank & Key Picks
Kansas City Southern carries a Zacks Rank #4 (Sell).
Some better-ranked stocks in the broader Transportation sector are Air France-KLM AFLYY , CSX Corporation CSX and Norfolk Southern Corporation NSC . While Air France-KLM and CSX sport a Zacks Rank #1 (Strong Buy), Norfolk Southern holds a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here .
Shares of Air France-KLM have surged more than 32% in the past six months while CSX and Norfolk Southern stocks have rallied more than 12%.
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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Air France-KLM SA (AFLYY): Free Stock Analysis Report CSX Corporation (CSX): Free Stock Analysis Report Norfolk Southern Corporation (NSC): Free Stock Analysis Report Kansas City Southern (KSU): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research