Kansas City Southern reported its profit fell 14% in the June
quarter, hurt by revenue declines in all of its commodity groups
except chemicals and petroleum, and a particularly sharp drop in
its energy segment.
Kansas City Southern operates railroads in the Midwest and
Mexico that run north to south, in contrast to the majority of
other railroads, which run east to west. In May, the company
withdrew its revenue and volume guidance because of uncertainty
around energy markets, U.S. fuel prices and currency impacts.
In the most recent quarter, carload volumes fell 6% from the
year before. Energy revenue fell 46%, in large part due to the
decline in U.S. oil and drilling operations.
Chemical and petroleum revenue grew 1%. Industrials and consumer
products revenue fell 7%, while agriculture and minerals revenue
fell 9%.
Overall, the company reported a profit of $111.8 million, or
$1.01 a share, down from $129.8 million, or $1.18 a share, a year
earlier. Sales fell 9.8% to $585.8 million.
Analysts had expected revenue of $603 million on earnings of
$1.02 a share.
Chief Executive David Starling said that, despite volume
challenges particularly in the energy group, the company expects
performance to improve during the rest of the year.
"As evidenced in the weekly industry carload data, there are
still uncertainties in many of the primary markets served by rail.
However, KCS's average daily volumes increased each month
throughout the second quarter and the initial results from the
first few weeks of July suggest the positive trend may be
continuing," he added.
Shares rose 4.6% in light premarket trading, though they have
fallen 24% this year through Thursday's close.
The Missouri-based rail company has recently reported weak
results as depreciation of the peso and softness in its energy
segment offset strong chemical and intermodal revenues. Like many
companies, it has been affected by the volatility in the energy
sector—which began when oil prices began tumbling last year—and the
negative effect of the strong dollar.
Write to Angela Chen at angela.chen@dowjones.com
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