Kansas City Southern (NYSE: KSU) only managed to meet estimates last quarter, and investors hope that it will surpass expectations this quarter. The company will unveil its latest earnings on Thursday, July 21. Kansas City Southern is engaged in domestic and international rail operations in North America that are focused on the growing north/south freight corridor connecting commercial and industrial markets in the central Unites States.

What analysts say:

  • Buy, sell, or hold?: Analysts strongly back Kansas City Southern, with 12 of 18 rating it a buy and the remainder rating it a hold. Analysts like Kansas City Southern better than competitor Canadian Pacific Railway Limited overall. While analysts still rate the stock a moderate buy, they are a little more optimistic about it compared with three months ago.
  • Revenue forecasts: On average, analysts predict $524.6 million in revenue this quarter. That would represent a rise of 13.7% from the year-ago quarter.
  • Wall Street earnings expectations: The average analyst estimate is earnings of $0.70 per share. Estimates range from $0.65 to $0.73.

What our community says:
CAPS All-Stars are solidly behind the stock, with 98.3% assigning it an "outperform" rating. The community at large agrees with the All-Stars, with 97% granting it a rating of "outperform." Fools are keen on Kansas City Southern and haven't been shy with their opinions lately, logging 153 posts in the past 30 days. Even with a robust four out of five stars, Kansas City Southern's CAPS rating falls a little short of the community's upbeat outlook.

Management:
Kansas City Southern's profit has risen year over year by an average of more than twofold. The company's gross margin shrank by 2.8 percentage points in the last quarter. Revenue rose 12% while cost of sales rose 19.5% to $214.7 million from a year earlier.

Now let's look at how efficient management is at running the business. Traditionally, margins represent the efficiency with which companies capture portions of sales dollars. The following table shows gross, operating, and net margins over the past four quarters. 

Quarter Q1 Q4 Q3 Q2
Gross Margin 56.1% 53.8% 59% 58.1%
Operating Margin 26.2% 28.2% 26.5% 27.6%
Net Margin 13.1% 11.4% 12.1% 8.1%
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