Should You Invest in Kansas City Southern?

PHOTO CREDIT: Kansas City Southern

OVERVIEW

Kansas City Southern is a company based in the United States. The company operates rail services for cargo transportation. The company operates over 6700 miles of rail in the area east of the Mississippi River. The company transports these cargo products from industrial cities to ports in Gulf cities. The company was founded in 1887.

Why You Should?

1. Kansas City Southern is a great reopening play. After a COVID vaccine is administered, the industrial economy in the United States and around the world will start to grow and gain strength once again. These higher volumes will benefit both the company and its investor base.
2. Kansas City Southern will benefit from the possible resolution of trade tensions caused by the current administration. If a Biden administration can notch a trade deal with our allies like China, Mexico, Canada, and the European Union, Kansas City Southern will see a spike in cargo volumes. This will benefit both the company and its investor base.
3. The impacts of the COVID-19 Pandemic has shut down global economies around the world. As all non-essential factories close, Kansas City Southern has seen a decline in volumes. However, once a COVID vaccine is administered and the pandemic comes to an end, global economies will gain strength once again, which will cause a rise in cargo volumes.
4. Kansas City Southern has seen rising revenues over the past couple of financial years. However, the company has also seen lackluster profits over this same time period due to geopolitical issues, a weaker global economy, and higher operating costs. These strong numbers will benefit the company’s future growth and will also benefit the investor base. In the financial year of 2019, the company reported revenues of around 2.87 billion and profits of around 539 million. In the financial year of 2018, the company reported lower revenues of around 2.71 billion but higher profits of around 627 million.

PHOTO CREDIT: Yahoo Finance

Why You Should Not?

1. The COVID-19 Pandemic has decimated global economies. Government regulation shut down many facets of the economy, causing a fall in cargo volumes due to these impacts. This has hurt the company’s top and bottom lines and has also hurt the company’s investors.
2. Kansas City Southern has tough competition in the rail and cargo transportation industry. Some of these competitors include Norfolk Southern, Union Pacific, CSX, J.B. Hunt, UPS, FedEx, and many others. These tough competitors might hurt the company’s future growth, which will hurt investors.

MY OPINION

In my opinion, I think that Kansas City Southern is a decent long-term investment due to its position as a good reopening play, the resolution of trade tensions, a strong global economy returning, as well as rising revenues. However, lackluster profits, impacts from the COVID-19 Pandemic, and tough competition might hurt the company in the future.