In December 2018, Kansas City Southern (NYSE:KSU) announced its most recent earnings update, which indicated that the company endured a substantial headwind with earnings falling by -35%. Below, I’ve laid out key numbers on how market analysts perceive Kansas City Southern’s earnings growth outlook over the next few years and whether the future looks brighter. Note that I will be looking at net income excluding extraordinary items to get a better understanding of the underlying drivers of earnings.
Analysts’ outlook for the coming year seems rather muted, with earnings growing by a single digit 7.3%. The growth outlook in the following year seems much more positive with rates generating double digit 20% compared to today’s earnings, and finally hitting US$814m by 2022.
While it’s useful to be aware of the growth rate year by year relative to today’s value, it may be more beneficial to analyze the rate at which the earnings are growing every year, on average. The pro of this method is that we can get a bigger picture of the direction of Kansas City Southern’s earnings trajectory over the long run, irrespective of near term fluctuations, which may be more relevant for long term investors. To calculate this rate, I put a line of best fit through the forecasted earnings by market analysts. The slope of this line is the rate of earnings growth, which in this case is 8.8%. This means, we can anticipate Kansas City Southern will grow its earnings by 8.8% every year for the next few years.
For Kansas City Southern, I’ve compiled three fundamental factors you should further examine:
- Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- Valuation: What is KSU worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether KSU is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of KSU? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.