Is Kansas City Southern (KSU) A Risky Investment?

Kansas City Southern (NYSE:KSU) finished Friday with an addition of $3.37 to close at $305.33, an upside of 1.12 percent. An average of 679,580 shares of common stock have been traded in the last five days. There was a gain of $9.74 in the past week, and it reached a new high 34 times over the past 12 months. The last 20 days have seen an average of 705,615 shares traded, while the 50-day average volume stands at 896,236.

KSU stock has increased by 12.38% in the last month. The company shares reached their 1-month lowest point of $270.38 on 09/24/21. With the stock rallying to its 52-week high on 05/13/21, shares of the company touched a low of $171.82 and a high of $315.39 in 52 weeks. It has reached a new high 20 times so far this year and achieved 49.58% or $101.20 in price. In spite of this, the price is down -3.19% from the 52-week high.


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Insider Transactions

2 days have passed since Kansas City Southern (KSU) last reported insider trading activity. Ottensmeyer Patrick J, who is President & CEO, most recently acquired $4,690 shares at $301.89 per share on Oct 21. In this transaction, the insider spent $1,415,887. EVP & Chief Financial Officer, Upchurch Michael W, disposed of 37,845 shares at a price of $301.41 on Oct 21. The insider now owns more than $11,406,801 worth of shares. Prior to that, SVP Chief Legal Ofc & Corp Sec Godderz Adam J went on to Sale 8,844 shares at $301.89 each on Oct 21. An amount of $2,669,911 was transacted.

Valuation Metrics

Kansas City Southern (KSU) has a trailing price-to-earnings (P/E) ratio of 231.31, which compares with the 18.35 for the broader industry and 29.83 for the sector. In the last five years, Kansas City Southern’s PE ratio has ranged between 299.34 and 9.194. The stock’s beta is 1.06. Other valuation ratios to consider include the trailing price-to-sales (P/S) ratio at 9.78, the price-to-book (PB) ratio at 7.32, and the price-to-cash flow ratio at 42.48.

Kansas City Southern pays a $2.16 dividend per share annually. It offers a dividend yield of 0.71%. The company has a payout ratio of 142.20%. The company’s most recent quarterly dividend payment took place on Oct. 6, and it was $0.54 a share, without any change from last year. Its dividend has been increased for the last 2 consecutive years with the latest increase dividend $0.10 reported on Thursday February 4 2021.Dividends have grown by 18.84% each year over the last three years.

The quick ratio of Kansas City Southern for the three months ended June 29 was 0.50, and the current ratio was 0.70, indicating that the company is not able to meet its debt obligations. Further, the company has a long term debt to equity ratio of 1.00 and a total debt to equity ratio of 1.00 for the quarter ending June 29. Kansas City Southern’s EBITDA margin for the year ending June 29 is 52.86%, while its operating margin for the same period stands at 12.60%. Its gross profit as reported stood at $1.0 billion compared to revenue of $2.63 billion.

For investors, determining the potential profitability of the investment also depends on the performance of the company’s management. In the past 12 months, Kansas City Southern’s return on assets was 1.30%. For the broader industry, ROE averaged 13.58 over the past year.

Earnings Surprise

For the three-month period that ended June 29, Kansas City Southern had $3.77 billion in total debt. In the quarter under review, the net income was down than the previous quarter. The company posted a net income of $156.1 million in the quarter, while revenues of -$378.6 million were shrunk -21.52%. The analyst consensus anticipated Kansas City Southern’s latest quarter earnings to come in at $2.18 per share, but it turned out to be $2.06, a -5.50% surprise. For the quarter, EBITDA amounted to $342.4 million. Shareholders own equity worth $90.98 million.

Technical Picture

From a technical analysis perspective, let’s take a brief look at Kansas City Southern (KSU) price momentum. RSI 9-day as of the close on 22 October was 85.96%, suggesting the stock is Overbought, with historical volatility in this time frame at 6.15%.

As of today, KSU’s price is $300.65 +3.30% or $9.74 from its 5-day moving average. KSU is currently trading +12.08% higher than its 20-day SMA and +1.91% higher than its 100-day SMA. However, the stock’s current price level is +4.45% above the SMA50 and +41.61% above the SMA200.

The stochastic %K and %D were 96.81% and 97.20%, respectively, and the average true range (ATR) was 4.37. With the 14-day stochastic at 95.23% and the average true range at 4.49, the RSI (14) stands at 76.18%. The stock has reached 7.08 on the 9-day MACD Oscillator while the 14-day reading was at 11.78.

Analyst Ratings

Wolfe Research downgraded Kansas City Southern (NYSE: KSU) to a a Peer perform rating in its most recent analyst report. Previously, the stock was rated as an Outperform. The consensus rating for Kansas City Southern (KSU) among analysts is Hold. According to current brokerage recommendations, 1 brokerage firm advise that investors sell KSU, while 12 suggest investors hold. There are 0 analysts who rate the stock as underweight. The stock is rated overweight by 1 analysts, while 1 others rate it as a “buy”.

What is KSU’s price target for the next 12 months?

Analysts predict a range of price targets between $280.00 and $319.00, with a median target of $300.00. Taking a look at these predictions, the average price target given by analysts for Kansas City Southern (KSU) stock is $299.92.

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