Genesee & Wyoming (GWR) first became a Zacks #5 Rank Strong Sell this year in May when it was trading $87. Since then, the stock price has fallen over 40% as earnings estimates for this year and next have slid 25%.
Rail transport industries had a terrific couple of years in 2013 and 2014 as traffic hit records, with lots of help from abundant shale oil being pumped in record quantities and delivered efficiently to refineries. But 2015 witnessed a peak in traffic and profits that took other carriers down as well for the year...
Norfolk Southern (NSC): -20%
CSX Corp (CSX): -29%
Union Pacific (UNP): -35%
Kansas City Southern (KSU): -42%
Genesee & Wyoming owns and operates short line and regional freight railroads and provides related rail services on three continents. The company owns or leases 120 freight railroads worldwide that are organized in 11 operating regions with 7,500 employees and more than 2,500 customers.
Since the North American railroads offer the most transport business, it's where their business can be hit the hardest. So it's not clear, in a slowing global economy with declining commodity prices if their other regions can offset the pain. Here's how the company ("G&W") describes its operations in different parts of the world...
G&W's nine North American regions serve 41 U.S. states and four Canadian provinces and include 113 short line and regional freight railroads with more than 13,000 track-miles.
G&W's Australia Region provides rail freight services in New South Wales, the Northern Territory and South Australia and operates the 1,400-mile Tarcoola-to-Darwin rail line.
G&W's U.K./Europe Region is led by Freightliner, the U.K.'s largest rail maritime intermodal operator and second-largest rail freight company. Operations also include heavy-haul in Poland and Germany and cross-border intermodal services connecting Northern European seaports with key industrial regions throughout the continent.
One Picture Says It All
Below is a snapshot of the Zacks proprietary Price & Consensus chart which plots the GWR stock price against annual consensus earnings estimates as they evolved over time.
As you can see from the light blue line (2015 full-year EPS consensus) and the gold line (2016 EPS), the stock price started diving right along with those downward estimate revisions.
This is how the Zacks Rank warns you about bad investments, just as it alerts you to wise ones. Keep your eye on the Rank to let you know when the picture changes for G&W.
Kevin Cook is a Senior Stock Strategist for Zacks where he runs the Follow The Money (FTM) portfolio.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.