On Aug 24, Kansas City Southern KSU was upgraded to a Zacks Rank #2 (Buy) from a Zacks Rank #3 (Hold).
Reasons for the Upswing
Kansas City Southern has been thriving of late on multiple tailwinds. Shares of the company have gained 8.8%, significantly outperforming the industry’s 3.4% decline, in the last three months.
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The company’s efforts to reward shareholders through dividend payments and buybacks are impressive. To realize this initiative, the board of directors has approved of a new share repurchase program worth $800 million in August. The share repurchase plan replaces the company’s previously announced $500 million program in 2015, completed in the second quarter of 2017. The authorization also includes a $200 million Accelerated Share Repurchase program.
Simultaneously, the company increased the quarterly dividend in excess of 9%. Additionally, the directors also announced a regular dividend of 25 cents per share on 4% of Kansas City Southern’s outstanding non-cumulative preferred stock.
The company performed laudably in the second quarter, reporting better-than-expected earnings per share and revenues. Both metrics also improved on a year-over-year basis. The results were aided by a 6% rise in overall carload volumes.
In the reported quarter, operating income increased 9% to $239 million. This significant expansion in utility coal volumes boosted the Energy segment’s results, a chief growth driver behind the stock’s outperformance. Apart from the energy segment, revenues at the company’s chemical & petroleum segment along with automotive unit and agriculture & minerals segments improved on a year-over-year basis in the second quarter of 2017.
The above positives substantiate Kansas City Southern’s Zacks Rank #2.Seems the time is ripe for investors to add this stock to their portfolio. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Other Stocks to Consider
Investors interested in the Transportation sector may also consider Alstom SA ALSMY, Canadian National Railway Company CNI and Canadian Pacific Railway Limited CP. All these stocks carry the same bullish rank as Kansas City Southern.
Shares of Alstom and Canadian National Railway have surged 33.5% and 21.7%, respectively, in a year, while Canadian Pacific Railway shares have gained 3% in the last six months.
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