Kansas City Southern's (NYSE:KSU) most recent earnings announcement in December 2018 signalled that the company experienced a immense headwind with earnings declining by -35%. Below, I've laid out key growth figures on how market analysts view Kansas City Southern's earnings growth trajectory 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 subdued, with earnings rising by a single digit 7.7%. The growth outlook in the following year seems much more optimistic with rates generating double digit 20% compared to today’s earnings, and finally hitting US$812m by 2022.
While it’s informative knowing the growth rate each year relative to today’s figure, it may be more insightful to gauge the rate at which the business is growing every year, on average. The benefit of this approach is that it ignores near term flucuations and accounts for the overarching direction of Kansas City Southern's earnings trajectory over time, which may be more relevant for long term investors. To compute this rate, I put a line of best fit through analyst consensus of forecasted earnings. The slope of this line is the rate of earnings growth, which in this case is 8.8%. This means, we can expect Kansas City Southern will grow its earnings by 8.8% every year for the next couple of years.
For Kansas City Southern, I've compiled three pertinent factors you should look at:
- 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 email@example.com. 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.