A Tale of Two Cities
Michael is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
"It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness…"
A Tale of Two Cities, by Charles Dickens
~
Mr. Dickens could have been writing about today's current investing climate judging by the opening lines of his novel. Today, the stock markets include the best and worst of times - with wisdom and foolishness abounding side by side. Reasoned due diligence and investing based on sound business fundamentals as opposed to emotional wishful thinking is a strategy to undertake.
The following is a tale of two cities. It's a story of how their financial performance is providing a return on investment for investors.
City National (NYSE: CYN) provides banking, investment, and trust services via their wholly owned subsidiary, City National Bank. In January, City National reported Fourth Quarter and Full-Year 2012 financial results.
Noteworthy for investors are the following:
Net Income
Fourth-quarter 2012 net income totaled $47.2 million or $0.87 per share. This is up 8 percent from $43.9 million, or $0.82 per share in the fourth quarter of 2011. Full-year 2012 net income was $208.0 million, or $3.83 per share. This is up 21 percent from $172.4 million, or $3.21 per share, in 2011.
Assets
City National's assets at December 31, 2012 were $28.6 billion, exceeding $28 billion for the first time. This was up 21 percent from the fourth quarter of 2011 and 9 percent from the third quarter of 2012.
Dividends
City National's Board of Directors declared an accelerated quarterly common stock cash dividend of $0.25 per share and a special common stock cash dividend of $0.25 per share. The quarterly and special dividends were in addition to the regular $0.25 per share dividend paid. Income-loving investors should consider companies committed to paying out extra dividends.
Acquisitions
City National acquired Rochdale Investment Management and First American Equipment Finance. Therefore, investors should note that the Company could offer more services to existing clients while experiencing growth in their client base due to these acquisitions.
Investors can also take away that City National's loans and deposits grew at double-digit rates to record levels. Moreover, City National expanded their technology banking business. They did this to serve the technology and life science industries better, which should contribute to future growth for the Corporation. In addition, City National's revenue for the full-year 2012 totaled $1.2 billion, up 7 percent from 2011.
One negative for investors to look at - City National's revenue for the fourth quarter of 2012 reached $303.6 million. This was up 5 percent from the prior year period. However, this was down 4 percent from the third quarter of 2012.
Kansas City Southern (NYSE: KSU) is a transportation holding company with railroad investments in the United States, Mexico and Panama. The Company reported Fourth Quarter and Full-Year 2012 financials in January 2013.
Noteworthy for investors are the following:
Revenues & Carloads
Kansas City Southern reported record fourth quarter 2012 revenues of $568 million. This represents an increase of 7% over fourth quarter 2011. Full year 2012 revenue was a record $2.2 billion. This is up 7% over 2011.
Carloads for 2012 were 2.1 million. This represents an increase of 5% over the year prior. Fourth quarter carloads were 532,000. This is a record and represents an increase of 2% over fourth quarter 2011.
Operating Income
Fourth Quarter 2012 operating income was $174 million, which is 15% higher than the prior year. Full-year operating income was $716 million, a 17% increase over the prior year.
In addition, Kansas City Southern believes they will generate robust short-term and long-term revenue growth. They are basing this on many new facilities that they will serve coming on-line in the second half of 2013 and in 2014. This is in tandem with expanded business opportunities throughout all commodity groups. They garner revenues from Automotive, Chemical & Petroleum, Intermodal, Industrial & Consumer Products, and Energy and Agriculture & Minerals segments. Therefore, the company is diversified and not beholden to one segment for earning revenue.
Investors should consider operational efficiency when looking at transportation companies such as Kansas City Southern, Canadian Pacific Railway Limited, and others. In fact, Canadian Pacific's President and Chief Executive Officer, Mr. E. Hunter Harrison, said in January 2013, "Canadian Pacific is moving forward on our transformational journey to become the most efficient railroad in North America."
Kansas City Southern is looking at efficiencies as well concerning their rail operations. The company anticipates sustained growth and their management is focusing on the close monitoring of every aspect of their ongoing operations. They are working at this while simultaneously overseeing the expansion of system capacity.
One negative for investors to look at - Kansas City Southern reported net income in the fourth quarter of 2012 totaled $92 million, or $0.83 per diluted share. This is in comparison to $96 million, or $0.87 per diluted share, in the fourth quarter of 2011.
Smart investors know that, at all times, as Dickens' said, "…it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us…" Company profits and investor returns can be just as fickle; therefore, a serious analysis of corporate performance and management is essential before making any investment to ensure that overall good results like the above become a part of your portfolio.
Michael Ugulini has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!
