KSU - Embedded Expectations Analysis - 2020 04 15
ï€ Kansas City Southern (KSU:USA) currently trades near recent averages relative to UAFRS-based (Uniform) earnings, with a 20.6x Uniform P/E. At these levels, the market has bullish expectations for the firm, but management may be concerned about headcount and other costs, their locomotive and railcar fleet, and growthï€ Specifically, management may lack confidence in their ability to sustain refined products volume and revenue growth by utilizing additional storage capacity, maintain velocity improvements in Mexico, and execute their dwell and car handling reduction initiatives. Additionally, they may be exaggerating the progress of their Precision Scheduled Railroading (PSR) initiatives, the growth potential of their cross-border franchise segment, and their focus on cost and headcount reductions. Furthermore, they may have concerns about their core capex spending, the impact of their reduced locomotive and railcar fleet, and uncertainty in trade developments and economic conditions in 2020. Finally, they may be downplaying concerns about the number of crews needed to operate, and they may be exaggerating the quality of their service design and their ability to increase shareholder returns going forward
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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