Kansas City Southern (KSU) 2nd quarter 2021 earnings report review
Category: Kansas City Southern (KSU)
Date: 20 July 2021 Stock price of Kansas City Southern (KSU): $262.87 Market Capital of Kansas City Southern (KSU): $24 billion We take a look at the 2nd quarter 2021 earnings report of freight rail operator Kansas City Southern (KSU) and compare their stock price performance to rivals such as Union Pacific (UNP) and Norfolk Southern (NSC). For the 2nd quarter 2021 period revenue came in at $749.5 million and net loss of -$378.6million. The loss is largely related to merger costs associated with the merger of Kansas City Southern and Canadian National.
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KCS delivered strong second quarter volume growth, as our franchise benefited from unique growth drivers and the economy recovered from the COVID-19 downturn - president and chief executive officer, Patrick J. Ottensmeyer "
More About Kansas City Southern (KSU)
Headquartered in Kansas City, Mo., Kansas City Southern (KCS) (NYSE: KSU) is a transportation holding company that has railroad investments in the U.S., Mexico and Panama. Its primary U.S. holding is The Kansas City Southern Railway Company, serving the central and south central U.S. Its international holdings include Kansas City Southern de Mexico, S.A. de C.V., serving northeastern and central Mexico and the port cities of Lázaro Cárdenas, Tampico and Veracruz, and a 50 percent interest in Panama Canal Railway Company, providing ocean-to-ocean freight and passenger service along the Panama Canal. KCS' North American rail holdings and strategic alliances with other North American rail partners are primary components of a unique railway system, linking the commercial and industrial centers of the U.S., Mexico and Canada.
Overview of Kansas City Southern2nd quarter 2021 earnings report
The data below refers to the most recent quarter unless specified otherwise:
- Revenues: $693.4 million (down from $729.5 million for the same quarter of the previous year)
- Revenue decreased by -4.9% over the last 12 months
- Operating expenses: $431.1 million (down from $493.5 million for the same quarter of the previous year)
- Operating expenses decreased by -12.6% over the last 12 months
- Net income: $165.7million (up from a $127.2 million for the same quarter of the previous year)
- Diluted earnings per share: $1.80 (up from $1.30 for the same quarter of the previous year)
- PE ratio of Norfolk Southern : 33.3
- Diluted weighted-average shares outstanding: 91.8 million (down from 97.98 million for the same quarter of the previous year)
Related Topics:
Kansas City Southern management commentary on their 4th quarter 2020 earnings
KANSAS CITY, Mo.--(BUSINESS WIRE)-- Kansas City Southern (KCS) (NYSE:KSU) reported revenues of $749.5 million, an increase of 37% from second quarter 2020. Overall, carload volumes were up 31% compared to prior year.
Second Quarter 2021
Second quarter revenues were $749.5 million, an increase of 37% primarily resulting from higher volumes, higher fuel surcharge, and the strengthening of the Mexican peso against the U.S. dollar. Second quarter operating expenses were $1,181.2 million, including a $700 million termination fee paid to Canadian Pacific. The $700 million reimbursement from Canadian National will be recognized upon KCS shareholder vote on the merger with Canadian National. Operating loss was $431.7 million and the reported operating ratio was 157.6%. Second quarter net loss was $378.0 million, or $4.17 per diluted share
Second Quarter 2021
Second quarter revenues were $749.5 million, an increase of 37% primarily resulting from higher volumes, higher fuel surcharge, and the strengthening of the Mexican peso against the U.S. dollar. Second quarter operating expenses were $1,181.2 million, including a $700 million termination fee paid to Canadian Pacific. The $700 million reimbursement from Canadian National will be recognized upon KCS shareholder vote on the merger with Canadian National. Operating loss was $431.7 million and the reported operating ratio was 157.6%. Second quarter net loss was $378.0 million, or $4.17 per diluted share
"KCS delivered strong second quarter volume growth, as our franchise benefited from unique growth drivers and the economy recovered from the COVID-19 downturn,” stated president and chief executive officer, Patrick J. Ottensmeyer. “Although we are pleased with the strong volume growth, we fell short of our own expectations for customer service.
"Our operating team is focused on implementing structural and sustainable changes that will improve operational performance and the resiliency of our network. To that end, we have deployed additional assets and crews in support of our service recovery, setting the Company up to continue delivering robust volume growth while improving customer service in the second half of 2021. “During the second quarter, KCS also announced a pro-competitive merger with Canadian National, which will deliver more choices to customers through the creation of new, single line service options between the U.S., Canada and Mexico. This combination represents an exciting opportunity for KCS and CN stakeholders, and we look forward to delivering a safer, faster, cleaner and stronger railroad.
"Our operating team is focused on implementing structural and sustainable changes that will improve operational performance and the resiliency of our network. To that end, we have deployed additional assets and crews in support of our service recovery, setting the Company up to continue delivering robust volume growth while improving customer service in the second half of 2021. “During the second quarter, KCS also announced a pro-competitive merger with Canadian National, which will deliver more choices to customers through the creation of new, single line service options between the U.S., Canada and Mexico. This combination represents an exciting opportunity for KCS and CN stakeholders, and we look forward to delivering a safer, faster, cleaner and stronger railroad.
Stock price chart of Kansas City Southern (KSU) over the last 5 years
The image below shows the stock price performance of Kansas City Southern (KSU) over the last 5 years. And its been a pretty good time for KSU stockholders with the stock of Kansas City Southern providing a return of 170.8% to its stockholders over the last 5 years.
The stock of Kansas City Southern is trading at a lot closer to its 52 week high than it is to its 52 week low which is a clear indication that the short term sentiment and momentum of Kansas City Southern stock is positive at this point in time.
The stock of Kansas City Southern is trading at a lot closer to its 52 week high than it is to its 52 week low which is a clear indication that the short term sentiment and momentum of Kansas City Southern stock is positive at this point in time.
Kansas City Southern (KSU) vs Union Pacific (UP) vs Norfolk Southern (NSC) over last 5 years
The image below shows the stock price performance of Union Pacific (UNP) vs Norfolk Southern (NSC) vs Kansas City Southern (KSU) stock over the last 5 years. All three freight rail operators active in the USA. And as the image shows the stock price performance of the three freight rail operators are very similar. The summary below shows the stock price returns provided by each stock over the last 5 years:
- Kansas City Southern (KSU): 170.8%
- Union Pacific (UNP): 131.7%
- Norfolk Southern (NSC): 122.2%
Our latest stock valuation of Kansas City Southern
So what do we value Kansas City Southern (KSU) stock at based on their latest earnings report? Based on their 3rd quarter 2020 earnings report our valuation model provides a target price (full value price) for Kansas City Southern at $207.00 a stock. (up strongly from our 4th quarter 2020 earnings report valuation). We therefore believe the stock of Kansas City Southern (KSU) is overvalued at its current price.
We usually recommend that long term and fundamental investors look to enter a stock at least 10% below our target price, which in this case is $207. A good entry point would therefore be at $186.30
Since the stock of Kansas City Southern (KSU) is trading at well above our suggested entry price we rate the stock of Kansas City Southern as a sell.
We usually recommend that long term and fundamental investors look to enter a stock at least 10% below our target price, which in this case is $207. A good entry point would therefore be at $186.30
Since the stock of Kansas City Southern (KSU) is trading at well above our suggested entry price we rate the stock of Kansas City Southern as a sell.
Next earnings release of Kansas City Southern
It is expected that Kansas City Southern (KSU) will release their 3rd quarter 2021 earnings report in middle of October 2021