NEW YORK (TheStreet) -- JPMorgan has downgraded Kansas City Southern (KSU - Get Report) to "neutral" from "overweight." The investment firm cites increasing regulatory risk in Mexico as reason for the downgrade.
By market open, shares had taken off 3.9% to $92.26.
TheStreet Ratings team rates KANSAS CITY SOUTHERN as a Buy with a ratings score of B+. The team has this to say about their recommendation:
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"We rate KANSAS CITY SOUTHERN (KSU) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, increase in net income, good cash flow from operations, expanding profit margins and growth in earnings per share. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- KSU's revenue growth has slightly outpaced the industry average of 4.9%. Since the same quarter one year prior, revenues slightly increased by 8.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Road & Rail industry average. The net income increased by 24.0% when compared to the same quarter one year prior, going from $91.80 million to $113.80 million.
- Net operating cash flow has increased to $225.80 million or 43.63% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 10.26%.
- 41.33% is the gross profit margin for KANSAS CITY SOUTHERN which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 18.48% trails the industry average.
- KANSAS CITY SOUTHERN has improved earnings per share by 24.1% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, KANSAS CITY SOUTHERN reported lower earnings of $3.18 versus $3.42 in the prior year. This year, the market expects an improvement in earnings ($4.60 versus $3.18).
- You can view the full analysis from the report here: KSU Ratings Report