|Bid||101.50 x 800|
|Ask||109.23 x 2200|
|Day's range||104.13 - 107.36|
|52-week range||99.47 - 114.91|
|PE ratio (TTM)||11.40|
|Earnings date||20 Jul 2018|
|Forward dividend & yield||1.44 (1.35%)|
|1y target est||122.00|
The U.S. rail network congestion might weigh on Kansas City Southern's (KSU) Q2 earnings. Moreover, it is likely to generate low revenues at the Agriculture & Minerals and the Energy segments.
Of the 26 analysts covering Norfolk Southern (NSC) stock, five have recommended a “strong buy,” and five have recommended a “buy.” Fourteen analysts have given it a “hold” rating, and two have recommended a “sell.” The stock has a consensus rating of 2.5, which indicates a “buy.”
In the previous part of this series, we examined the leverage levels of major US railroads after their first-quarter earnings. Now let’s consider their dividend payments. Since it’s a capital-intensive industry, railroads reinvest most of their net earnings back into the business. The retention per share ratio is thus very high. That, in turn, lowers their dividend payout ratios. The transportation and logistics sector is included in the industrials sector. Railroads’ dividend yields have been historically lower than the other subsectors in the industrial (IYJ) sector.
For the smallest US Class I railroad, Kansas City Southern (KSU), rail traffic volumes have been a mixed bag in 2018. For the past several weeks, it has reported very uneven growth in volumes. In Week 25, which ended on June 23, it registered a 7% loss in railcar volumes, excluding intermodal. Its carload volumes were ~24,600 units from ~26,500. In the 25th week, US railroads (XLI) posted a 2.5% YoY carload growth overall, which is in sharp contrast to the slump for this US-Mexico railroad.
Intermodal is the second-largest revenue source for US railroads (FXR). Intermodal freight haulage involves cargo transportation in an intermodal container using various modes of transportation without handling the cargo itself while switching over modes. Railroads face tough competition from trucking companies in their intermodal operations.
Railroads are a barometer of economic health, and investors are feeling the mood in the markets for the direction of railroad stocks. Higher interest rates and a lower unemployment rate are the major indicators of a renewed confidence in the US economy.
In Week 24 of 2018, the United States’ smallest Class I railroad, Kansas City Southern (KSU), registered a small gain of 0.2% in its carload traffic. Our observation of KSU’s overall traffic pattern in 2018 suggests that the railroad is witnessing a bumpy ride.
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General Electric's (GE) operating segment, GE Transportation, clinches orders for 50 new locomotives from the Mexican and US rail subsidiaries of Kansas City Southern.
The smallest Class I US railroad, Kansas City Southern (KSU), saw its carload traffic rise 3.8% YoY (year-over-year) in Week 23. This year, the US-Mexico railroad’s freight volumes have fluctuated. In Week 23, KSU’s carload traffic rose YoY to ~26,500 carloads from ~25,500, more than US railroads’ (XTN), which grew 2.8% YoY.
In Week 23, Eastern US rail giant CSX’s (CSX) freight traffic rose slightly, by ~1% YoY (year-over-year). This year, the railroad is slowly getting back on track after weakness in 2017. In Week 23, CSX’s carload volumes grew YoY to ~69,400 units from ~68,700, less than competitor Norfolk Southern’s (NSC), which rose 2% YoY, and US railroads’ (XLI), which rose 2.8% YoY.
Kansas City Southern (KSU) is the smallest Class I railroad company in the United States. In Week 22, it reported a slight 0.84% contraction in its carload traffic. This year, the US-Mexico railroad company’s carload volume growth has had a bumpy ride. In Week 22, KSU’s carload volumes fell YoY to just over 24,200 carloads from ~24,400 carloads. In contrast, US railroad companies’ (XTN) carload volumes gained 0.2% YoY in the week.
Analysts’ consensus mean rating on Canadian Pacific Railway (CP) for the next 12 months is 2.12 with a “buy” outlook as of May 28.
The smallest US Class I railroad, Kansas City Southern (KSU), saw its carload traffic fall 1.4% YoY (year-over-year) in Week 20 (ended May 19). This year, the US-Mexico railroad’s carload volume growth has had a bumpy ride. In Week 20, the railroad’s carload traffic fell YoY to ~24,400 carloads from ~24,800. In contrast, US railroads’ (XTN) carload traffic rose 1.2% YoY.
Among all Class I railroad companies, Canadian Pacific Railway (CP) was the only one (XTN) to be highly optimistic in its 2018 outlook, and the company maintains that outlook.
Canadian Pacific Railway (CP) announced a second-quarter cash dividend of 0.65 Canadian dollars on May 10. Upon annualizing this quarterly dividend, we can translate it into a dividend of 2.60 Canadian dollars. The railroad’s dividend payout ratio is 22.8% based on its adjusted EPS of 11.39 Canadian dollars in the last four quarters.
In Week 20 (ended May 19), Jacksonville-headquartered eastern US rail giant CSX (CSX) reported a slight 0.80% YoY (year-over-year) rise in its carload traffic, getting back on track after weakness over the last year. In Week 20, CSX’s carload volumes rose YoY to ~69,400 units from ~68,800. CSX’s carload volume growth was substantially lower than competitor Norfolk Southern’s (NSC) 3.2% gain in the same category, and lower than the 1.2% rise reported by US railroads (XTN).
Kansas City Southern (KSU) is the smallest Class I railroad in the United States. It has rail freight hauling operations in Mexico as well as the Midwest United States. In the week ended May 12, KSU’s overall traffic was nearly unchanged compared to the week ended May 13, 2017.
On May 12, the AAR (Association of American Railroads) published its weekly rail freight data for 12 major North American railroads. The weekly data were for the week ended May 12, or Week 19. That week, reporting US rail carriers’ total railcar volumes, including intermodal units, rose 5.8%.
On May 17, Union Pacific (UNP) stock closed at $142.49, up 0.8% from the closing price of $141.36 on May 16. Based on that closing price, UNP has a market capitalization of $109.7 billion—the highest among all major railroads in the US.
A quick look at data from the last ten years reveals that Union Pacific’s dividend payout ratio was as high as 45.0% in 2011–2012 and that its lowest dividend payout ratio was 22.0% in 2008–2009. The present levels of UNP’s dividend payout are above its highest payout in the past ten years. Based on the adjusted EPS of $7.58, NSC’s dividend payout ratio comes in at 38.0%.
Kansas City Southern (KSU) reported earnings 30 days ago. What's next for the stock? We take a look at earnings estimates for some clues.
On May 10, Western US rail freight giant Union Pacific (UNP) declared a quarterly cash dividend of $0.73 per share on its common stock. In the first quarter, UNP raised its quarterly cash dividend from $0.665 per share to $0.73 per share. The company’s quarterly cash dividend on equity shares is payable on June 29 to stockholders of record on May 31.
In Week 18 of this year, Kansas City Southern’s (KSU) carload traffic rose 3.7% YoY (year-over-year) to ~24,000 units from ~23,200. The US-Mexico railway’s freight volume growth has fluctuated recently. In comparison, US railroads’ (IYT) gained 6.4% in Week 18.
In Week 18, major eastern US rail carrier CSX’s (CSX) carload traffic fell marginally YoY (year-over-year), by 0.22% to ~69,400 units from ~69,500. Throughout much of 2018, the Florida-based rail giant has reported YoY railcar traffic decline, though it seems to be getting back on track. In contrast, rival Norfolk Southern’s (NSC) carload traffic grew 10.2% in Week 18, and US railroads’ grew 6.4%.