S&P lowers Kansas City Southern view to stable

S&P said it revised the outlook on Kansas City Southern and its subsidiaries Kansas City Southern de Mexico S.A. de CV and Kansas City Southern Railway Co. to stable from positive.

The agency also said it affirmed the group’s ratings, including their BBB- corporate credit rating and A-3 rating on the commercial-paper program.

The outlook revision reflects diminished prospects for a near-term upgrade due to uncertainty surrounding the potential effect of the new U.S. presidential administration's trade policies, S&P said.

Higher U.S. import tariffs could weaken the Mexican economy and trim cross-border trade, the agency explained.

Cross-border trade with Mexico accounts for about 30% of the company's traffic, S&P said.

Of that, 60% of movements head south into Mexico from the United States, the agency said.

Trade risk aside, 2017 has the potential to be a modestly positive growth year for the company given the favorable demand fundamentals for its commodity groups, S&P said.

The ratings also reflect the favorable fundamentals of the North American freight railroad industry given the limited competition from alternate modes of commercial freight transport for some commodities, formidable barriers to entry and moderate cyclicality, the agency said.

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