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

Earnings & Valuation

This table compares CSX and Kansas City Southern’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
CSX $11.55 billion 3.97 $5.20 billion $1.91 26.29
Kansas City Southern $2.47 billion 4.42 $1.18 billion $4.98 20.81

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

Institutional and Insider Ownership

69.8% of CSX shares are held by institutional investors. Comparatively, 84.5% of Kansas City Southern shares are held by institutional investors. 4.8% of CSX shares are held by insiders. Comparatively, 1.0% of Kansas City Southern 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.

Analyst Recommendations

This is a summary of recent ratings for CSX and Kansas City Southern, as provided by MarketBeat.com.

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

CSX currently has a consensus target price of $53.52, suggesting a potential upside of 6.60%. Kansas City Southern has a consensus target price of $103.92, suggesting a potential upside of 0.27%. Given CSX’s stronger consensus rating and higher probable upside, research analysts clearly believe CSX is more favorable than Kansas City Southern.

Dividends

CSX pays an annual dividend of $0.80 per share and has a dividend yield of 1.6%. Kansas City Southern pays an annual dividend of $1.32 per share and has a dividend yield of 1.3%. CSX pays out 41.9% 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. Kansas City Southern has increased its dividend for 3 consecutive years.

Risk and Volatility

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

Profitability

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

Net Margins Return on Equity Return on Assets
CSX 17.39% 17.60% 5.72%
Kansas City Southern 21.52% 11.40% 5.68%

Summary

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

About CSX

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.

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.

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