The shares of this railway company were recently upgraded at Cowen & Co. to ‘Outperform’. Barron’s also touted the stock, saying, “the easing of trade tensions with Mexico and the emerging overhaul of that country’s energy industry likely will produce big opportunities for railroad operator Kansas City Southern and its stock should benefit.”
Kansas City Southern (KSU)
From Positive Patterns
Kansas City Southern (KSU) scored a nice upside breakout and the chart looks good. Now KSU needs to break the old all-time highs in the $124 area. I have moved my buy up to $120 and won’t chase it past that. And I remind you this is the only railroad stock still in a good buy area (my opinion).
The EPS consensus from www.zacks.com is $6.12 this year and $6.99 in 2019. The railroad could beat both these numbers, especially the $6.99 in 2019, which I expect to be 35-50 cents higher (no guarantees, just my guess).
Remember, Kansas City Southern throws off a lot of free cash-flow, and with $6.99 or so in 2019 earnings, cash flow should come to somewhere close to $11 a share. That means KSU sells for a bit more than 10-11 times cash flow and that’s not bad for a good growth stock like this one. I am confident KSU will show cash flow growth of more than 11% a year ahead. Buy it up to $120.
Bob Howard, Positive Patterns, P.O. Box 310, Turners, MO 65765, 417-887-4486, August 17, 2018