Kansas City Southern reported weaker-than-expected 4Q results. However, the transportation company projects double-digit revenue growth and improved earnings in 2021 following. Shares rose 2.2% on Friday.
Kansas City (KSU) expects sales to increase at a double-digit rate in 2021 following a 8% decline in 2020. The company forecasted earnings of at least $9 per share for this year. As for 2022, Kansas City expects its EPS to be in the range of $10.50-$11.
Coming back to the 4Q results, Kansas City’s adjusted earnings of $1.89 per share grew 3.8% year-over-year but missed analysts’ estimates of $1.96 per share. Its 4Q revenue of $693.4 million fell 5% and came in below the Street’s estimates of $694.5 million.
The company said the decline in 4Q sales was primarily due to lower volumes amid service disruptions at Lazaro Cardenas, lower fuel surcharge, and changes in foreign currency translation.
The company’s CEO Patrick J. Ottensmeyer said, “As we turn our focus to 2021, our primary objective will be the implementation of PSR [Precision Scheduled Railroading] Phase 3, which combines improved operational performance with an intense focus on customer service and revenue growth.” (See KSU stock analysis on TipRanks).
On Jan. 15, Raymond James analyst Patrick Brown raised the stock’s price target to $245 (12.6% upside potential) from $210 and maintained a Buy rating. The analyst believes that Kansas City Southern’s Mexican franchise offers above-average growth opportunities among U.S. railroads over the long-term.
Overall, consensus among analysts is a Moderate Buy based on 5 Buys and 5 Holds. The average analyst price target of $213.50 implies downside potential of about 1.9% to current levels. Shares have gained 32.8% over the past year.