Kansas City Southern (NYSE: KSU) and Hub Group (NASDAQ:HUBG) are both industrials companies, but which is the superior business? We will compare the two businesses based on the strength of their analyst recommendations, valuation, institutional ownership, risk, profitability, dividends and earnings.

Risk and Volatility

Kansas City Southern has a beta of 0.87, suggesting that its stock price is 13% less volatile than the S&P 500. Comparatively, Hub Group has a beta of 1.49, suggesting that its stock price is 49% more volatile than the S&P 500.

Institutional and Insider Ownership

83.6% of Kansas City Southern shares are held by institutional investors. Comparatively, 93.8% of Hub Group shares are held by institutional investors. 1.0% of Kansas City Southern shares are held by insiders. Comparatively, 5.4% of Hub Group shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Dividends

Kansas City Southern pays an annual dividend of $1.44 per share and has a dividend yield of 1.4%. Hub Group does not pay a dividend. Kansas City Southern pays out 28.3% of its earnings in the form of a dividend. Kansas City Southern has raised its dividend for 4 consecutive years.

Analyst Ratings

This is a breakdown of current ratings and price targets for Kansas City Southern and Hub Group, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Kansas City Southern 0 7 9 0 2.56
Hub Group 1 7 4 0 2.25

Kansas City Southern presently has a consensus target price of $112.20, indicating a potential upside of 5.31%. Hub Group has a consensus target price of $47.50, indicating a potential downside of 5.57%. Given Kansas City Southern’s stronger consensus rating and higher possible upside, analysts clearly believe Kansas City Southern is more favorable than Hub Group.

Valuation and Earnings

This table compares Kansas City Southern and Hub Group’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Kansas City Southern $2.33 billion 4.73 $478.10 million $5.09 20.93
Hub Group $3.57 billion 0.48 $74.80 million $1.60 31.44

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

Profitability

This table compares Kansas City Southern and Hub Group’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Kansas City Southern 21.42% 11.86% 5.88%
Hub Group 1.39% 8.87% 4.05%

Summary

Kansas City Southern beats Hub Group on 11 of the 17 factors compared between the two stocks.

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.

About Hub Group

Hub Group, Inc. is an asset-light freight transportation management company. The Company offers intermodal, truck brokerage and logistics services. It operates through two business segments: Mode and Hub. The Mode segment markets and operates its freight transportation services, consisting of intermodal, truck brokerage and logistics, primarily through agents entering into contractual arrangements with Mode Transportation, LLC (Mode LLC). The Mode segment also operates a temperature protected services division. The Hub segment provides intermodal, truck brokerage and logistics services through a network of operating centers throughout the United States, Canada and Mexico. The Hub segment services customers in a range of industries, including consumer products, retail and durable goods. It operates through a network of operating centers and independent business owners. The Company also provides drayage services with its own drayage operations.

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