Kansas City Southern Earnings Rise on Automotive, Chemicals Segments

Lower Gas Prices and the Depreciating Peso Dented Revenue Growth

Kansas City Southern reported a 24% increase in earnings on increased carloads and strength in its automotive and chemicals segments, though lower gas prices and the depreciating peso dented revenue growth.

Earnings beat expectations, sending shares up about 1% in premarket trading.

Kansas City Southern operates railroads in the Midwest and Mexico that run north to south, in contrast to the majority of other railroads, which run east to west. The company’s focus on cross-border traffic has led to revenue gains in recent years.

Looking forward, the company expects “positive developments in a wide-range of commodity groups,” Chief Executive David Starling said.

“And, while there is significant volatility in the energy markets, KCS anticipates volume growth in crude oil traffic originating in Canada and terminating at various Gulf locations,” he said.

Kansas City Southern reported a profit of $142 million, or $1.28 share, up from $114 million, or $1.03 a share, a year earlier. Excluding foreign currency considerations and other items, per-share earnings were $1.27, compared with $1.03 a year earlier.

Revenue climbed 4.4% to $643 million.

Analysts polled by Thomson Reuters had forecast per-share earnings of $1.23 on revenue of $659 million.

Total carload volume increased by 5%.

Revenue in the automotive group rose by 13%, while the industrial and consumer-products segment edged up 1%. Revenue at the intermodal segment increased 8%, and chemical and petroleum revenue grew by 9%. Agriculture and minerals revenue fell 5%, mostly due to exceptionally strong grain shipments a year before.

Lower fuel prices and the depreciating peso reduced revenue growth by about 2% compared.

Competitor CSX Corp. last week reported a 15% jump in earnings due to strong demand.

Shares of Kansas Southern have been off about 3% in the past 12 months through Thursday’s close.

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