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Rail News: Kansas City Southern

KCS set revenue, volume records in 3Q

Strong automotive, grain, intermodal, metals and pulp paper traffic helped Kansas City Southern set revenue and volume records in the third quarter.

Revenue rose 9 percent to a 3Q-best $677.5 million, and volume increased 4 percent to a record 595,400 units compared with third-quarter 2013 results.

In addition, operating income climbed 15 percent to $229 million, reported net income jumped 17 percent to $138 million, adjusted diluted earnings per share also rose 17 percent to $1.29, operating expenses increased 6 percent to $448 million and the operating ratio improved 1.7 points to 66.1.

The continued strength and diversity of KCS' franchise helped the Class I achieve record quarterly results, said President and Chief Executive Officer David Starling during the railroad's earnings conference held this morning.

"Our operating ratio speaks to our business growth, system efficiency and cost controls," he said.

Revenue and volume increased in five of six business groups, with energy the sole laggard. Energy revenue dipped 4 percent to $90.7 million and volume declined 3 percent to 84,000 units primarily because of weak utility coal traffic and a sharp decline in frac sand shipments. There's been a shift in frac sand destinations in the Bakken Shale due to seasonal and other factors, said Executive Vice President of Sales and Marketing Pat Ottensmeyer.

Automotive revenue leaped 28 percent to $65.8 million and volume jumped 22 percent to 28,000 units primarily because of the positive effects of three new auto plants in Mexico, he said.

Results from the other four business groups show that industrial and consumer revenue climbed 13 percent to $166.9 million and volume rose 6 percent to 85,800 units; intermodal volume jumped 11 percent to $106.7 million and volume increased 5 percent to 256,800 units; chemical and petroleum revenue rose 7 percent to $117.4 million and volume ratcheted up 2 percent to 62,200 units; and agricultural and minerals revenue increased 8 percent to $104.6 million and volume rose 5 percent to 53,100 units.

Looking ahead, KCS executives are optimistic about business prospects for remainder of the year and expect long-term growth to be fueled by systemwide opportunities, said Starling. For example, heavy crude oil shipments from Canada to Texas ports are projected to grow, said Ottensmeyer.

Contact Progressive Railroading editorial staff.

More News from 10/17/2014