KSU - Embedded Expectations Analysis - 2020 07 30
Kansas City Southern (KSU:USA) currently trades above corporate averages relative to UAFRS-based (Uniform) earnings, with a 25.6x Uniform P/E. At these levels, the market has bullish expectations for the firm, but management may be concerned about their profitability, operating model, and Mexican operationsSpecifically, management may be concerned about continued declines in EPS and about the worsening investment climate in Mexico, and might lack confidence in their ability to improve velocity, dwell, and car miles per day. Additionally, they appear concerned about changes in the regulatory framework and their ability to sustain lower comp costs following the pandemic. Moreover, management may lack confidence in their ability to build out train length and maintain a flexible operating model. Management may also be downplaying the impact coronavirus has had on personnel, and exaggerating the potential of their operating initiatives. Furthermore, they may be concerned about automotive carloads continuing to decline, the sustainability of cross-border growth and their ability to stay disciplined with train consolidation. Finally, management may lack confidence in the sustainability of stable tonnage in Mexico and in their ability to accommodate larger trade needs
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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