KCS revenue falls 23 percent in Q2

Kansas City Southern reported second-quarter 2020 revenue of $547.9 million, a 23 percent decline from second-quarter 2019 primarily due to the impact of the global COVID-19 pandemic.

Overall, carload volumes tumbled 21 percent compared to the prior year, KCS officials said in a press release.

Operating expenses in the quarter were $367.5 million, including $10.5 million of restructuring charges primarily related to the voluntary separation program implemented in the quarter. Operating income was $180.4 million and net income was $110.3 million, down from $208 million and $129.1 million, respectively, a year ago.

Adjusted diluted earnings per share was $1.15 compared with $1.64 a year ago. The Class I posted a Q2 operating ratio (OR) of 67.1 percent and an adjusted OR of 65.2 percent, compared with 70.9 percent and 63.7 percent, respectively, during the same period last year.

KCS also announced it is not providing guidance on revenue, volume, OR or earnings per share due to the general economic uncertainty created by the pandemic. The company's previously provided 2020 capital expenditure guidance remains at $425 million or below, while its outlook for 2021 and 2022 capital expenditures remains at about 17 percent of revenue.

"Kansas City Southern demonstrated excellent execution during an extremely challenging quarter," said President and Chief Executive Officer Patrick Ottensmeyer. "Our network experienced a rapid decline in volumes followed by an unprecedented rebound, forcing us to quickly adjust our service model to match customer demand while optimizing our cost structure."

Precision scheduled railroading (PSR) was a key contributor to producing sustainable improvements to customer service and operations and contributed to the "strong cost performance" during the quarter, Ottensmeyer said.

"Although visibility into second half volumes and revenue remains limited, the company is focused on retaining the efficiencies gained during the second quarter, and reiterates its outlook to deliver at least $500 million free cash flow in 2020," he said. "We are confident in our operational execution and believe KCS will emerge from these challenging times even better positioned to deliver superior growth and shareholder returns."

KCS is on track to deliver PSR savings of $95 million in 2020, company officials said.

Ottensmeyer also thanked KCS employees for working "tirelessly" during the challenging quarter.

"Their efforts have allowed KCS to continue providing consistent and reliable service to our customers," he said.