Kansas City Southern Q3 Profit Rises, But Results Miss Estimates

(RTTNews) - Transportation holding company Kansas City Southern (KSU) reported Friday a profit for the third quarter that increased from last year, boosted by revenue increases across all divisions, led by Intermodal, and a 3 percent improvement in carload volumes. The results for the quarter missed analysts' expectations. Looking ahead, the company expect a strong end to the year benefited by growth in export grain shipments.

"Kansas City Southern achieved record revenues and carloads as a result of solid, sustainable growth opportunities and strong execution by our team. This performance demonstrates KCS' ability to absorb the impacts of a challenging economic environment while consistently delivering strong top-line and bottom-line results.," President and CEO David Starling said in a statement.

The Kansas City, Missouri-based company reported net income of $118.3 million or $1.07 per share for the third quarter, higher than $90.0 million or $0.82 per share in the prior-year quarter.

Excluding debt retirement costs and foreign exchange rate fluctuations, adjusted earnings for the quarter was $1.10 per share, compared to last year's $0.95 per share.

On average, 20 analysts polled by Thomson Reuters expected the company to report earnings of $1.11 per share for the quarter. Analysts' estimate typically excludes special items.

Revenues for the quarter grew 8 percent to $621.6 million from $577.40 million in the same quarter last year, but missed fifteen Wall Street analysts' consensus estimate of $622.27 million by a whisker.

The company attributed the revenue growth primarily to a 17 percent growth in Intermodal. Further, revenues from industrial & consumer, as well as agriculture & minerals and automotive, each grew by 7 percent. Energy revenues increased 6 percent and chemicals & Petroleum revenue rose 3 percent from last year.

Starling noted that, "The fact that KCS delivered revenue growth in all of its business units speaks to the strength and diversity of this franchise. In addition to the many exciting growth opportunities that we see on the horizon from Intermodal, Auto and Energy, KCS' core carload franchise continues to deliver solid revenue performance and contribution to our overall growth in earnings."

The company stated that it is particularly excited of the fact that cross-border revenue grew 16 percent in the quarter, along with continued strength in cross-border intermodal. Cross-border revenue also benefited from strength in steel shipments and an early rebound in export grain.

Carload volumes for the quarter increased 3 percent to 569.9 thousand, and revenue per carload grew 4 percent to $1,046 from the year-ago quarter.

Operating ratio for the quarter was 67.8 percent, a 0.9 point improvement over the year-ago quarter. Operating income grew 11 percent to $200 million from last year. Operating expenses was $421 million, up 6 percent from a year ago.

"Looking ahead, we expect a strong end to the year benefited by growth in export grain shipments. We also look forward to long-term improvement in our operating ratio as we move forward with our plan to increase the percentage of equipment we own versus lease," Starling added.

In Friday's regular trading session, KSU is currently trading at $116.67, up $3.51 or 3.10% on a volume of 0.31 million shares.