Kansas City Southern (which my colleague Marshall Hargrave profiled in February) owns railroad investments and 6,600 miles of track, ranging from the central U.S. through Mexico and into Panama.

Fresh off strong results in its most recent quarter, KSU’s management foresees earnings growth eventually reaching 20% per year. Analysts agree and expect the company to sustain double-digit earnings growth of 15 to 17% a year for the next three years. 

KSU’s longer-term profit drivers include continued industry growth in Mexico, including two new car-assembly plants; expansion of Mexican rail traffic into the U.S.; and continued deleveraging. With a current long-term debt-to-capitalization ratio of 31.5%, KSU is aiming for lower debt levels than its peers. 

Shares of KSU (which pays a 1% dividend yield) rose steadily for several years, peaked in November, then corrected with the broader stock market early this year. After stabilizing between March and May, the stock broke past upside resistance at $106 last week. I expect KSU to climb to $114, meet minor resistance, and then keep rising to the November highs around $126 — a 17% gain over today’s share price. At that point, I expect the stock to consolidate for a while before making its next move.

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American Airlines Group emerged from bankruptcy protection last year, merged with US Airways Group in December, and issued new stock.

Trends in business and leisure air travel have been improving with the growing U.S. economy, allowing for increased revenue and net income. In addition, cost efficiencies associated with the US Airways merger are also contributing to profitability.

The Street expects American’s EPS to grow 77% this year, to $5.15 per share, followed by additional double-digit growth in 2015 and ’16. That’s a huge leap in earnings.

What’s more, the resulting forward price-to-earnings (P/E) ratio is shockingly low at 7.7. Compare that with Southwest Airlines (NYSE: LUV) at 17.6 and Delta Air Lines (NYSE: DAL) at 13.5.

If American’s 2014 P/E rises to the low end of its peers’ range at 13, that would give AAL a price of $67, representing 68% upside over today’s price.

The company has higher cash levels than its peers. Analysts see a dividend increase and a large share repurchase authorization as being likely later this year. And while airlines typically have higher debt levels than other industries, clearly American Airlines is comfortable enough with its debt levels to deploy cash elsewhere.

AAL fluctuated steadily between $33 and $39 for the past four months, but that range has narrowed recently to $37.50 to $39.50. A narrowing of a trading range is a very bullish sign for a pending breakout — and sure enough, AAL has begun closing at new highs in recent days. 

Hertz Global Holdings is the owner of airport car rental brands Hertz, Dollar, Thrifty and Firefly. (My colleague Marshall Hargrave also profiled Hertz in February.)

Hertz plans to spin off its construction equipment-leasing division in a tax-free distribution to shareholders around early 2015. Hertz expects to garner around $2.5 billion from the spin-off, which it will use to pay down debt and repurchase about $1 billion of stock.

Increases in business and leisure travel are contributing to Hertz’ strong financial outlook. Profitability is also increasing from cost synergies associated with last year’s acquisition of Dollar Thrifty Automotive Group.

As Morgan Stanley’s analysts summarized, “Hertz is a great brand, rentals are a consolidated industry, and [Chairman and CEO] Mark Frissora is known for being a good steward of capital.”

Consensus earnings estimates show very nice EPS growth of 14% this year and 26% next year for Hertz, which currently sports a forward P/E of 15.7.

Earlier this year, analysts feared that increases in used-car supplies and new-car price wars would be detrimental to Hertz’s ability to resell its cars at good prices. Those fears have not played out, and as a result, stock charts of rental car companies are turning decidedly bullish.

After almost doubling in price in early 2013, HTZ has been trading roughly sideways (while edging upward) for a year. In May, the trading range narrowed to $27.70 to $29.70, a bullish indication that the stock price is about to launch toward new highs again.