Kansas City Southern (NYSE: KSU) and CSX Corporation (NASDAQ:CSX) are both large-cap transportation companies, but which is the better investment? We will compare the two businesses based on the strength of their risk, analyst recommendations, profitability, dividends, institutional ownership, earnings and valuation.

Earnings and Valuation

This table compares Kansas City Southern and CSX Corporation’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Kansas City Southern $2.47 billion 4.53 $1.18 billion $4.98 21.29
CSX Corporation $11.55 billion 4.12 $5.20 billion $1.91 27.26

CSX Corporation has higher revenue and earnings than Kansas City Southern. Kansas City Southern is trading at a lower price-to-earnings ratio than CSX Corporation, indicating that it is currently the more affordable of the two stocks.

Analyst Ratings

This is a summary of recent recommendations and price targets for Kansas City Southern and CSX Corporation, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Kansas City Southern 0 10 7 0 2.41
CSX Corporation 0 9 18 0 2.67

Kansas City Southern presently has a consensus price target of $103.92, indicating a potential downside of 2.00%. CSX Corporation has a consensus price target of $53.43, indicating a potential upside of 2.62%. Given CSX Corporation’s stronger consensus rating and higher possible upside, analysts clearly believe CSX Corporation is more favorable than Kansas City Southern.

Risk & Volatility

Kansas City Southern has a beta of 0.79, indicating that its stock price is 21% less volatile than the S&P 500. Comparatively, CSX Corporation has a beta of 1.3, indicating that its stock price is 30% more volatile than the S&P 500.

Insider and Institutional Ownership

84.5% of Kansas City Southern shares are held by institutional investors. Comparatively, 69.8% of CSX Corporation shares are held by institutional investors. 1.0% of Kansas City Southern shares are held by insiders. Comparatively, 4.8% of CSX Corporation shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Profitability

This table compares Kansas City Southern and CSX Corporation’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Kansas City Southern 21.52% 11.40% 5.68%
CSX Corporation 15.46% 16.93% 5.57%

Dividends

Kansas City Southern pays an annual dividend of $1.44 per share and has a dividend yield of 1.4%. CSX Corporation pays an annual dividend of $0.80 per share and has a dividend yield of 1.5%. Kansas City Southern pays out 28.9% of its earnings in the form of a dividend. CSX Corporation pays out 41.9% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. CSX Corporation has increased its dividend for 3 consecutive years. CSX Corporation is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Summary

CSX Corporation beats Kansas City Southern on 11 of the 17 factors compared between the two stocks.

About Kansas City Southern

Kansas City Southern (KCS) is a holding company. The Company has domestic and international rail operations in North America that are focused on the north/south freight corridor connecting commercial and industrial markets in the central United States with industrial cities in Mexico. The Company’s subsidiaries include The Kansas City Southern Railway Company (KCSR) and Kansas City Southern de Mexico, S.A. de C.V. (KCSM). KCSR serves a 10-state region in the midwest and southeast regions of the United States and has the north/south rail route between Kansas City, Missouri and various ports along the Gulf of Mexico in Alabama, Louisiana, Mississippi and Texas. KCSM operates a corridor of the Mexican railroad system. KCSM’s rail lines provide rail access to the United States and Mexico border crossing at Nuevo Laredo, Tamaulipas. KCSM also provides rail access to the Port of Lazaro Cardenas on the Pacific Ocean.

About CSX Corporation

CSX Corporation is a transportation company. The Company provides rail-based freight transportation services, including traditional rail service and transport of intermodal containers and trailers, as well as other transportation services, such as rail-to-truck transfers and bulk commodity operations. The Company categorizes its products into three primary lines of business: merchandise, intermodal and coal. The Company’s intermodal business links customers to railroads through trucks and terminals. The Company’s merchandise business consists of shipments in markets, such as agricultural and food products, fertilizers, chemicals, automotive, metals and equipment, minerals and forest products. The Company’s coal business transports domestic coal, coke and iron ore to electricity-generating power plants, steel manufacturers and industrial plants, as well as export coal to deep-water port facilities.

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