Canadian National Railway (NYSE: CNI) and Kansas City Southern (NYSE:KSU) are both large-cap transportation companies, but which is the superior investment? We will compare the two companies based on the strength of their earnings, dividends, valuation, analyst recommendations, institutional ownership, risk and profitabiliy.

Dividends

Canadian National Railway pays an annual dividend of $1.22 per share and has a dividend yield of 1.5%. Kansas City Southern pays an annual dividend of $1.32 per share and has a dividend yield of 1.3%. Canadian National Railway pays out 31.8% of its earnings in the form of a dividend. Kansas City Southern pays out 26.5% 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. Canadian National Railway has raised its dividend for 5 consecutive years and Kansas City Southern has raised its dividend for 3 consecutive years. Canadian National Railway is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Valuation and Earnings

This table compares Canadian National Railway and Kansas City Southern’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Canadian National Railway $10.13 billion 5.88 $5.45 billion $3.84 20.66
Kansas City Southern $2.47 billion 4.37 $1.18 billion $4.98 20.57

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

Profitability

This table compares Canadian National Railway and Kansas City Southern’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Canadian National Railway 30.59% 25.42% 10.24%
Kansas City Southern 21.52% 11.40% 5.68%

Insider and Institutional Ownership

55.1% of Canadian National Railway shares are held by institutional investors. Comparatively, 86.3% of Kansas City Southern shares are held by institutional investors. 2.4% of Canadian National Railway shares are held by insiders. Comparatively, 1.0% of Kansas City Southern shares are held by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Volatility & Risk

Canadian National Railway has a beta of 1.11, indicating that its share price is 11% more volatile than the S&P 500. Comparatively, Kansas City Southern has a beta of 0.8, indicating that its share price is 20% less volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of current recommendations for Canadian National Railway and Kansas City Southern, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Canadian National Railway 0 14 5 0 2.26
Kansas City Southern 0 11 7 0 2.39

Canadian National Railway currently has a consensus price target of $81.36, suggesting a potential upside of 2.57%. Kansas City Southern has a consensus price target of $102.50, suggesting a potential upside of 0.07%. Given Canadian National Railway’s higher possible upside, research analysts clearly believe Canadian National Railway is more favorable than Kansas City Southern.

Summary

Canadian National Railway beats Kansas City Southern on 12 of the 17 factors compared between the two stocks.

Canadian National Railway Company Profile

Canadian National Railway Company is engaged in the rail and related transportation business. The Company’s network of approximately 20,000 route miles of track spans Canada and mid-America, connecting approximately three coasts, including the Atlantic, the Pacific and the Gulf of Mexico and serving the cities and ports of Vancouver, Prince Rupert (British Columbia), Montreal, Halifax, New Orleans, and Mobile (Alabama), and the metropolitan areas of Toronto, Edmonton, Winnipeg, Calgary, Chicago, Memphis, Detroit, Duluth (Minnesota)/Superior (Wisconsin), and Jackson (Mississippi), with connections to all points in North America. Its network and connections to all Class I railroads provide its customers access to the three North American Free Trade Agreement nations. It carries over 300 million tons of cargo, serving exporters, importers, retailers, farmers and manufacturers. Its freight includes seven commodity representing a portfolio of goods.

Kansas City Southern Company Profile

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.

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