What: Shares of railroad company Kansas City Southern (NYSE:KSU) fell as much as 12% on Friday after it reported third-quarter earnings.

So what: Revenue fell 7% from a year ago to $632 million and net income fell 5% to $131.5 million, or $1.20 per share. Adjusted earnings per share, which pulls out one-time costs, were $1.21 per share and a penny behind estimates, but revenue was below the $639.4 million analysts expected, and that spooked investors.  

Now what: Kansas City Southern barely missed earnings estimates, so I wouldn't panic too much if I were a shareholder. What's concerning is that revenue and earnings are both on the decline and shares trade at a lofty 19 times trailing earnings.

That high valuation would keep me away from shares today, but this is a steady company that isn't in dire straights by any means. If shares continue to fall, there could be good value for investors, but I would like to see shares below 15 times earnings before thinking there's great value in this railroad stock.