UPDATE: Bank of America Raises PT on Kansas City Southern from $60 to $69

Bank of America has published a report on Kansas City Southern KSU raising the price target from $60.00 to $69.00. In the report, Bank of America wrote, "KSU reported normalized 2Q11 EPS of $0.71, above our $0.65 estimate and consensus' $0.70. It posted revenues of $535 million, up 16% year-over-year, and $14 million above our target as robust 8.9% yield growth (rev/car; above our 4.8% target) was driven by 5.4% pure pricing (above our 5.0% target), and aided by 6.7% carload growth (vs. our 8.0% target). Expenses of $383 million were $2 million above our target, resulting in a 71.7% operating ratio, its all time best, a 70 bp improvement from last year and 150 bps better than our target. It noted its operating ratio would have been an additional 50 bp better (+$0.02/sh) if not for a $2.5 million surcharge delay from rising fuel prices. Chairman Haverty noted the company aims to improve its operating ratio 100 to 150 bps in 2011 (from 73.5% in 2010); we estimate 71.8% in 2011. He also expects 2H11 revenue growth to exceed the 14% it posted in 1H11 (up from low double digit growth previously; we target 20%, up from 16% previously). Bank of America rated Kansas City Southern a BUY with a price target of $69.00. Kansas City Southern closed Thursday at $61.37.
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Posted In: Analyst ColorPrice TargetAnalyst RatingsBank of America Merrill LynchIndustrialsKansas City SouthernRailroads
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