KCS posts Q3 revenue, income decline

Kansas City Southern's third-quarter revenue slipped 4 percent to $605 million versus the same quarter last year, the Class I reported this morning.

Overall carload volumes fell 4 percent compared with a year ago. Excluding the peso and fuel-price factors, KCS' third-quarter revenue would have been down 1 percent compared with last year's quarter, company officials said in a press release.

KCS third-quarter revenue declined in four commodity groups, which was partially offset by small increases in agriculture and minerals, and chemicals and petroleum. Intermodal revenue dropped 7 percent largely because of service disruptions on the Mexican network.

Reduced U.S. drilling operations continue to affect KCS's crude oil and frac sand movements. As a result, energy revenue fell 15 percent during the third quarter versus a year ago.

The railroad posted third-quarter net income of $121 million, or $1.12 per diluted share, compared with $132 million, or $1.20 per diluted share, in third-quarter 2015. Operating income for the quarter declined 9 percent to $200 million compared with year-ago results. The company's operating ratio was 66.9 percent, a 1.7 point increase from third-quarter 2015.

The quarter's operating expenses were down 2 percent to $405 million compared with last year. However, excluding the estimated impacts of Mexican peso depreciation and lower U.S. fuel prices, operating expenses rose 2 percent. Also during the quarter, KCS recognized a $16 million Mexican fuel excise tax credit. Additionally, the Class I recorded a year-to-date adjustment to increase the incentive compensation level for the year.

"Kansas City Southern faced a challenging third quarter as extraneous events, including flooding outages and service disruptions on our Mexican network, resulted in additional operating costs," said President and Chief Executive Officer Patrick Ottensmeyer. "In spite of these events, KCS' third-quarter carloads grew 5 percent sequentially with strength seen in both the automotive and energy commodity groups. Overall, the company remains committed to growth and we continue to invest and prepare for the many long-term opportunities on the horizon."