JP Morgan Comments On Genesee & Wyoming Following Earnings Report

The announcement of a large new iron ore contract in Australia along with several other more modest pieces of new business highlights the significant growth potential of Genesee & Wyoming GWR over the next several years. JP Morgan is raising its 2011 EPS estimates to reflect GWR's increase in EPS guidance and increasing 2012 EPS to reflect the impact of the new contract in Australia. GWR stock reflects high expectations but we believe that the company is likely to deliver against those expectations. GWR's 1Q11 EPS of $0.52/share was below JP Morgan's forecast of $0.56 and Consensus of $0.57/share as the step up in fuel prices caused a $0.04/share headwind and weather issues in Australia and Canada were a combined drag of ~$0.04/share. JP Morgan expects fuel to be at least a $0.02/share headwind in 2Q11 but it does not anticipate any lingering impact from the 1Q weather issues. Despite the downside 1Q, GWR raised its full year 2011 EPS guidance from $2.60/share to $2.75/share. JP Morgan is raising its 2011 EPS estimate from $2.58/share to $2.72/share to reflect lower tax rate, stronger volumes and stronger yield performance. JP Morgan is also increasing its 2012 forecast from $3.00/share to $3.20 with $0.15 from half a year impact from the new iron ore contract and $0.05 from lower tax rate. JP Morgan has a $64 PT and Neutral rating on GWR GWR closed Thursday at $61.69