Kansas City Southern Falls Most in S&P 500 on Mexican Bill

Feb 18, 2014 4:35 pm ET

(Updates share price in fourth paragraph.)

Feb. 18 (Bloomberg) -- Kansas City Southern, the U.S. railroad that gets almost half its revenue from Mexico, fell the most in the Standard & Poor’s 500 Index after the lower house of Mexico’s Congress approved a bill to increase rail competition.

The legislation, which would give third-party companies access to now-exclusive rail networks, now goes to the Mexican Senate for a vote, Anthony Gallo, a Wells Fargo & Co. analyst, said in a note today. Kansas City Southern operates a Mexican railroad under a 1997 government concession that extends to 2027, he said.

“If material changes are made to the existing exclusive concessions, we believe there is a potential for it to be disruptive to rail activity in Mexico and to cross-border activity more broadly,” Gallo said. The Baltimore-based analyst rates the company’s shares outperform.

Shares of the Kansas City, Missouri-based company declined 4.471 percent to $91.67 in New York, slightly wider than Waste Management Inc.’s 4.465 percent drop, for the biggest daily slide in the S&P 500. Kansas City Southern’s closing price was its lowest since January 2013.

Kansas City Southern got 46 percent of its revenue last year from Mexico, according to data compiled by Bloomberg. The company’s Mexico unit and Ferromex, in which Union Pacific Corp. has a 26 percent stake, together move about 90 percent of the country’s rail traffic, Gallo said.

Union Pacific, the biggest U.S. railroad, fell 1 percent to $178.30. Kansas City Southern is fifth-largest in the U.S.

--Editors: John Lear, James Callan