Ford Motor Company (F), Kansas City Southern (KSU): Profit From the Auto Industry’s Expansion Into Mexico

Picking and choosing…

Rail is one of the best long-term investments you will find to gain exposure to the car-induced boom occurring in Mexico. Kansas City Southern (NYSE:KSU) and Union Pacific Corporation (NYSE:UNP) are the two publicly traded American rail companies you can choose from. But which company deserves your hard-earned money the most?

In relation to earnings, Union Pacific Corporation (NYSE:UNP) is much cheaper than Kansas City Southern (NYSE:KSU). U.P. trades at 18 times trailing earnings and only 14.5 times forward earnings. This compares to K.C.S’s costly P/E ratio of over 38, and a forward P/E of over 20.

U.P. also offers the superior dividend, with shares yielding almost 2%, as opposed to K.C.S.’s dividend yielding less than 1%. Union Pacific Corporation (NYSE:UNP) also carries less debt than Kansas City Southern (NYSE:KSU), which means that it should have more room to invest in itself for future growth.

Considering everything outlined above, Union Pacific looks like your best bet. The company is clearly the best positioned to profit from the auto industry’s increasing investment in Mexico, as well as the increasing trade between Mexico and the U.S in general. Throw in its cheaper valuations and nice dividend, and you have a winner.

Joseph Harry owns shares of Ford. The Motley Fool recommends Ford. The Motley Fool owns shares of Ford. 

The article Profit From the Auto Industry’s Expansion Into Mexico originally appeared on Fool.com.

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