Shares of Kansas City Southern KSU declined 2.06% and touched a 52-week low of $90.14 during Friday’s trading session, finally closing at $90.50. Over the last one month, shares of the company have lost more than 12%.
The price decline was largely the result of adverse foreign currency movements characterized by the strengthening of the U.S. dollar, lower fuel surcharges owing to declining fuel costs and sluggish carload growth at the energy sector. These adverse factors have compelled this MO-based company to trim its 2015 revenue and volume outlook.
Following the guidance cuts, Kansas City Southern’s Energy segment revenues declined 50% and the number of carloads fell by 38% so far in the second quarter of 2015.
The uncertainty prevailing in the energy market has also prompted the railroad operator to slash its capital spending target for 2015 to the range of $650 million to $670 million, from the earlier projected band of $700 million to $720 million.
We note that Kansas City Southern has made railroad investments in the U.S., Mexico and Panama. The weakening of the Mexican peso versus the U.S. dollar has hurt its results apart from the slump in the energy market.
Kansas City Southern currently has a Zacks Rank #5 (Strong Sell).
Stocks to Consider
Better-ranked stocks in the related sector include American Railcar Industries, Inc. ARII, Trinity Industries Inc. TRN and JetBlue Airways Corporation JBLU. American Railcar sports a Zacks Rank #1 (Strong Buy) while both Trinity Industries and JetBlue carry a Zacks Rank #2 (Buy).
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