Kansas City Southern (KSU) Stock Is Down Today on Lower 2015 Revenue Guidance

Kansas City Southern (KSU) is falling Monday after the railroad company lowered its 2015 revenue guidance.
By Lindsay Ingram ,

NEW YORK (TheStreet) -- Shares of Kansas City Southern (KSU) - Get Report were falling 6.9% to $107.68 Monday after the railroad company reduced its guidance for full year 2015.

Kansas City Southern said it now expects low single-digit revenue growth for full year 2015, down from mid single-digit growth for the year.

The railroad operator said the decrease is due to slow year-to-date carload growth from the energy sector, the continued weakening of the Mexican peso compared to the U.S. dollar, and lower fuel surcharge revenues. The company said that linehaul revenue growth for all other commodity groups are in line with its previous guidance for the year.

Kansas City Southern said the slower than expected carload growth will result in a 4% decline in revenue for the first quarter of 2015.

TheStreet Ratings team rates KANSAS CITY SOUTHERN as a Buy with a ratings score of B+. TheStreet Ratings Team has this to say about their recommendation:

"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 impressive record of earnings per share growth, revenue growth, expanding profit margins, solid stock price performance and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company shows weak operating cash flow."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • KANSAS CITY SOUTHERN has improved earnings per share by 24.3% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, KANSAS CITY SOUTHERN increased its bottom line by earning $4.56 versus $3.18 in the prior year. This year, the market expects an improvement in earnings ($5.38 versus $4.56).
  • Despite its growing revenue, the company underperformed as compared with the industry average of 14.0%. Since the same quarter one year prior, revenues slightly increased by 4.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • 43.77% 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 21.94% trails the industry average.
  • The stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.
  • The debt-to-equity ratio is somewhat low, currently at 0.62, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Despite the fact that KSU's debt-to-equity ratio is low, the quick ratio, which is currently 0.59, displays a potential problem in covering short-term cash needs.
  • You can view the full analysis from the report here: KSU Ratings Report
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