UPDATE: BMO Capital Markets Reiterates Underperform Rating, Raises PT on Kansas City Southern
In a report published Wednesday, BMO Capital Markets reiterated its Underperform rating on Kansas City Southern (NYSE: KSU), and raised its price target from $73.00 to $75.00.
BMO Capital Markets noted, “KSU is targeting high-single-digit revenue growth in F2013 (mid-single-digit growth in volumes and core pricing), which is consistent with our forecast but slightly below consensus of +11%. The operating ratio is projected to further improve in F2013 but cost guidance for concession fees and D&A in F2013 were higher than expected. Notwithstanding these higher costs, we believe that KSU can deliver 120 bps improvement in its operating ratio in F2013 given strong outlook for labor productivity and assets utilization. KSU projects capital spending to be around 21% of revenues or $515 million approximately, which is above average versus other Class 1 peers but consistent with the company's higher growth prospects.”
Kansas City Southern closed on Tuesday at $91.67.
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