Volume rose 7 percent to 552,400 units and revenue climbed 6 percent to $577.4 million compared with third-quarter 2011 results.
In addition, on an adjusted basis (excluding hurricane-related impacts in third-quarter 2011), diluted earnings per share increased 5 percent to 82 cents, operating income rose 16 percent to $181 million and the operating ratio improved 2.6 points to a record 68.7.
The financial results were driven by solid top-line growth, disciplined operating performance, a diverse traffic mix and cost controls, said KCS President and Chief Executive Officer David Starling.
Revenue primarily was propelled by the railroad's five fastest-growing traffic categories: automotive, cross-border intermodal, container traffic through Lázaro Cárdenas, Mexico, crude oil and frac sand. Cross-border intermodal revenue soared 88 percent and frac sand revenue leaped 82 percent year over year, helping to offset weak coal and grain revenue, which account for 20 percent of KCS' business.
"Collectively, these five categories, which represent approximately 18 percent of total KCS freight revenues for the third quarter, grew by 46 percent when compared to the third quarter of 2011," said Starling. "We believe that there is significant long-term growth potential in each of these areas."
Overall, KCS set revenue records in four of its six business units despite lower volume in three of the units. Automotive revenue jumped 31 percent; intermodal revenue climbed 25 percent; energy revenue increased 8 percent; chemical/petroleum revenue rose 4 percent; industrial and consumer revenue inched up 1 percent; and agricultural and mineral revenue fell 10 percent.
Adjusted operating expenses increased only 2 percent to $397 million even though volume climbed 7 percent, said Executive Vice President and Chief Financial Officer Mike Upchurch. Compensation and benefits costs inched down from $109 million in the year-ago period to $108 million as the quarterly average headcount dipped from 6,112 in the year-ago period to 6,106. Fuel costs rose slightly from $87 million in three-quarter 2011 to $90 million.
Because of the promise inherent in the five growing traffic sectors, KCS' growth story "is very much intact," said Starling. Grain business will receive a big boost next year, as well, due to new origination points on the railroad's network.
Bartlett Grain Co. L.P. plans to open a facility in Jacksonville, Ill., in July 2013 and Ray-Carroll County Grain Growers expects to open a facility in Corder, Mo., in September 2013. The facilities will provide KCS access to two new grain producing regions and strengthen the Class I's grain franchise, said EVP of Sales and Marketing Pat Ottensmeyer.
— Jeff Stagl
Browse articles on Kansas City Southern on Progressive Railroading
- Election 2012: Rail experts sound off on funding, retirement, rules, policies and taxes
- Rail industry stakeholders weigh in on 2012 election issues
- Transportation infrastructure investment in an era of partisanship
- Is federal funding for Amtrak at stake?
- To what extent is rail transportation investment at risk?
- Freight-rail regulation: Will re-reg resurface?
- Truck size and weight will continue to be an issue for railroads
- What's at stake for the rail industry this election cycle; plus, vital signs on the rail industry trade-show circuit (Context, October 2012)
- RailTrends 2012 preview by Tony Hatch
- Profile: Jim Young, Union Pacific Railroad (Progressive Railroading's 2012 Railroad Innovator Award winner)
- Port of Vancouver expansion project ramps up
- Kansas City Southern Railway reaches 125th anniversary in good stead
- Progressive Railroading's Passenger Rail at a Glance 2012
- Suppliers of railroad ties dedicate more resources to fulfill railroads' crosstie needs
- New train station on track for late 2014 completion in Rochester
- Americans want more transportation options; plus, freight rail traffic data
- State DOTs' social media activity on the rise, AASHTO survey finds