KSU  Kansas City Southern

Exchange

NYSE

Sector

Transportation

Industry

Railroads

Market Cap.

11.08B

Vuru Grade

43.72/100

Current Price

$105.14
+1.36 (+1.31%)

Growth Price

$58.52
Overvalued by 44.34%

Company Metrics

  • P/E 21.16
  • P/S 4.43
  • P/B 2.61
  • EPS 4.97
  • Cash ROIC 1.26%
  • Cash Ratio 0.23
  • Dividend 1.44 / 1.41%
  • Avg. Vol. 1.07M
  • Shares 105.38M
  • Market Cap. 11.08B

Company Description

Kansas City Southern, through its subsidiaries, engages primarily in the freight rail transportation business. It operates north/south rail between Kansas City, Missouri, and various ports along the Gulf of Mexico in Alabama, Louisiana, Mississippi, and Texas in the midwest and southeast regions of the United States. The company also operates direct rail passageway between Mexico City and Laredo i... more


Download 10 Years of Financial Statements:
Income Statement   Balance Sheet   Cash Flow

News

Kansas City Southern's (KSU) CEO Patrick Ottensmeyer on Q3 2017 Results ...
Seeking Alpha - 16 hours ago
Greetings and welcome to the Kansas City Southern Third Quarter 2017 Earnings Call. At this time, all participants are in a listen-only mode.
Higher freight volumes lift Kansas City Southern quarterly profit - Reuters
Kansas City Southern Posts Strong 3Q Gains Despite Hurricane Harvey - Transport Topics Online
Railroad Kansas City Southern quarterly profit rises
Reuters - 23 hours ago
Oct 20 (Reuters) - Kansas City Southern, the fourth-largest U.S. railroad, reported a higher quarterly net profit on Friday, driven by year-over-year growth from all of its six business units and increased rail car volumes.
Kansas City Southern (KSU) Beats on Q3 Earnings
Nasdaq - 22 hours ago
Earnings : Kansas City Southern's earnings (excluding 12 cents from non-recurring items) of $1.35 per share beat the Zacks Consensus Estimate of $1.32.
MSCI Larger Than S&P 500 Component Kansas City Southern
Nasdaq - Oct 13, 2017
In the latest look at stocks ordered by largest market capitalization, Russell 3000 component MSCI Inc (Symbol: MSCI) was identified as having a larger market cap than the smaller end of the S&P 500, for example Kansas City Southern (Symbol: KSU), ...
Kansas City Southern: How the Stock Has Moved since 2Q17 Earnings
Market Realist - Oct 12, 2017
Kansas City Southern was hit hard last year after Donald Trump was elected president. His views on Mexico and NAFTA (North American Free Trade Agreement) increased the volatility of KSU stock.
Kansas City Southern, The Growth Stock - Benzinga
Bank of America Merrill Lynch sees upside on Kansas City Southern - Seeking Alpha
Will High Costs Mar Kansas City Southern (KSU) Q3 Earnings?
Zacks.com - Oct 16, 2017
Kansas City Southern (KSU - Free Report) is scheduled to report third-quarter 2017 results on Oct 20, before the market opens.
Kansas City Southern (KSU) Moves Lower on Volume Spike for October 17 - Equities.com (blog)
Earnings Clues on Kansas City Southern (KSU), Regions Financial Corporation ... - StockNewsJournal
A Railroad Pair Trade: Kansas City Southern Vs. Union Pacific
Benzinga - Oct 4, 2017
Citi in a note recommended a pair trade in the railroad sector by designating Kansas City Southern (NYSE: KSU) as its top pick, while downgrading Union Pacific Corporation (NYSE: UNP) to Neutral.
Traders Secrets on Kansas City Southern (KSU), Xerox Corporation (XRX) - StockNewsJournal
Kansas City Southern Risk Points versus Transportation - CML News
Kansas City Southern: Railcars Kept Freight Volumes Up in Week 37
Market Realist - Sep 26, 2017
Recently, Kansas City Southern (KSU), the smallest Class I railroad in the United States, was affected by Hurricane Harvey.
KCS keeps Q3 profits chugging despite Hurricane Harvey impacts
American Shipper - 19 hours ago
Class I railway Kansas City Southern's (KCS) net income rose 7 percent to $129.9 million for the quarter on revenues that grew 9 percent to $656.6 million compared with the same 2016 period, according to the company's most recent financial statements.
Kansas City Southern (KSU) October implied volatility at 55 into Q3
StreetInsider.com - Oct 19, 2017
Kansas City Southern (NYSE: KSU) October call option implied volatility is at 55, November is at 23; compared to its 52-week range of 20 to 38 into the expected release of Q3 results on October 20.
Growth Rate Assumed by Market

We did a reverse valuation to calculate the growth rate the market is assuming for KSU to be considered fairly valued at its current market price. It's useful to compare this to the growth rate we're assuming for the Growth Price.

Future Free Cash Flow Growth Rate

This is the annual growth rate we've applied to calculate KSU's Free Cash Flow for the next 10 years. To calculate it, we looked at several time periods of the last 10 years. Feel free to adjust it, but we limit the initial growth rate to 20% and slow it down over the years. Otherwise, long-term sustainability issues come into play.

Discount Rate

The discount rate is the annual rate of return an investor requires to take the risk of investing in a single stock. To account for that risk, this should be above 8-10%, as this is the avg. annual rate of return for the S&P500 over the past 100 years.

$105.14 Current Price

$58.52 Growth Price (DCF)

Overvalued by 44.34%


Growth Rate Assumed by Market: 29.46%


Future Free Cash Flow Growth Rate: 0.0%


Discount Rate: 15.0%


Show Free Cash Flow numbers

$97.29 Book Price

Overvalued by 7.47%


Poor Cash Return on Invested Capital over the past 5 years

KSU has been unable to consistently generate sufficient returns from its investments in buildings, projects and equipment. This could be due to poor management, lack of an economic moat or the capital intensive nature of the business.

KSU has only created $1.26 of cash for every $100 invested.
Figures in USD. Fiscal year ends in December
20122013201420152016
Free Cash Flow 133.20M -8.30M -64.30M 77.10M 322.80M
divided by
Invested Capital 5.90B 6.28B 6.84B 7.45B 7.90B
Cash ROIC 2.26% -0.13% -0.94% 1.04% 4.08%

Satisfactory Return on Equity over the past 5 years

KSU has generated adequate returns with capital that shareholders have invested. This is sufficient and implies that management performance has been good.

KSU has generated $12.06 of Earnings for every $100 of Shareholders' Equity.
Figures in USD. Fiscal year ends in December
20122013201420152016
Net Income 379.40M 353.30M 504.30M 485.30M 479.90M
divided by
Stockholders' Equity 3.10B 3.37B 3.76B 3.91B 4.09B
Return on Equity 12.25% 10.48% 13.43% 12.40% 11.73%

Mediocre Business Performance over the past 10 years

KSU isn't a strong business and might be consistently attempting to fuel growth with debt or has trouble staying profitable. The lack of predictability in free cash flow should be concerning for the reliability of future earnings.

KSU has been unable to consistently create value for shareholders.
Figures in USD. Fiscal year ends in December
2007200820092010201120122013201420152016
Free Cash Flow -29.00M -120.80M -56.30M 209.00M 143.00M 133.20M -8.30M -64.30M 77.10M 322.80M

Weak Balance Sheet

KSU's financial position is not ideal. The key is to check whether KSU is using debt to fuel its growth and the sustainability of that tendency. Highly capital intensive businesses (see Economic Moat) follow this route, which can deeply impact the future prospects of the business.
Figures in USD. Fiscal year ends in December
2007200820092010201120122013201420152016
Cash 55.50M 229.90M 117.50M 85.40M 72.40M 72.60M 429.50M 348.00M 136.60M 170.60M
Current Assets 645.70M 690.70M 613.80M 598.20M 642.50M 522.30M 942.40M 818.30M 537.00M 648.00M
Total Assets 4.93B 5.44B 5.48B 5.64B 6.17B 6.40B 7.44B 8.09B 8.34B 8.82B
Current Liabilities 1.10B 1.10B 410.80M 431.20M 437.40M 424.80M 730.60M 898.80M 757.60M 744.40M
Total Liabilities 3.20B 3.53B 3.42B 3.21B 3.41B 3.30B 4.06B 4.34B 4.43B 4.73B
Stockholder' Equity 1.73B 1.91B 2.06B 2.43B 2.76B 3.10B 3.37B 3.76B 3.91B 4.09B
Current Ratio 0.59 0.63 1.49 1.39 1.47 1.23 1.29 0.91 0.71 0.87
TL-to-TA 0.65 0.65 0.62 0.57 0.55 0.52 0.55 0.54 0.53 0.54

Consistent Reinvestment of Profits over the past 10 years

KSU has consistently retained profits. This may put KSU in a strong position to invest for the future, by buying new machinery, investing in R&D or a number of other options. By effectively using these earnings, KSU can greatly improve their long-term economic picture.
Figures in USD. Fiscal year ends in December
2007200820092010201120122013201420152016
Retained Earnings 1.17B 1.34B 1.39B 1.55B 1.88B 2.17B 2.42B 2.80B 2.96B 3.13B
Retained Earnings Growth - 14.43% 4.26% 11.00% 21.14% 15.53% 11.83% 15.63% 5.82% 5.71%

Growing Competitive Advantage over the past 10 years

KSU has a growing competitive advantage. This could be due to strong branding, the ability to keep costs low, or some other characteristic that is hard to replicate. Look at its future prospects to determine sustainability and whether the economic moat will continue to strengthen.

$13.95 of every $100 of Revenue have been pure profit, on average over the past 10 years.
Figures in USD. Fiscal year ends in December
2007200820092010201120122013201420152016
Net Income 153.80M 168.70M 57.00M 180.20M 330.30M 379.40M 353.30M 504.30M 485.30M 479.90M
divided by
Revenue 1.74B 1.85B 1.48B 1.81B 2.10B 2.24B 2.37B 2.58B 2.42B 2.33B
Net Profit Margin 8.82% 9.11% 3.85% 9.93% 15.74% 16.95% 14.91% 19.57% 20.06% 20.56%

Strong Pricing Power over the past 10 years

KSU has maintained substantial gross margins, suggesting that they have been able to set prices without consideration of the cost of goods sold. This potentially leaves flexibility in inflationary environments to raise prices on consumers and maintain profitability.

$62.99 of every $100 worth of sales have been Gross Profit, on average over the past 10 years.
Figures in USD. Fiscal year ends in December
2007200820092010201120122013201420152016
Gross Profit 987.70M 1.01B 822.60M 1.04B 2.10B 1.30B 1.40B 1.54B 1.53B 1.52B
divided by
Revenue 1.74B 1.85B 1.48B 1.81B 2.10B 2.24B 2.37B 2.58B 2.42B 2.33B
Gross Margin 56.67% 54.51% 55.57% 57.35% 100.00% 58.17% 59.24% 59.82% 63.28% 65.25%

High Capital Intensity over the past 10 years

KSU spends large amounts of capital buying new equipment or investing in new facilities to stay competitive. Over the long term, those costs may have to be fuelled by debt. Look at the growth of Shareholders' Equity to see if this strategy is having a positive or negative impact.

238.81% of Profits are being spent on Capital Expenditures, like Property, Plant, & Equipment, required to run the business.
Figures in USD. Fiscal year ends in December
2007200820092010201120122013201420152016
Capital Expenditure 410.50M 576.50M 349.20M 287.30M 495.00M 540.00M 806.60M 970.30M 832.20M 590.50M
divided by
Net Income 153.80M 168.70M 57.00M 180.20M 330.30M 379.40M 353.30M 504.30M 485.30M 479.90M
Capital Expenditure Ratio 266.91% 341.73% 612.63% 159.43% 149.86% 142.33% 228.30% 192.41% 171.48% 123.05%

Very Strong Dividend History over the past 10 years

KSU has consistently distributed a dividend for at least the past 10 years. Such a long dividend history suggests KSU is very established in its market and that its dividend distribution is likely to continue for a significant period of time.
Figures in USD. Fiscal year ends in December
2007200820092010201120122013201420152016
Dividend Paid 23.30M 15.20M 11.00M 11.00M 3.00M 86.10M 71.20M 116.60M 140.10M 142.80M
divided by
Shares Outstanding 97.62M 98.60M 93.65M 107.53M 109.83M 110.08M 110.34M 110.43M 109.92M 107.76M
Dividend Paid Per Share 0.24 0.15 0.12 0.10 0.03 0.78 0.65 1.06 1.27 1.33
Price at Year End 34.38 18.17 33.83 48.13 68.01 82.06 122.33 122.68 74.27 84.85
Dividend Yield 0.69% 0.85% 0.35% 0.21% 0.04% 0.95% 0.53% 0.86% 1.72% 1.56%

History of Stock Buybacks over the past 10 years

KSU has some history of delivering increased value for shareholders in the form of stock buybacks. These have helped improve financial metrics and increase each shareholders' relative ownership stake in the company, due to fewer shares outstanding and holding the same number of shares.
Figures in USD. Fiscal year ends in December
2007200820092010201120122013201420152016
Shares Outstanding 97.62M 98.60M 93.65M 107.53M 109.83M 110.08M 110.34M 110.43M 109.92M 107.76M
Stock Bought Back - -1.00% 5.29% -12.91% -2.09% -0.23% -0.24% -0.08% 0.47% 2.00%
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