This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Why Kansas City Southern (KSU) Is Dropping

NEW YORK (TheStreet) -- Shares of Kansas City Southern (KSU - Get Report) are dropping on Tuesday on fears reform regulation in Mexico will hurt profitability.

By late morning, shares had plunged 5.4% to $90.79. Trading volume of 3 million was nearly double its three-month daily average.

Earlier, Mexico's lower house of Congress approved legislation which would reform the nation's rail freight industry, a sector dominated by the duopoly of Grupo Mexico and Kansas City Southern. The bill, which still needs Senate approval, would hope to encourage increased investment in infrastructure and lower freight prices.

According to Reuters, Grupo Mexico and Kansas City Southern are considering legal action, arguing the bill infringes upon the 14 years of exclusivity they still have in their concessions.

Must Read: Why GT Advanced Technologies (GTAT) Is Up Today

The concerns were large enough for analysts at JPMorgan to downgrade the stock.

"We are lowering our rating on KSU from Overweight to Neutral due entirely to our concern that there is a meaningful probability that new rail legislation in Mexico could become law. While such a law would be challenged by KSU and other railroads, it ultimately could translate to less pricing opportunity in Mexico," wrote analyst Thomas Wadewitz in the report.

"The near-term impact to KSU stock would likely come in the form of lower valuation as visibility to the EPS impact might be unclear for several years. While we still believe that KSU has an attractive multi-year volume growth story, from a risk management perspective we can no longer justify recommending the stock in light of the risk from potential new rail legislation in Mexico."

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
KSU $98.46 0.00%
AAPL $109.50 0.00%
FB $92.47 0.00%
GOOG $639.16 0.00%
TSLA $226.72 0.00%


Chart of I:DJI
DOW 17,050.75 +138.46 0.82%
S&P 500 2,013.43 +15.91 0.80%
NASDAQ 4,810.7880 +19.6360 0.41%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs