Trump, NAFTA And Kansas City Southern Remain In A Mexican Standoff

Kansas City Southern KSU investors should keep their expectations in check ahead of the company’s Q4 earnings report on February 20. In a new report, Loop Capital analyst Rick Paterson outlines a number of headwinds the railroad company is facing at the moment.

According to Paterson, the potential impact that “tormentor-in-chief” Donald Trump will have on NAFTA is the primary near-term threat for Kansas City Southern.

Loop’s Q4 numbers on the company’s operations have been mostly disappointing. Terminal dwell times are up 17 percent year-over-year, dragged down by Mexico locations. In addition, weather events and civil protects unrelated to the company have been an issue in recent months as well. Paterson says the company has also done a lackluster job absorbing expanding Mexican volumes. Once again, the peso declined significantly in Q4 as well.

After factoring in all the unfortunate circumstances, Loop is now projecting Q4 EPS of $1.17.

“While we’re clearly more bearish than bullish into earnings, the fact that the stock’s P/E is the lowest in the industry should, in theory, limit the damage if the numbers disappoint,” Paterson explains.

Loop maintains a Buy rating on Kansas City Southern and a $98 price target for the stock.