KCS earnings pick up steam in Q1 2017

Kansas City Southern’s net income jumped 38.9 percent to $149.6 million for the quarter on revenues that grew 8.3 percent to $610 million compared with the same 2016 period, according to the company’s most recent financial statements.    Kansas City Southern (KCS), a transportation holding company that owns the Kansas City Southern Railway Company, Kansas City Southern de México, S.A. de C.V., and a 50 percent interest in the Panama Canal Railway Company, saw net earnings surge 38.9 percent year-over-year to $149.6 million in the first quarter of 2017.
   Net earnings per diluted share (EPS) grew from $0.99 in first quarter 2016 to $1.38 per diluted share in 2017, according to the company’s most recent financial statements. Excluding the impacts of foreign exchange rate fluctuations, adjusted diluted EPS stood at $1.17 per share compared with $1.03 per share the previous year. Both reported and adjusted EPS were first quarter records for KCS.
   KCS’ revenues rose 8.3 percent year-over-year to $610 million for the quarter, as total carload and intermodal volumes jumped 5.5 percent to 540,900 units compared with the same 2016 period.
   The Kansas City, Mo.-based Class I railway reported an operating ratio of 65.4 percent for the first quarter of 2017, a 1.2 point improvement from 66.6 percent last year and another first quarter record for the company.
   “Kansas City Southern is pleased with the return of year-over-year revenue and volume growth in first quarter 2017,” KCS President and CEO Patrick J. Ottensmeyer said of the results. “We all remain focused on operational improvements and longer-term growth drivers and are excited to see some of these opportunities, such as refined products movements, materialize in 2017.”
   Meanwhile, KCS subsidiary Kansas City Southern de Mexico (KCSM) has filed arguments and evidence with Mexico’s Federal Economic Competition Commission (COFECE) challenging the commission’s claims of a lack of effective competition in the Mexican freight rail market.
   COFECE in March released a preliminary report in which it found a fundamental lack of competition with respect to trackage rights between KCSM, Ferrocarril Mexicano, S.A. de C.V., Ferrosur, S.A. de C.V. and Ferrocarril and Terminal del Valle de México, S.A. de C.V., an entity partially owned by KCSM.
   According to KCS, COFECE’s preliminary report “does not have any legal or regulatory implications with respect to the rights of KCSM under its concession title or applicable law, nor the current operations of the railway system. Notwithstanding, KCSM’s response argues that the investigation which supports the conclusions in the Preliminary Report was conducted contrary to the rule of law, the rules of procedure, and relied upon faulty economic analysis.
   KCS pointed to three separate reports from the Organization for Economic Cooperation and Development (OECD) it believes “represent important conclusions and findings that should have been considered by the investigative authority of the Competition Commission.”
   COFECE has 110 business days from the filing to analyze the evidence and arguments submitted by parties in response to the preliminary report and issue a final report, KCS said, adding that the company “believes that KCSM’s response to the Competition Commission’s Preliminary Report filed today is compelling and should lead to an amended Final Report.”