Falling energy prices impact KCS rail revenues

Kansas City Southern railroad says carload volumes for oil and coal are below expectations in Q1.    Railroad operator Kansas City Southern has lowered its full-year revenue guidance due to headwinds from the energy sector and the strong dollar.
   The company said it now expects low single-digit revenue growth, down from the mid-single digit growth projection in January.
   The change in guidance reflects slower year-to-date carload growth from energy commodities, along with the continued deterioration of the Mexican peso against the dollar and lower fuel surcharge revenues.
   The decline of West Texas Intermediate crude oil prices to six-year lows has slowed production from U.S. fields and lowered the volume of product carried by KCS to refineries. Lower natural gas prices continue to push out coal as a preferred source of fuel for power plants, a phenomenon that has impacted railroads for at least three years now. Coal previously was the largest revenue generator for the rail sector.
   Lower oil prices have decreased diesel fuel prices, which in turn has reduced the revenue KCS obtains through fuel surcharges. Lower fuel surcharges and the exchange rate are expected to negatively impact first quarter revenues by 4 percent.
   KCS, which primarily operates in the central and south-central United States, also owns a railroad in Mexico that connects to its U.S. network.
   The company said energy-related revenues are 10 percent below last year at this time, with revenue from coal expected to be down 20 percent during the first quarter. KCS also said revenues from frac sand and metals are lower because of a significant decline in new drilling operations in the United States.
   Revenue growth for all other commodity groups is expected to be in line with previous guidance, according to the railroad.
   KCS stock fell 8 percent to $106.48 on the news, which subsequently dragged down other railroad stocks as well.