Kansas City Southern (KSU): Weren’t Not in Kansas Anymore

The company hopes to reach an operating ratio target of 65% by 2017. Customer satisfaction is also of high priority. The company’s customer satisfaction level was up to 94% in the first quarter.

Union Pacific boosted its annual dividend by 15% during 2012, putting its payout ratio to around 30%. Union Pacific also distributed $717 million to shareholders via dividends and share repurchases last quarter; during 1Q, the railroad bought back nearly 2.9 million shares for $394 million, leaving 12.2 million shares under its current authorization.

Bottom line

On the surface, the Kansas City Southern (NYSE:KSU) valuation isn’t compelling. The stock trades well above its major peers…

However, I like Kansas Southern given the company’s exposure to Mexico and the fact that analysts expect the company to grow EPS at an annualized 15% over the next five years. Although both Norfolk and Union Pacific operate on opposite sides of the country, they both have major competitors.

Marshall Hargrave has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

The article Weren’t Not in Kansas Anymore originally appeared on Fool.com and is written by Marshall Hargrave.

Marshall is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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