KCS broke revenue, carload records in second quarter

Boosted by strong automotive and grain business, Kansas City Southern set revenue and carload records in the second quarter.

Revenue climbed 12 percent to an all-time-high $650 million and carloads rose 7 percent to a new benchmark 573,600 units compared with second-quarter 2013 figures. In addition, on an adjusted basis, operating income jumped 20 percent to $206 million, diluted earnings per share soared 26 percent to $1.18 and the operating ratio improved 2 points to 68.3. After adjusting for lease termination costs, quarterly operating expenses rose 9 percent to $436 million.

Agriculture and minerals revenue ballooned 33 percent to $114.9 million, including a 58 percent jump in grain revenue to $66.5 million, while automotive revenue climbed 25 percent to $59.6 million.

Intermodal revenue rose 14 percent to $98.7 million, industrial and consumer products revenue increased 10 percent to $156.2 million, chemical and petroleum revenue ratcheted up 6 percent to $115.1 million, and energy revenue declined 5 percent to $81.4 million as crude oil and utility coal revenue dropped 37 percent and 7 percent, respectively.

"[Our] core carload franchise continues to show strength in line with the general economy, while the energy commodity group declined due to reduced shipments of utility coal," said KCS President and Chief Executive Officer David Starling in a press release.

After a relatively promising first half, KCS senior executives are optimistic about business prospects in the second half and beyond.

"Looking ahead, [our] long-term growth story remains very much intact with the recent announcements of additional automotive plants in Mexico and the growth of our energy franchise with the announcement of the crude oil terminal in Port Arthur, Texas," said Starling. "Energy and automotive, along with cross-border intermodal, Lázaro Cárdenas expansion [in Mexico] and a host of other system-wide opportunities, position KCS very well for business growth over the next several years."

The recently announced automotive facilities in Mexico include an Audi plant that's scheduled to open in January 2016 in Puebla; Mercedes Benz/Infiniti plant that's expected to open in 2017 in Aguascalientes; and BMW plant that's projected to open in 2019 in San Luis Potosí.