Why Earnings Aren’t the Whole Story for Kansas City Southern (KSU)

Another benefit for Kansas City Southern has come from strength in the auto sector, which has helped both it and larger rival Union Pacific Corporation (NYSE:UNP) produce growth in past quarters. Auto sales have surged lately, and so increasing volumes of vehicles could help offset weakness in coal and other struggling commodities.

Yet arguably the biggest upside potential Kansas City Southern has is as a potential takeover target. Ever since the Berkshire Hathaway Inc. (NYSE:BRK.A) purchase of Burlington Northern, railroads have been on the radar screen as buyout candidates. The challenge, though, is that a Union Pacific Corporation (NYSE:UNP) bid would probably raise antitrust concerns, while for smaller companies like CSX, Kansas City Southern would be a pretty big bite to swallow. Nevertheless, as long as industry conditions remain good, expect takeover speculation to continue.

In Kansas City Southern’s earnings report, watch for the current status of the company’s continuing moves toward greater diversity of transported goods. If it can keep on top of trends, Kansas City Southern has plenty of room to grow.

The article Why Earnings Aren’t the Whole Story for Kansas City Southern originally appeared on Fool.com.

Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter @DanCaplinger. The Motley Fool has no position in any of the stocks mentioned.

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