Kansas City Southern Kept Neutral

We remain encouraged by Kansas City Southern’s (KSU) favorable revenue trend on the back of continued momentum in pricing and shipments, particularly in Intermodal, Energy and Automotives.

New business opportunities in Mexico and other emerging international markets will also bode well for future growth. Moreover, the improvement in the company’s cost structure and estimated reduction in debt expenses look promising and suggest earnings going forward.

However, stiff competition, increased railroad regulation, highly unionized labor and uncertain market conditions for some products may limit the upside potential of the company.Consequently, we maintain our long-term Neutral recommendation on the stock. 

Kansas City Southern is one of the oldest freight rail transportation companies. It functions in a seller’s market, enjoying pricing power since 1980 when the U.S. government adopted the Staggers Rail Act.  The company has thereby been able to increase prices on average by nearly 4–5% per annum, subsequently maintaining a substantial profit margin.

Additionally, improving cross-border traffic between the U.S. and Mexico and emerging business opportunities in the Mexican market supported by its cheap labor costs, favorable currency environment and lower transportation cost to the U.S. markets are expected to bode well for the company’s top- and bottom-line growth.

The company remains optimistic about most of its product segments. In terms of the Coal business, which is now grouped under the Energy segment, the management expects double-digit growth this year. This is based on new business opportunities which are in the pipeline.

Coal exports will benefit from growing demand for coal shipments to the Asian market through the new facilities at Lazaro Cárdenas. Auto production is expected to rise in Mexico, with upcoming plants by Honda, Mazda, Nissan and Audi. Further, the company’s expanding business in crude oil and fracturing sand shipments will also aid long-term growth opportunities.

Given a capital-intensive operating environment, investments play a vital role in expanding network and terminal capacity, and enhancing safety, service and reliability for railroads customers. The company expects capital expenditure of approximately 18% of total revenues in this year.

Additionally, in February this year, the company got a loan worth $54.6 million from the U.S. Department of Transportation to buy 30 new locomotives. Kansas City Southern expects delivery by the end of this year and 20 each year through 2015.

However, Kansas City Southern faces intense competition from various transportation providers, including railroads like Union Pacific Railroad (UNP), and motor carriers, barges and ships that operate along similar routes across its service area.

Transportation providers such as motor carriers and barges utilize public rights-of-way that are built and maintained by governmental entities, while Kansas City Southern and other railroads must build and maintain rail networks using largely internal resources.

The current state of a volatile U.S. and world economy may keep Kansas City Southern’s top-line growth under pressure in the near future. Moreover, near-term growth for the company is expected to be tempered by lower coal production forecasts by the U.S. Energy Information Administration.

Lower natural gas prices and a weak utility coal market have raised significant concerns, limiting overall coal shipments despite strong exports to Asian countries.

Additionally, the company foresees declines in its grain shipments, given higher U.S. grain prices. Going forward, exchange rate fluctuation also remains crucial for the company‘s earnings, as a substantial part of the business arises from cross-border markets.

For the short-term, Kansas City Southern holds a Zacks #3 Rank (Hold).

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Small Business Executives Learn to Align Capabilities with Navy Missions through Upcoming Contracting Opportunities - Southern Maryland Online

By Mike Welding, NSWC Indian Head Division Public Affairs, and John Joyce, NSWC Dahlgren Division Public Affairs
Lt. Col. James Bachinsky, Joint Staff Comptroller Acquisition Management Branch Chief, briefs more than 250 executives representing over 100 companies at the 20th Naval Surface Warfare Center Dahlgren Division (NSWCDD) "Small Business Opportunities Fair and Conference" held at the University of Mary Washington (UMW) Dahlgren campus May 8.
DAHLGREN, Va. -- A capacity crowd of small business executives discovered a myriad of partnering and prospective contracting opportunities at the first joint "Small Business Opportunities Fair and Conference" featuring two Naval Surface Warfare Center (NSWC) Divisions at the University of Mary Washington (UMW) Dahlgren campus May 8.

Top NSWC Indian Head Division and NSWC Dahlgren Division leaders representing command, technical, small business and contracts offices shared their knowledge and expertise with businessmen and women interested in becoming a partner or expanding their current partnership with NSWC.

"With the increased emphasis on competition in the current business environment, keeping an eye on small businesses and small business participation is critical," said Kris Parker, NSWCDD Deputy for Small Business. "Events such as this, help us (NSWCDD & NSWCIHD) determine who's out there from a partnering standpoint, and help small businesses determine what efforts are coming up and where they should apply their limited resources."

What's more, the Navy's current and potential small business partners learned precisely how they could align with the capabilities of the two warfare center divisions.

"I am extremely encouraged and optimistic about the future," said Earnest King, Chief Marketing Officer, II Corps Consultants, Inc. "Perhaps the most beneficial aspect of the conference was the open lines of communication and willingness of the small business advocates at both NSWC Dahlgren Division and NSWC Indian Head Division to assist small businesses with insight and forecasted opportunities to evaluate."

King was among approximately 250 executives representing more than 100 companies who enjoyed a series of "firsts" at the event, including:

-- A combined overview of both the NSWC Dahlgren Division and NSWC Indian Head Division Warfare Centers (NSWCIHD).

-- In-depth technical and business overviews presented by command staff from both NSWC Divisions.

-- A new UMW Dahlgren Campus location to allow for easier access and greater participation.

The businessmen and women also networked with professionals from other small businesses, large businesses and academia - furthering their opportunities for teaming and partnerships.

They listened to NSWCIHD Commander Capt. Andrew Buduo and NSWCIHD Technical Director Dennis McLaughlin as well as NSWCDD Commander Capt. Michael Smith and NSWCDD Technical Director Carl Siel present command technical and business overviews geared to helping small and large business executives and entrepreneurs guide their business decisions.

"The warfare centers complement one another," said Smith, pointing out that every Navy warfare center division has its own niche and collaborates closely. "For instance, Dahlgren Division tests products developed at Indian Head."

The event promoted service contract opportunities for small businesses with the Pentagon-based Joint Chiefs of Staff, the Maryland-based NSWC Indian Head Division and Naval Explosive Ordnance Disposal Technology Division as well as NSWC Dahlgren Division, headquartered in Virginia.

"Indian Head is a good place to do business," Buduo said. "Our work is projected to grow over the next several years."

It may seem counterintuitive during a time of declining defense budgets to expect growth, but it has a lot to do with Indian Head Division's mission beyond service contracts, explained McLaughlin.

"Developing energetics weapons systems is a very unique business," he added. "For instance, we are the only site that conducts substantive work in all phases of weapon energetics."

Chiefs of Contracts from NSWCDD and NSWCIHD - Pat Canciglia and Penny Kennedy respectively - provided procurement forecasts and explained how they handle changes in the procurement environment while focusing on small business.

"We are looking at our initiatives to improve our small business contracting," Kennedy said. "This is one reason we are doing things like industry days, to reach out to small businesses and educate them about what we do."

Both warfare centers partner with industry to bring innovative solutions and performance improvements to the warfighter at a reduced cost.

"NSWC Dahlgren is recognized for its leadership in systems integration," said Siel. "We rely on you to augment that leadership. The complex systems we develop and support require quick and ready access to new technology and unique skills in order to meet the needs of our warfighters. Sometimes the response time can be very short. Readiness is everything."

The capabilities of small businesses to provide rapid and cost-effective technological solutions are considered an invaluable resource by the event's leaders faced with challenges associated with reducing total ownership costs across the Navy.

"Without question, budget constraints are having an impact," said Smith. "But we continue to deliver critical technology and products and are recognized for our leadership in surface warfare and systems engineering."

NSWC Indian Head is planning to have another industry outreach day in January, 2013, one that will focus on the command's 144 technical areas. "We expect an uptick in work due to our unique technical capabilities," said McLaughlin. "Our manufacturing workload is already increasing and may offer an opportunity for contractor surge support."

The warfare centers' parent command, Naval Sea Systems Command (NAVSEA), has also embarked on a larger initiative to promote competition on contracts. According to NAVSEA's Head of Contracts, Jerry Punderson, NAVSEA contract work totaled $36 billion last year, with much of it going to single competitive bid contracts.

NAVSEA wants to reduce the number of single competitive bid contracts for several reasons, particularly to improve buying power.

"From a total ownership cost perspective, hosting the event at the University of Mary Washington allowed Dahlgren to realize a savings of approximately $15,000," said Parker.

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Oh Canada: Neighbor to the north eyes business opportunities in southern NM

LAS CRUCES - The country on the other side of the United State's international border has long been a source of commerce and business. No, not just the one about 50 or so miles south of Las Cruces, but the one about 1,500 miles to the north.

Last year the United State exported more than $280 billion in trade with Canada and imported more than $316 billion.

Maybe some more of that pie can be sliced off for southern New Mexico.

Jeffrey Gray, trade commissioner for the General Consulate of Canada's Los Angeles office, was is in Las Cruces for three days last week to tour White Sands Test Facility, White Sands Missile Range Business Development Office and other locations. His officer overseas the country's business interest in the southwest. He said Canadian companies are interested in the unmanned aerial vehicle programs in the area as well as the aerospace industry at large.

"This trip is really fact finding for me," Gray said.

Representatives of Canada's trade office in Phoenix were also in Albuquerque last week.

"Our main focus is to bring Canadians into the marketplace, bring locals up to Canada and look for opportunities for people to meet and do business," Gray said. "We want to attract investment up north and help Canadians who are interested in investing in United States Southwest."

"Canada is getting known (for its) unmanned vehicle system industry," Gray said. "In Alberta there's a group called Canadian Center for Unmanned Vehicle Systems

and they have ... a lot of UAV testing going on."

Gray said he uses a lot of his time looking after the aerospace, defense and security areas on behalf of Canadian industry and the Canadian government. That made the Las Cruces area with WSMR, the NASA presence and Spaceport America an obvious place to visit.

The Canadian aerospace industry sports about 400 companies with approximately 83,000 employees, $22.2 billion in revenues with an output ranked fifth in the world, Gray said.

That contrasts to the $76.5 billion in business the U.S. industry reported in the first half of last year alone, according to the U.S. Census Bureau. Still, Canada has consistently been one of the top suppliers for U.S. companies as well as one of the top foreign markets for U.S. aerospace products and services.

"One of the sectors (Canada) is looking at too is bio mass," said Eric Montgomery, MVEDA's business development manager.

The work of Sapphire Energy in Las Cruces and Columbus, as well as research at New Mexico State University, in the efforts to produce fuel from algae, also attracted Gray to the area.

"(Interest) is mainly how it relates to aviation jet fuel, or aviation fuels generally," Gray said. "There might be some upcoming synergy between what research organizations in universities and government labs are doing in the United States and what we're doing up in Canada in the bio fuels area."

While most look south when talk turns here to an international border, the one 1,500 or so miles north can also bring an economic bump to southern New Mexico.

"A lot of times we talk about Mexico as our major international opportunity and it certainly is, but Canada plays a role in what we do," Montgomery said. "We've had conversations with a variety of different companies who get raw materials from Canada. They are shipped down to processing facilities in Mexico and then they bring them back to the United States through The Santa Teresa port of entry for their distribution throughout the country."

Gray said Canadian industry does not have a presence in southern New Mexico, but that could change, as other southern border areas have attracted such investment.

"Obviously, in Arizona and California there has been great interest," he said.

Brook Stockberger can be reached at (575) 541-5457

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Zacks' Voice of the People highlights opportunities with Freeport McMoRan Copper & Gold, BHP Billiton, Southern Copper and Vale SA - MSN Money

PR Newswire

CHICAGO, Feb. 28, 2012

CHICAGO, Feb. 28, 2012 /PRNewswire/ -- Zacks highlights commentary from People and Picks Trader "inthemoneystocks".

For more Voice of the People, visit http://at.zacks.com/?id=5851

Featured Post

Metal and Mining Stocks In Play

The leading base metal and mining stocks all started the day declining at the open. This is common to see when the U.S. Dollar Index is strong before the opening bell. Leading stocks such as Freeport McMoRan Copper & Gold Inc (NYSE: FCX), BHP Billiton Ltd (NYSE: BHP), Southern Copper Corp (NYSE: SCCO) and Vale SA (NYSE: VALE) will usually trade inverse to the U.S. Dollar.

These stocks have rebounded off of their morning lows as soon as the U.S. Dollar Index declined. Nearly every day that the U.S. Dollar Index starts strong it will fade or sell off once the opening bell rings at the New York Stock Exchange.

Traders can watch for intra-day support on the U.S. Dollar Index around the $78.50 level. Should the U.S. Dollar Index catch a bid and trade higher the leading metal and mining stocks will likely come under some selling pressure.

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