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Kansas City Southern on July 19 reported record second-quarter revenue of $714 million, up 5% compared with 2018’s $682.4 million.
The Kansas City, Mo.-based Class 1 freight railroad said net income was $129.1 million or $1.29 a share compared with $148.7 million or $1.45 a share in the same period a year ago. The company’s revenue numbers beat expectations on Wall Street, which had forecast $703.9 million.
The railroad’s operating ratio worsened to 70.9 from 64.0 in the same period a year ago. Operating ratio, or operating expenses as a percentage of revenue, is a key industry metric used to measure efficiency. The lower the ratio, the greater the company’s ability to generate a profit.
“The company is handling the same volume as last year with fewer assets, fewer crewstarts and considerably less network congestion, driving an improvement in customer service, operating metrics and cost profile,” CEO Patrick Ottensmeyer said. “I am extremely pleased with the commitment, enthusiasm and cross-functional teamwork that my Kansas City Southern colleagues have demonstrated in the early stages of executing Precision Scheduled Railroading principles. Together, we are building a more consistent, reliable and resilient network that is positioned to deliver excellent customer service and strong operating leverage as volume and revenue growth improves.”
Kansas City Southern and other freight railroads, including Union Pacific, are implementing Precision Scheduled Railroading principles, which are designed to improve customer service, control costs, optimize assets, improve safety and develop employees. Several Class 1 carriers have said publicly they are using those principles, spelled out by the late railroad executive Hunter Harrison, who used them to help turn around the operations of railroads where he served as CEO.
Of the Class 1 railroads, KCS is the only one to run a dedicated freight system through an agreement with the Mexican government. The majority of the rail system spans from the Valley of Mexico to the U.S. border at Laredo, Texas. There also are tracks connecting to the port cities of Lázaro Cárdenas and Veracruz, giving railroad access to the Gulf of Mexico and the Pacific Ocean to the U.S. border.
Revenue by sectors:
- Chemical and petroleum division up 20% compared with 2018’s second quarter
- Industrial and consumer productions sector flat year-over-year
- Agriculture and minerals improved 3%
- Energy increased 1%
- Intermodal revenue dropped 1%
- Automotive rose 1%