I think it is going be the usual, slightly lumpy ride within a fairly narrow range until the Q4 earnings report. If KSU meets the improved performance numbers, we'll have another good bump to the next level. Looking good!
Wait until the Chinese raise interest rates and the price of land appreciates. KSU is way more valuable than those little envelopes with plastic DVDs that arrive in the mail.
Analysts -nameless, faceless beings with no skin in the game. no hands on business experience and earning money by convincing "marks" to part with their money so that they can charge management fees.
A buyout ? Mexican momentum will only be there if demand is growing . Where does the demand come from , those on food stamps ?
No analyst within the last 2 year rates KSU as a buy but there are many sells and holds and their average target is more than $30 below KSU's present stock price
I think there is a "black swan" swimming around
The ICE & DME owned by CP rail is more advantageous as a KCS holding. It extends the potential "length of haul". But, I don't think EHH gives it up, at least not in worthwhile chunks to any competitor. So, will some sort of strategic alliance or merger between CP and KCS become the alternative? Now that KCS has restructured its debt and is churning out respectable profits and free cash flow -- something might be workable.
BNSF owns a significant chunk of the Tongue River Railroad (35% I recall) and that will give them another entry into the Powder River Basin if, that is ever required. It also makes the DM&E less attractive.
KCS does not own the trackage in Mexico -- it is a concession that is 50% lapsed through its first renewable term. How eager is any NA railroad going to be to pay a premium for a concession as opposed to an ownership. Especially a concession whose terms of exclusivity of trackage rights can be adjusted during the second term. I don't think a takeover happens. At least not any single railroad -- the risk is too great.
I know your post is tongue in cheek, but an acquisition now at just about any real-worl premium would be a steal for Buffet at a time when Mexico momentum is just staring to build. Every metric points to Mexico taking more and more manufacturing business, in every category from China. Virtually every input cost and transportation cost are more attractive in Mexico. Plus a better labor force. Not to mention, tariff free status with the most important nations being another huge benefit. Buffet couldn't afford KSU at a fair asking price. :-)
So far they have sold in small quantities 131 K wait until those 10.5 M in T Rowe Price or Vanguard's 7M shares are sold .
When anyone of those funds exits look out below you momentum speculators .
Compare streetinsider ratings with yahoo . there are 3 sells 9 neutrals and only 1 buy compared to yahoo 3 strong buys and 5 buys on yahoo .
Those strong buys and buys must be very old ones because neither yahoo or streetinsider have had a buy rating since sept 2011
I think it is time to try this again .. from my May 6, 2010 post:
A "game" that I have sometimes "played" is to put myself in Mr. Haverty's shoes and contemplate the next strategic move for KCS.
Mr. Haverty (born June 11, 1944) experienced, insightful, hardened, a strategic long term disciplined visionary, with no obvious and equally capable successor in the wings, probably has about three more years in the "chair".
I assume that for the short term every move will serve a dual purpose. Increase the financial security of KCS but, don't undertake any projects which would inhibit the value of KCS as an acquisition.
So, for example I think the mini hump at Shreveport, though necessary for an independent KCS could be redundant for a potential acquiror. Therefore a no-go.
However, a bypass around Victoria, Tx and thereby accessing the Victoria Barge Channel and potentially new trackage from Victoria to Alice might be worthwhile.
Brownsville-Matamoros bridge while avoiding any chance of UP being a bridge carrier between the Brownsville Channel and KCSM -- high priority.
Strategic and quiet lobbying for favorable positioning with I-69 rail corridor (The Trans Texas Corridor) definitely important.
Two years of paying down debt to say the $1.2B level, and ensuring the independence of KCS by supplementing a less capable successor by further augmenting Mr. Erdman's role, and reinitiating a dividend of perhaps $.80 annaully. Worth thinking about.
Looking for thoughts.
You are missing a bit of vital information relative to looking forward. First, KSU has been laying groundwork for the future with heavy investment in PRODUCTIVE assets. They are steadily moving to solidify their position as *the only game in town*.
Next, the Mexican auto industry has nothing to do with auto companies clearing their inventory via huge discounts. Mexico's auto industry is very much a worldwide story, not the least of which is their preferred trade/zero tariff status. Knock off 10% from the cost of simply exporting vehicles and you will quickly understand why BMW, Audi and Mercedes are entering Mexico from a manufacturing standpoint. Another way to equate this is to simply add 10% net profit to every car shipped from Mexico. A skilled labor pool with extremely reasonable wages compounds the equation exponentially.
Not even factored in is the future export of oil and increased export of natural gas. Again, KSU has been smart about building productive infrastructure that will contribute to future growth.
You clearly just do not get it.
I am confused. Your focus is:
1. the "economic moat" or "defensibility" of the KCS railroad franchise
2. the susceptibility of KSU share price to "over exuberance"
All the hype on KSU is based on the trade with Mexico , particularly their auto business from the those new plants expected in a year or two . That is the reason why KSU has a PS ratio almost 3 times as high as NSC and CTX two other railroads
Even UNP is much lower at 3.25 times sales . One look at UNP\'s chart tells me that PS is going to get a lot smaller very soon ..
The 10 year chart shows that KSU with its 1,000 % climb since 2009 is far more dangerous looking than Salesforce a fast growing tech in the Cloud business
I see another huge problem with KSU's scenario because the recent buying binge on new cars is about to collapse because we have the same symptoms we had in 2008 . Huge disounts so that auto companies can clear their inventory .Remember Bernanke has created his second bubble in just 7 years since taking office and it is all a mirage of growth because he still cannot stop his ponzi scheme even though he admits it hasn't worked
If you want yet another reason take a look at what analysts say and I am not referring to the foolish analysts .Their average target is $87 and there is only one buy and 3 sells , highest target $107 lowest $74 goldman sachs .
The floor is yours. Why don't you explain how the financials from an Internet company (Netflix) with minimal hard assets, declining EPS, and rapidly expanding debt are relevant in a discussion about a transportation provider (KCS) whose business is based on hard assets and has a rapidly expanding EPS?
Don't believe me ?
Using one of the most important measuring sticks price to sales ratio .NFLX = 4.49 , KSU = 5.83