KSU - Embedded Expectations Analysis - 2019 08 19
Kansas City Southern (KSU:USA) currently trades near recent averages relative to UAFRS-based (Uniform) Earnings, with a 21.2x Uniform P/E. At these levels, the market has bullish expectations for the firm, but management has concerns about EPS growth, upcoming tax legislation in Mexico, and their ability to meet long-term guidance.Specifically, management may lack confidence in their ability to meet their long-term EPS growth rate guidance. Furthermore, they may lack confidence in their ability to meet their CapEx guidance, and they appear concerned about growth and ongoing weakness in their domestic Intermodal business. Moreover, they appear concerned about the sustainability of recent performance levels, and they may be concerned about the impact of the USMCA. Additionally, they appear concerned about the Mexican government's decision to terminate the fuel excise tax credit for the rail industry, and they may be concerned about the sustainability of recent labor savings. Finally, management may be concerned about their ability to meet their long-term guidance, and they appear concerned about the sustainability of recent cross-border volume growth.
Kansas City Southern is a transportation holding company with domestic and international rail operations in North America. The company's subsidiary, The Kansas City Southern Railway Company, is a United States Class I railroad that serves a several region in the midwest and southeast regions of United States and has north/south rail route between Kansas City, MO and several main ports along the Gulf of Mexico in Alabama, Louisiana, Mississippi and Texas. The company's subsidiary, Kansas City Southern de Mexico, S.A. de C.V. operates a main commercial corridor of the Mexican railroad system and has as its main route a direct rail passageway between Mexico City and Laredo, TX.
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