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Genesee & Wyoming (GWR) Down 0.2% Since Last Earnings Report: Can It Rebound?

Zacks Equity Research

A month has gone by since the last earnings report for Genesee & Wyoming (GWR). Shares have lost about 0.2% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Genesee & Wyoming due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Earnings Miss at Genesee & Wyoming in Q3

Genesee & Wyoming’s earnings (excluding 6 cents from non-recurring items) of $1.22 per share fell short of the Zacks Consensus Estimate by 8 cents. The bottom line also decreased 0.8% year over year. Moreover, total revenues of $583.7 million declined 3.3% year over year.

Due to the weak freight-related scenario, freight revenues that accounted for bulk (70.3%) of the top line in the September quarter dipped 3.1% to $410.15 million. Freight-related revenues contributing 24.2% to the top line slid 2.8% to $141.37 million. The balance came from ‘other revenues’.

Total operating expenses (on a reported basis) decreased 1% to $470.9 million. Operating income (on a reported basis) decreased 11.7% to $112.8 million in the reported quarter.

Segmental Results

Geographically, operating revenues from North American operations declined slightly in the September quarter due to weak freight revenues. Moreover, the same from the company’s Australian and U.K./European operations declined 6.7% and 6.6%, respectively. Notably, North American, Australian and U.K./European operations contributed 60%, 12.3% and 27.4%, respectively, to total operating revenues.

At the North American unit, adjusted operating ratio (operating expenses as a percentage of revenues) deteriorated to 72.9% from 71.9% in third-quarter 2018. Notably, lower the value of the metric the better. Moreover, at its Australian operations, the same deteriorated to 72.8% from 73% a year ago. At the U.K./European operations, operating ratio worsened to 101.5% from 97.3% in the prior-year quarter. On a consolidated basis, the metric (reported) stood at 80.7% compared with 78.8% a year ago.
 

How Have Estimates Been Moving Since Then?

Analysts were quiet during the last two month period as none of them issued any earnings estimate revisions.

VGM Scores

At this time, Genesee & Wyoming has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Genesee & Wyoming has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.



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