Railroad News

KCS posts higher revenue, lower net income in Q4

Kansas City Southern today reported fourth-quarter 2019 revenue rose 5 percent to $729.5 million compared with the same quarter a year ago, driven primarily by increases in chemicals, petroleum and industrial and consumer products.

However, fourth-quarter net income declined year over year to $127.2 million, or $1.30 per diluted share, from $161.1 million, or $1.59 per diluted share.

Total carloads for the quarter fell 1 percent, as declines in automotive and intermodal offset carload growth in all other business units, KCS officials said in a press release.

Fourth-quarter operating expenses came in at $493.5 million, including $38.3 million in restructuring charges related to precision scheduled railroading (PSR) initiatives. Operating income declined year over year to $236 million from $256.4 million.

The Class I posted a fourth-quarter adjusted operating ratio of 62.4 percent.

"Kansas City Southern's implementation of PSR principles has sustained momentum in the fourth quarter, driving strong results in the form of more consistent and reliable operations, improved customer service, improved cost structure and growth in shareholder returns," said President and Chief Executive Officer Patrick Ottensmeyer.

For full-year 2019 versus the previous year, KCS posted $2.9 billion in revenue, up 6 percent on a 1 percent decline in carloads. Year over year, operating income was $886.3 million, down from $986.3 million; reported operating ratio was 69.1 percent, up from 63.7 percent; and net income was $540.8 million, or $5.40 per diluted share, down from $629.4 million, or $6.13 per diluted share.

During 2019, KCS "significantly" improved operating performance, as demonstrated by an increase in gross velocity of 22 percent, a decline in terminal dwell of 16 percent and an improvement to car miles per day of 19 percent, as compared to 2018's levels, company officials said.

PSR initiatives also contributed directly to an operating expense savings of $58 million last year, and are projected to deliver incremental savings of $61 million this year, they added.

"Year one of KCS's PSR implementation has exceeded our own expectations for service, operational and financial improvement," Ottensmeyer said. "As we turn our focus to 2020, we look forward to growing our business while implementing our second year of PSR initiatives."

The "strong results" have allowed the company to improve guidance, including the expectation that KCS will deliver a 60 percent to 61 percent operating ratio in 2020, and a ratio below 60 percent in 2021, he said.

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