Kansas City Southern Earnings Slip as Commodities Slide
October 18 2016 - 10:20AM
Dow Jones News
Kansas City Southern said its third-quarter earnings fell 8.4%
as the railroad operator's revenue was hurt by weak freight volume,
led by declines in crude and frac sand shipments.
The Kansas City, Mo., company operates railroads in the Midwest
and Mexico, a country the railroad company expects will become a
growth area as auto makers increase capacity there.
Like other railroad operators, Kansas City Southern has cut
costs in an effort ride out a long stretch of low energy prices
that have caused energy producers to reduce drilling in the U.S.
That in turn has weighed on demand for coal used to generate
electricity, frac sand used in hydraulic fracturing and crude
oil.
In the latest quarter, the company's total carload volume
declined 4% from a year earlier, but improved by 5% from the second
quarter.
Among commodity groups with lower volume, shipments of crude oil
dropped 63%, frac sand volume declined 19% and coal shipments
decreased 1%.
Chief Executive Patrick J. Ottensmeyer, who took the helm in
July, said in prepared remarks that events such flooding outages
and service disruptions on its Mexican network resulted in
additional operating costs.
The company said the service disruptions in Mexico also
contributed to a 7% revenue decline in its intermodal
business—which moves freight by more than one mode of
transportation.
Over all, Kansas City Southern reported a profit of $120.6
million, or $1.12 a share, down from $120.5 million, or $1.20 a
share, a year earlier. Revenue decreased 4.3% to $604.5 million.
Excluding impacts from a weaker Mexican peso and lower U.S. fuel
prices, revenue fell 1%.
Analysts polled by Thomson Reuters expected per-share profit of
$1.18 and revenue of $602.7 million.
Operating expenses grew 1.8%.
On Wednesday, CSX Corp. reported that its third-quarter revenue
fell 8% as the railroad operator remained under pressure from weak
coal demand. However the company's cost-cutting efforts helped its
results top analysts' expectations. Union Pacific Corp. plans to
release its third-quarter results on Thursday. Norfolk Southern
Corp. is set to report on Oct. 26.
Write to Tess Stynes at tess.stynes@wsj.com
(END) Dow Jones Newswires
October 18, 2016 10:05 ET (14:05 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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