Kansas City Southern (KSU) Is Water-Logged And Getting Wetter Today

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Trade-Ideas LLC identified Kansas City Southern ( KSU) as a "water-logged and getting wetter" (weak stocks crossing below support with today's range greater than 200%) candidate. In addition to specific proprietary factors, Trade-Ideas identified Kansas City Southern as such a stock due to the following factors:

  • KSU has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $146.4 million.
  • KSU has traded 1.4 million shares today.
  • KSU traded in a range 213.3% of the normal price range with a price range of $5.91.
  • KSU traded below its daily resistance level (quality: 395 days, meaning that the stock is crossing a resistance level set by the last 395 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Water-Logged and Getting Wetter' criteria are worthwhile stocks to watch for a variety of factors including historical back testing and volatility. Trade-Ideas targets these opportunities because the stock is exhibiting an unusual behavior while displaying negative price action. In this case, the stock crossed an important inflection point; namely, "support" while at the same time the range of the stock's movement in price is twice its normal size. This large range foreshadows a possible continuation as the stock moves lower.

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More details on KSU:

Kansas City Southern, through its subsidiaries, engages in the freight rail transportation business. The stock currently has a dividend yield of 1.2%. KSU has a PE ratio of 30.2. Currently there are 4 analysts that rate Kansas City Southern a buy, 1 analyst rates it a sell, and 7 rate it a hold.

The average volume for Kansas City Southern has been 1.2 million shares per day over the past 30 days. Kansas City Southern has a market cap of $10.6 billion and is part of the services sector and transportation industry. The stock has a beta of 1.58 and a short float of 2.7% with 1.76 days to cover. Shares are down 22.5% year-to-date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Kansas City Southern as a buy. 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 ratings report include:
  • 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).

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

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