Kansas City Southern (KSU - Free Report) is performing impressively at the moment. Also, we are optimistic about the company’s prospects and believe that this is the right time for investors to add the stock to their portfolios.
Let’s take a look into the factors that make this Zacks Rank #2 (Buy) stock a compelling choice for investors right now. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
An Outperformer: Kansas City Southern has outperformed its industry in a year’s time. The stock has gained 36.4% versus the industry’s 0.3% decline.
Earnings Estimates Moving North: Annual estimates for Kansas City Southern have been northbound over the past 60 days, reflecting analysts’ confidence in the stock. For instance, the Zacks Consensus Estimate for current-year earnings has climbed 1.4% to $8.04 while for 2021, the same has moved 3.3% up to $9.17.
Given the wealth of information at their disposal, investors could be best guided by broker advice and the direction of their estimate revisions. The second factor serves as a key pointer when it comes to determining the price performance of a stock.
Impressive Earnings Surprise History: Kansas City Southern has a stellar earnings surprise record. The company outpaced the Zacks Consensus Estimate in each of the last four quarters. The average earnings beat is 4.7%.
Tailwinds: We are positive about Kansas City Southern's adoption of the precision scheduled railroading model. Through this initiative, the company aims to improve operational efficiencies and reduce network congestion.Improvement in the adjusted operating ratio (operating expenses as a percentage of revenues) is an added positive and can be attributed to the company's efforts to cut costs. We are also impressed by the company's efforts to reward its shareholders through dividend payments and buybacks. To this end, the company raised the quarterly dividend payout on its common stock by 11.1% to 40 cents a share ($1.60 annually) in November 2019. Other railroads to have increased quarterly dividends in a year’s time include Union Pacific Corporation (UNP - Free Report) , Norfolk Southern Corporation (NSC - Free Report) and Canadian National Railway (CNI - Free Report) .
Solid Industry Rank: The industry to which Kansas City Southern belongs, currently has a Zacks Industry Rank of 109 out of 250 plus groups (top 43%). Studies show that 50% of a stock price movement is directly related to the performance of the industry group that it hails from.
In fact, an ordinary stock with below-par performance in a strong group is likely to outperform a great stock in a poor industry. Therefore, taking the industry’s performance into account is imperative.
Style Scores: In addition to a top Zacks Rank and a favorable industry rank, the stock has a Growth Score and a Momentum Score of B. Kansas City Southern expects 2020 earnings to grow at 16.5% on a year-over-year basis, indicating a rise from its industry’s 12.8% projected growth. Also, Kansas City Southern’s Momentum Score highlights its short-term attractiveness.
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