X

Kansas City Southern Q2 profit declines 13% but beats estimates

Kansas City Southern (NYSE: KSU) reported a 13% decrease in earnings for the second quarter of 2019 due to higher costs and expenses as well as an increase in income tax expense. However, the results exceeded analysts’ expectations.

Net income fell by 13% to $129 million or $1.28 per share. Adjusted earnings increased by 6% to $1.64 per share. Revenues rose by 5% to $714 million. Overall, carload volumes were flat compared to the prior year.

Revenue growth for the second quarter of 2019 was led by a 19% increase in Chemicals and Petroleum due to growth in shipments related to Mexico energy reform, and a 5% increase in Automotive. These increases were partially offset by revenue declines in the remaining four commodity groups.

Energy revenues declined by 5%, as increased Utility Coal shipments were more than offset by declines in Frac Sand and Crude Oil. Industrial & Consumer Products and Agriculture & Minerals revenues each declined by 2%, and Intermodal revenues declined by 1%.

Looking ahead into the full year 2019, the company expects volume growth to be flat to slightly down, and revenue growth to be in the range of 5% to 7%. Capital expenditures are anticipated to be below $600 million in 2019.

Adjusted operating ratio is expected to be in the low end of 60% to 61% range by 2021, absorbing negative impact from loss of Mexican Fuel Excise Tax Credit. Adjusted earnings per share is predicted to be in the low-to-mid-teens compound annual growth rate (CAGR) for 2019 to 2021.

Also read: Schlumberger Q2 earnings and CEO appointment

For the second quarter, carloads and units remained virtually unchanged from the previous year at 569,900. This was due to the growth in chemical and petroleum offset declines in four commodity groups, industrial and consumer products, agriculture and minerals, energy, and intermodal. Revenue per carload/unit increased by 4% year-over-year to $1,190.

The company said its operating performance was driving an improvement in customer service, operating metrics and cost profile. This improvement in cost profile helped Kansas City Southern absorb a 130 basis point headwind to its adjusted operating ratio from the loss of the Mexican Fuel Excise Tax credit, while still improving profitability versus prior year.

Rival Union Pacific (NYSE: UNP) reported better-than-expected earnings for the second quarter of 2019 driven by lower operating expenses.

Get access to timely and accurate verbatim transcripts that are published within hours of the event.

Related Post