(The Associated Press circulated the following on January 18.)
NEW YORK — Shares of railroad operator Kansas City Southern rose Friday, as an analyst lifted his rating to “Outperform,” saying the stock is undervalued following a recent sell-off.
BMO Capital Markets analyst Randy Cousins said the recent pullback provides a chance for investors to buy up shares, noting that cost cuts and new business opportunities should offset the impact of a slowdown in the U.S. economy this year.
“As concerns about the state of the U.S. economy escalate, the rail stocks have come under increasing pressure,” Cousins said. “The sell-off in the common stock of Kansas City Southern has been particularly severe.”
The stock has lost 30 percent of its value in the last three months, and 13 percent over the past 12 months.
But Cousins said rising fuel prices and the expansion of global trade have made railroads stocks more stable that they have been in the past. He noted that while carload volumes fell sharply during the 2001 recession, as the economy slowed in 2007 volumes only decreased 1.6 percent.
“Regardless of the near-term economic outlook, the long-term story at Kansas City Southern is exceptional,” he said.
Also Friday, Longbow Research analyst Lee Klaskow initiated coverage of Kansas City Southern with a “Neutral” rating.
He suggested the rail faces a tough road over the next six months as freight demand remains weak. However, he notes that demand might begin to improve in the second half of the year.
Shares rose $1, or 3.4 percent, to $30.88 Friday. The stock has ranged between $27.66 and $43 in the past year.