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Will Kansas City Southern (KSU) Q2 Earnings Disappoint? - Analyst Blog

Kansas City SouthernKSU is set to release second-quarter 2015 financial results before the market opens on Jul 17, 2015.

In the last quarter, the company delivered a negative 6.36% earnings surprise. Let's see how things are shaping up for this announcement.

Factors at Play this Quarter

Kansas City Southern continues to face the brunt of weaker domestic coal shipments. Moreover, volatile Mexican peso against the strong dollar and weaker coal prices due to soft coal demand globally have compelled this MO-based company to trim its 2015 revenue and volume outlook.

Furthermore, uncertainty prevailing in the energy market has also prompted the Kansas City Southern to slash its capital spending target for 2015 to the range of $650 million to $670 million, from the earlier projected band of $700 million to $720 million.

Coal remains one of the key revenue driver for Kansas City Southern. Hence, weaker coal demand coupled with declining oil prices will continue to impact the company's top line.

Earnings Whispers

Our proven model does not conclusively show that Kansas City Southern is likely to beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or at least #3 (Hold) for this to happen. Unfortunately, this is not the case here as elaborated below.

Zacks ESP: The Earnings ESP represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate. Thus, the ESP for the company currently stands at -0.97% as the Most Accurate estimate is pegged at $1.02 while the Zacks Consensus Estimate is higher at $1.03.

Zacks Rank: Kansas City Southern carries a Zacks Rank #5 (Strong Sell). Please note that the Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement.

Stocks to Consider

Here are some companies you may want to consider as our model shows these have the right combination of elements to post an earnings beat this quarter.

Ryder System, Inc. R has an earnings ESP of +0.62% and a Zacks Rank #3.

United Parcel Service, Inc. UPS has an earnings ESP of +0.79% and a Zacks Rank #3.

United Continental Holdings, Inc. UAL has an earnings ESP of +0.92% and a Zacks Rank #3.

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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

UTD PARCEL SRVC (UPS): Free Stock Analysis Report

RYDER SYS (R): Free Stock Analysis Report

KANSAS CITY SOU (KSU): Free Stock Analysis Report

UNITED CONT HLD (UAL): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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