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Despite the negative operational and financial ramifications of Hurricane Alex, which caused widespread flooding and infrastructure damage in Mexico in July, Kansas City Southern registered “impressive” results in the third quarter, said KCS President and Chief Executive Officer David Starling during this morning’s earnings webcast and teleconference.

Adjusted diluted earnings per share (EPS) more than tripled to 49 cents, traffic rose 9 percent to 459,000 units, revenue jumped 13.5 percent to $438.3 million, operating income soared 38 percent to a record $116 million and KCS’ operating ratio dropped 4.8 points to 73.5 compared with third-quarter 2009 results. Chemical and petroleum revenue dipped 2 percent and volume tumbled 6 percent; industrial and consumer products revenue rose 20 percent and volume increased 13 percent; agricultural products and minerals revenue went up 4 percent and volume inched up 2 percent; coal revenue jumped 29 percent even though volume declined 8 percent; intermodal revenue and volume both soared 25 percent; and automotive revenue skyrocketed 64 percent and volume rose 18 percent.

Because of hurricane damage, Kansas City Southern de México S.A. de C.V. closed a mainline for 23 days in July. As a result, KCS lost about 27,000 carloads and $33 million in revenue during the quarter, said Executive Vice President of Sales and Marketing Patrick Ottensmeyer. Property damage costs totaled about $31 million and KCS has filed an insurance claim for $71.5 million, said EVP and Chief Financial Officer Michael Upchurch.

Quarterly EPS would have increased another five cents and the operating ratio would have dropped another three points without the hurricane effects, said Upchurch.

“But Alex will have no extended effect on the company,” said Starling.

Added Ottensmeyer: “We believe all business in Mexico is back.”

The hurricane didn’t have a major impact on third-quarter operating expenses, which increased 7 percent year over year to $322.3 million. However, two cost components did: fuel expenses, which increased from $49.7 million in the year-ago quarter to $61.8 million; and compensation/benefit expenses, which rose from $83.4 million to $87.3 million. Headcount increased slightly from 6,068 in third-quarter 2009 to 6,107 in third-quarter 2010, said Upchurch.

After a quarter that proved difficult because of the major storm, the fourth quarter appears to be on a positive growth track, said Ottensmeyer. October carloadings are reaching their highest levels in four years and every commodity segment except coal is showing promise. As a result, fourth-quarter revenue is expected to increase by a “high teens” percentage, said Ottensmeyer.

Mexico’s Gross Domestic Product (GDP) is strengthening and should exceed 3 percent growth in the fourth quarter and register nearly 5 percent growth for fiscal-year 2010, said Executive Chairman Mike Haverty. The nation’s GDP growth is vital to KCS because half of the Class I’s trackage is in Mexico and nearly half of the company’s annual revenue is generated in the country, he said.

— Jeff Stagl