KCS reports 'strong' results in Q4

Kansas City Southern today reported fourth-quarter 2020 revenue declined 5% to $693.4 million compared with $729.5 million during the same period in 2019.

KCS officials attribute the decrease primarily to lower volumes related to a service interruption in Mexico due to teachers protests, lower fuel surcharge and fluctuations in foreign currency.

The Class I posted Q4 net income of $166.3 million, or $1.80 per diluted share, compared with $127.9 million, or $1.30 per share, a year earlier. Operating income during the quarter totaled $262.3 million, up from $236 million; and operating expenses totaled $431.1 million, down from $493.5 million.

KCS posted a Q4 2020 operating ratio of 62.2%, which was essentially flat compared with 62.4% in Q4 2019.

"Despite several significant challenges in the fourth quarter, including continued impacts from the pandemic, weather events and an extended outage from illegal protests on segments of our network in Mexico, KCS delivered strong fourth-quarter results," President and Chief Executive Officer Patrick Ottensmeyer said in a press release.

The company is overcoming the adversity it faced throughout 2020 "and we heighten our focus on precision scheduled railroading (PSR)-driven service improvements to realize the significant growth opportunities that we see going forward," Ottensmeyer added.

During 2020, the network experienced a rapid decline in volumes due to the pandemic, followed by an unprecedented volume rebound. That forced the company to quickly adjust its service model to match customer demand while optimizing its cost structure, KCS officials said.

Those actions resulted in "significant improvements" to train length and fuel efficiency, improving 12% and 5%, respectively. PSR initiatives also contributed to operating expense savings.

This year, the company's primary objective will be to implement the third phase of its PSR initiative, "which combines improved operational performance with an intense focus on customer service and revenue growth," Ottensmeyer said.

Capital expenditures are expected to increase slightly, from 16% of revenue in 2020 to about 17% of revenue in 2021.