On Mar 15, 2013, we maintained our Neutral recommendation on
Kansas City Southern ( KSU ), owing to ample
cross-border growth opportunities, favorable pricing trends, high
demand for product supplies and cost-saving actions, which were
partially offset by certain risk factors. The transportation
holding company carries a Zacks Rank #2 (Buy).
Why Kept at Neutral?
We believe Kansas City Southern remains well positioned to reap
benefits from the strong ongoing pricing trend. The company is
expected to post mid-single-digit growth in volumes and core
pricing in the coming months. The growing demand for natural gas
and crude oil supplies will support the expansion of the energy
segment, leading to better business prospects for the
Strategic investments in expanding network and terminal capacity
as well as enhanced safety, service and reliability for railroads
customers are expected to pave way for the company's growth, going
forward. Kansas City Southern - the only railroad with service
networks across both sides of the U.S. and Mexico border - also has
a number of attractive projects in the pipeline that will likely
boost its performance level over the next few years.
We believe that the company's strong strategic positioning
within the industry plus its healthy financial profile will support
long-term development plans.CDN NATL RY CO (CNI): Free Stock Analysis
ReportCDN PAC RLWY (CP): Free Stock Analysis ReportCSX CORP (CSX): Free Stock Analysis ReportKANSAS CITY SOU (KSU): Free Stock Analysis
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However, we remain cautious on the stock due to competitive
pressures from other prominent industry players such as
Canadian National Railway Company ( CNI ) and CSX
Corp. ( CSX
), a unionized workforce, heavy investments and increased railroad
regulation. Additionally, the ongoing uncertainties in the coal and
agriculture industries, an expected slump in fuel surcharge
revenues and currency fluctuations keep us on the sidelines.
For the first and second quarters of 2013, the Zacks Consensus
Estimates for earnings are 90 cents and 98 cents per share,
respectively. These indicate a respective year-over-year growth of
20.0% and 15.7%.
Canadian Pacific Railway Limited ( CP ) with a Zacks Rank
#1 (Strong Buy) displays strong fundamentals and can be considered