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Rail News: Kansas City Southern

KCS sets revenue and income records, trims operating ratio

The last Class I to report fourth-quarter earnings had first-class financial results to share. Yesterday, Kansas City Southern reported record revenue of $460.3 million (up 4 percent year over year) and all-time-high operating income of $108.7 million (up 23.2 percent).

New business helped drive up chemical and petroleum revenue by 12 percent while increased Mexican traffic helped boost intermodal revenue by 11.6 percent. Automotive revenue rose 6.2 percent, coal revenue increased 2.4 percent, and agricultural/minerals and forest products/metals revenue both increased 0.8 percent compared with fourth-quarter 2006 totals.

In addition, KCS' operating expenses decreased 0.7 percent to $351.6 million, operating ratio improved 3.7 points to 76.4 and net income jumped 36.6 percent to $49.9 million vs. fourth-quarter 2006 performance. Although fuel, casualties/insurance and material costs increased in the quarter, compensation/benefits, purchased services and equipment expenses decreased.

KCS' quarterly traffic volume declined 2.5 percent year over year to 481,998 units. However, excluding the loss of certain haulage traffic, volume would have increased 4.9 percent, the Class I said.

For the full year, KCS reported record revenue of $1.74 billion and record operating income of $362.4 million, which rose 5 percent and 19.1 percent, respectively, compared with 2006 totals. In addition, net income jumped 45 percent to $153.8 million and the railroad's operating ratio improved 2.5 points to 79.2.

"While KCS' revenue growth of 5 percent fell short of our projections going into the year, given the weakness in the U.S. economy, we were generally pleased by the year-over-year increase," said KCS Chairman and Chief Executive Officer Mike Haverty in a prepared statement. "We were also encouraged by meeting our target of achieving an operating ratio below 80 percent for the full year."

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