Kansas City Southern Misses EPS, Revs Up - Analyst Blog

By
A A A

Kansas City Southern ( KSU ) reported third quarter 2013 adjusted earnings of $1.10 per share, missing the Zacks Consensus Estimate by a penny. However, adjusted earnings increased 16% from 95 cents in the year-ago quarter buoyed by higher freight volumes and operational efficiency.

Total revenue was $621.6 million in the third quarter, up 7.7% year over year and ahead of the Zacks Consensus Estimate of $617 million. The year-over-year increase was primarily attributable to 3% growth in carloads and solid revenue growth in the Intermodal segment.

In the third quarter, operating income was $200.3 million, up 10.8% year over year. Operating ratio was 67.8%, up 90 basis points year over year.

Segment Quarterly Results

Chemical & Petroleum segment contributed $109.5 million in revenues, up 3% year over year. Volume was down 1% year over year. Revenue per unit grew 4% year over year.

Industrial & Consumer Products generated revenues of $148.0 million, up 7% year over year. Business volume remained almost flat year over year. Revenue per carload was up 7% year over year.

Agriculture & Minerals segment revenues were $97.1 million, up 7% year over year. Business volume grew 6% year over year. Revenue per carload also inched up 1% year over year.

Energy segment generated $94.6 million in revenues, up 6% year over year. Business volume rose 2% year over year. Revenue per carload was also up 4% year over year.

Intermodal segment revenues were $95.8 million, up 17% year over year. Business volume rose 6% year over year. Revenue per carload grew 11% year over year.

Automotive segment accounted for $51.4 million of the total revenue, up 7% year over year. Business volume was flat year over year. Revenue per carload rose 7% year over year.

Quarterly Other revenues were $25.2 million, up 11% year over year.

Liquidity Position

The company exited the third quarter with cash and cash equivalents of $95.9 million compared with $72.6 million in 2012. Long-term debt increased to $1,728.6 million from $1,547.6 million in 2012. The company had free cash flows of $116.2 million in the quarter ended Sep 30, compared with $167.6 million in the corresponding quarter a year ago.  

Capital expenditures for the nine months ended Sep 30, 2013 amounted to $381.8 million compared with $296.3 million for the same period a year ago.  

Recommendation

We believe Kansas City Southern remains well positioned to reap benefits from the ongoing strong pricing trend. The company's productivity initiatives and efficient cost control measures are expected to drive operating performance over the long term. Further, strategic investments in infrastructural development will ensure the achievement of growth goals.

However, we remain cautious on the stock due to competitive pressure, a unionized workforce, heavy investments and increased railroad regulation. Additionally, the ongoing uncertainties in Coal and a competitive market may also pose significant headwinds to the company's growth.

Kansas City Southern, which operates with other railway companies like Canadian National Railway Co. ( CNI ), Norfolk Southern Corp. ( NSC ) and Canadian Pacific Railway ( CP ) retains a Zacks Rank #3 (Hold).



CDN NATL RY CO (CNI): Free Stock Analysis Report

CDN PAC RLWY (CP): Free Stock Analysis Report

KANSAS CITY SOU (KSU): Free Stock Analysis Report

NORFOLK SOUTHRN (NSC): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: CNI , CP , KSU , NSC

Zacks.com

Zacks.com

More from Zacks.com:

Related Videos

How to Save Money at Bars
How to Save Money at Bars           

Stocks

Referenced

89%
100%
100%
100%

Most Active by Volume

44,823,339
  • $75.19 ▲ 0.28%
43,744,171
  • $3.44 ▼ 0.29%
42,340,022
  • $97.671 ▲ 0.66%
34,178,145
  • $17.62 ▼ 1.23%
34,028,998
  • $15.59 ▼ 0.19%
32,055,708
  • $21.23 ▼ 2.41%
31,539,235
  • $3.76 ▲ 0.80%
30,434,619
    $34.25 unch
As of 7/25/2014, 04:03 PM