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Kansas City Southern today reported third-quarter 2020 revenue declined 12 percent to $659.6 million compared with the same period a year ago, as carload volumes fell 4 percent during the global COVID-19 pandemic.
The Class I's Q3 operating expenses were $388.1 million, down from $465.7 million, and operating income was $271.5 million, down from $282 million a year ago. KCS posted an operating ratio of 58.8 percent for the quarter, down from 62.3 percent in Q3 2019. Net income was $190.2 million, or $2.01 per diluted share, up from $180.6 million, or $1.81 per diluted share, a year ago.
KCS officials attributed the decline in carload volumes during the quarter to lower demand due to the COVID-19 pandemic and lower commodity prices, lower fuel surcharge and unfavorable foreign currency impacts.
"Kansas City Southern's strong third-quarter results demonstrate the company's resiliency and the tremendous discipline and focus of our workforce," said President and Chief Executive Officer Patrick Ottensmeyer in a press release. "Our service was tested this quarter with an unprecedented volume recovery and two hurricanes that struck the heart of our network."
The Class I responded to those challenges by executing the lessons learned from precision scheduled railroading (PSR), which included "aligning resources with rapidly increasing demand while maintaining a keen focus on preserving efficiencies created from PSR principles," Ottensmeyer said.
As KCS' outlook improves, the company has updated and improved parts of its 2020 guidance. KCS now expects adjusted diluted earnings per share to be slightly higher on a year-over-year basis. The full-year 2020 adjusted operating ratio is now expected to be on the low end of the 60% to 61% range, KCS officials said.
In addition, previously provided 2020 capital expenditures guidance will remain at $425 million or below. Guidance for 2021 and 2022 capital expenditures remains at approximately 17% of revenue.
"Our performance this year has been remarkable given the challenges we have faced," Ottensmeyer said. "This strong and sustainable operational performance has given us confidence to reintroduce elements of our guidance. Our outlook has improved for adjusted operating ratio, free cash flow and adjusted diluted earnings per share, and the company is positioned to deliver superior growth and customer service."