• The Company registered good growth
in 2003 as the U.S. economy began to improve. On a revenue
basis, Kansas City registered growth of 3%, which was quite
good. Operating profits also improved (ex-special charges).
• In addition to its U.S. rail properties, the company
has strong railroad properties in Mexico and along the Texas/Mexico
border. As a result of the NAFTA Treaty, two-way rail tonnage
has increased dramatically over the past five years. With
an improved economy, we anticipate higher volumes in 2004:
particularly in higher value freight shipments.
• Because of its unique rail systems, Kansas City Southern
is the main beneficiary of improving North/South economic
activity. It should be noted that the U.S. Southwest is the
fastest growing sector of the country.
• For 2004, we are expecting earnings of about $.60
per share, which is up from earnings of $.16 per share in
2003. We view our estimate for 2004 to be quite conservative.
Should economic activity be higher than the expected 3%-4%
growth, Kansas City Southern earnings may be higher than $.60
• The stock of Kansas City Southern has declined slightly
since our January 5, 2004 recommended price of $14.75 per
share. We consider Kansas City as a very attractive stock
which will participate in a rising economy; particularly in
cross border trader.