Is Donald Trump Trying To Kill This Rail Stock?

According to Rick Paterson of Loop Capital Markets, Republican presidential nominee Donald Trump's policies could be seen as a "material threat" to Kansas City Southern's KSU business.

Specifically, Trump attacked Ford Motor Company's F decision to shift some of its auto assembly plants from the US to Mexico. Ford is one of Kansas City Southern's customers and would benefit from transporting Ford's factories in Mexico for sale in the US. However, Ford's plans to do this is dependent on the North American Free Trade Agreement remaining in place.

Trump has made NAFTA a focal point of his campaign and has vowed to renegotiate the trade deal or abandon it completely. Paterson's quick take on this issue is that it's "easier to get out" of NAFTA than it is to get out of his lease.

Related Link: Poll: Donald Trump Won The Debate

The analyst highlighted article 2205 of the NAFTA agreement, which states, "A Party may withdraw from this Agreement six months after it provides written notice of withdrawal to the other Parties. If a Party withdraws, the Agreement shall remain in force for the remaining Parties."

Paterson also noted that Union Pacific Corporation UNP is impacted to the same risks, but to a lesser degree because Mexico is a "is a key growth engine for that company as well (Mexico volumes +5% in the first half), particularly in the auto business where it collaborates with Kansas City Southern de Mexico south of the border."

Finally, the analyst pointed out that Kansas City Southern was the best performing rail stock after Monday evening's debate and the Mexican peso became 2.5 percent stronger. Clearly, politics is having "an impact" on Kansas City's stock.

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