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Rail News: Kansas City Southern

Kansas City Southern posts record Q2 results

KCS CEO Ottensmeyer said he's been pleased with the company's early-stage implementation of PSR principles.
Photo – Kansas City Southern


Kansas City Southern today reported record second-quarter revenue of $714 million, a 5 percent increase on flat volumes compared with the previous year's same quarter.

Year-over-year revenue growth for the quarter was led by a 19 percent increase in chemicals and petroleum shipments, particularly to Mexico, as well as a 5 percent increase in automotive, KCS officials said in a press release.

Those increases were partially offset by revenue declines in KCS's four remaining commodity groups. Energy revenue declined by 5 percent, as increased utility coal shipments were offset in declines in frac sand and crude oil shipments. The industrial and consumer products and agricultural and mineral groups each declined by 2 percent. Intermodal revenue dipped 1 percent.

KCS reported operating expenses were $506 million. Excluding restructuring charges related to KCS's new precision scheduled railroading (PSR) initiatives, adjusted operating expenses rose 4 percent to $455 million in Q2 versus the year-ago period.

The Class I's adjusted operating income climbed 5 percent to $259 million compared to last year's Q2. The railroad posted an adjusted operating ratio of 63.7 percent, a 0.3 point improvement over Q2 2018's ratio.

KCS posted Q2 net income of $129 million, or $1.28 per diluted share, compared with $148 million, or $1.45 per diluted share in Q2 2018. However, this year's adjusted diluted earnings per share for the second quarter was $1.64, up 6 percent from a year ago.

"The company is handling the same volume as last year with fewer assets, fewer crew starts and considerably less network congestion, driving an improvement in customer service, operating metrics and cost profile," said President and Chief Executive Officer Patrick Ottensmeyer. "This improvement in cost profile helped us absorb a 130 basis point headwind to our adjusted operating ratio from the loss of the Mexican Fuel Excise Tax credit, while still improving profitability versus prior year."

Ottensmeyer added that he's been pleased with the company's early-stage implementation of PSR principles.

"Together we are building a more consistent, reliable and resilient network that is positioned to deliver excellent customer service and strong operating leverage as volume and revenue growth improves," he said.

Contact Progressive Railroading editorial staff.

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