With management having reported rejected a buyout bid worth $208/share, the pressure is on Kansas City Southern (KSU) management to show that they can drive even more value for shareholders staying independent. The third quarter was a step in the right direction, as the company benefited from a significant sequential improvement in volumes, including a strong recovery in cross-border traffic, as well as ongoing efficiency efforts tied to precision-scheduled railroading (or PSR).
I’m bullish on KSU’s above-average growth potential from its Mexican rail network and cross-border traffic, and I’m likewise bullish on the potential of higher margins from those PSR efforts. That said, I think the reported $208/share bid was a pretty fair offer and it’s tough for me to get a near-term (12-month) fair value much beyond $215 without a materially better near-term outlook for the U.S. and Mexican economies.
Read the full article at Seeking Alpha:
Kansas City Southern Leveraging Volume Recoveries And Self-Improvement
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