KCS Profit Doubles to $99.8 Million on Record Freight

Record third quarter freight traffic and record revenue pushed Kansas City Southern’s profit up 99 percent from a year earlier to $99.8 million.

Revenue soared 24 percent at the smallest of the Class I group of major railroads. Even after adjusting for the business-depressing effects of Hurricane Alex on KCS operations in the 2010 period, receipts were still up 16 percent.

Freight volume rose 13 percent year over year, or 7 percent adjusted for the hurricane impact.  The results pushed net income to 18.3 percent of revenue, up from an 11.5 percent profit margin a year earlier.

“These achievements are all the more impressive given the operating challenges caused by prolonged flooding in the Midwest, particularly along the Missouri River,” said David Starling, president and CEO. “The flooding resulted in the closure of a primary rail line into Kansas City from mid-June through Labor Day, which significantly disrupted grain and coal traffic.”

Starling also looks for the solid growth trends to continue. “With the weather challenges behind us, we remain confident that our mid-single-digit volume and mid-teen revenue growth guidance for 2011 is attainable,” he said.

KCS, which operates about half its network in the central U.S. and the other half in Mexico, raised revenue per shipment by 10 percent, slower than the volume gain. That stands in contrast to larger carriers Union Pacific Railroad and CSX Transportation, which boosted per-unit sales far more than their mild traffic gains through pricing and fuel surcharge collections.

At KCS, unit revenue gains were led by 21 percent increases for automotive and food product shipments, and a 20 percent jump for forest products. Intermodal volume rose 22 percent, while its per unit receipts increased 13 percent.

-- Contact John D. Boyd at jboyd@joc.com. Follow him on Twitter @jboydjoc.