KCS posts 'strong' Q1 results

Kansas City Southern today reported record first-quarter revenue of $675 million, up 6 percent from the prior year on a 1 percent decline in volume.

KCS attributed an overall decline in carload volumes primarily to service interruptions at Lazaro Cardenas in Mexico that were caused by teacher protests, company officials said in a press release.

The Class I posted net income of $103.2 million, or $1.02 per diluted share, compared with $145 million, or $1.40 per diluted share in Q1 2018. Adjusted diluted earnings per share were $1.54, up 18 percent over the same period a year ago.

KCS posted Q1 operating income of $160 million and a record adjusted operating income of $242 million (up 10 percent), excluding restructuring charges related to precision scheduled railroading (PSR) initiatives and including a Mexican fuel excise tax credit.

The operating ratio (OR) for the quarter came in at 76.2 percent, with an adjusted OR of 64.2 percent, compared with 65.8 percent in Q1 2018.

Revenue during the quarter grew in four commodity groups, led by a 21 percent increase in chemicals and petroleum due to refined product shipments to Mexico. Agriculture and minerals grew by 8 percent, driven by improved network cycle times. Energy and industrial revenue rose 5 percent, while consumer products grew 2 percent.

The revenue growth in those commodity groups was partially offset by decreases in the automotive and intermodal categories of 4 percent and 12 percent, respectively, due to auto plant shutdowns and teacher protests.

Meanwhile, operating expenses for the quarter were $515 million. Excluding the PSR-related restructuring charges and Mexican fuel excise tax credit, adjusted operating expenses were $433 million — 3 percent higher than in Q1 2018.

KCS President and Chief Executive Officer Patrick Ottensmeyer today in a press release said the company experienced a "strong start" to 2019, with solid revenue growth and improved operational performance.

"Although we are still in the early stages of implementation, KCS' transition to a precision-scheduled network is already producing improved velocity and dwell, which is driving improved customer service, labor and asset utilization as well as other efficiencies," he said.

Last year, KCS announced it was adopting PSR principles to help drive improvements.

"Our PSR initiatives support volume and revenue growth, capital efficiency and an improved cost profile," Ottensmeyer said. "They equally support improved customer service, capacity and network resiliency. We have confidence that this transition will continue to benefit all KCS stakeholders, including customers and shareholders."