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

Risk and Volatility

Union Pacific Corporation has a beta of 0.81, meaning that its share price is 19% less volatile than the S&P 500. Comparatively, Kansas City Southern has a beta of 0.79, meaning that its share price is 21% less volatile than the S&P 500.

Dividends

Union Pacific Corporation pays an annual dividend of $2.42 per share and has a dividend yield of 2.3%. Kansas City Southern pays an annual dividend of $1.32 per share and has a dividend yield of 1.3%. Union Pacific Corporation pays out 43.8% 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. Union Pacific Corporation has raised its dividend for 3 consecutive years and Kansas City Southern has raised its dividend for 7 consecutive years.

Analyst Ratings

This is a summary of recent recommendations for Union Pacific Corporation and Kansas City Southern, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Union Pacific Corporation 0 9 8 0 2.47
Kansas City Southern 0 10 7 0 2.41

Union Pacific Corporation currently has a consensus price target of $113.53, indicating a potential upside of 5.90%. Kansas City Southern has a consensus price target of $103.92, indicating a potential downside of 0.49%. Given Union Pacific Corporation’s stronger consensus rating and higher probable upside, equities analysts plainly believe Union Pacific Corporation is more favorable than Kansas City Southern.

Earnings and Valuation

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

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Union Pacific Corporation $20.72 billion 4.14 $9.80 billion $5.52 19.42
Kansas City Southern $2.47 billion 4.46 $1.18 billion $4.98 20.97

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

Profitability

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

Net Margins Return on Equity Return on Assets
Union Pacific Corporation 21.79% 22.70% 8.05%
Kansas City Southern 21.52% 11.40% 5.68%

Insider and Institutional Ownership

78.6% of Union Pacific Corporation shares are held by institutional investors. Comparatively, 84.5% of Kansas City Southern shares are held by institutional investors. 0.2% of Union Pacific Corporation 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, large money managers and hedge funds believe a company is poised for long-term growth.

Summary

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

About Union Pacific Corporation

Union Pacific Corporation is a railroad operating company in the United States. The Company operates through its principal operating company, Union Pacific Railroad Company (UPRR). Its business mix includes Agricultural Products, Automotive, Chemicals, Coal, Industrial Products and Intermodal. Its freight traffic consists of bulk, manifest, and premium business. Bulk traffic primarily consists of coal, grain, soda ash, ethanol, rock and crude oil shipped in unit trains-trains transporting a single commodity from one origin to one destination. Manifest traffic includes individual carload or less than train-load business involving commodities, such as lumber, paper, food and chemicals. The transportation of finished vehicles, auto parts, intermodal containers and truck trailers are included as part of its premium business. As of December 31, 2016, its network included 32,070 route miles, linking Pacific Coast and Gulf Coast ports with the Midwest and Eastern United States gateways.

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.

Receive News & Ratings for Union Pacific Corporation Daily - Enter your email address below to receive a concise daily summary of the latest news and analysts' ratings for Union Pacific Corporation and related companies with MarketBeat.com's FREE daily email newsletter.