Kansas City Southern posts record Q1 revenues

Wall Street analysts tracking the Class I railroad said the $639 million still fell short of expectations.    Kansas City Southern, a U.S. Class I railroad with extensive operations in Mexico, reported a net income of $145 million for the first quarter of 2018, relatively unchanged from $147 million last year, the company said Friday.
   KCS’ record first-quarter revenues of $639 million, up 5 percent year-over-year, still fell short of the $647 million Wall Street analysts expected.
   The company’s operating ratio totaled 65.8 percent for the quarter, compared to 65.4 percent for the first quarter of 2017.
   Carload volumes inched up 1 percent from last year’s first quarter. KCS President and CEO Patrick Ottensmeyer said the railroad maintains its outlook for mid-single digit volumes growth for the full year of 2018.
   KCS said in its 2017 annual report that it was expecting to spend between $530 million and $550 million in capital expenditures for 2018. The company invested $559.5 million in capital expenditures last year.
   Two of the other seven Class I railroads, CSX and Canadian Pacific, already posted their first-quarter financial results.
   Despite all seven Class I railroads thriving financially in 2017, increasing their full-year net incomes and lowering their operating ratios, they are all in the hot seat with shippers and the Surface Transportation Board over service issues. The STB in March sent a letter to each of the railroads expressing its concern with deteriorating freight rail service.
   In an April 5 response letter to the STB, Ottensmeyer said most of KCS’ network is operating normally, but it is experiencing congestion in south Texas, where it has two major rail yards, in Laredo and Port Arthur.
   He said the problems are affecting automotive, grain and other types of traffic and explained the company is “applying resources and is adequately equipped to meet expected demand.” However, he said that “a continued lack of available reroutes or lack of improvement in the circumstances that are impairing access through Houston” will impede its recovery efforts.
   The current KCS U.S. and Mexico combined fleet consists of 1,072 locomotives, of which 65 are in storage, Ottensmeyer said in the letter. This represents an increase of about 3 percent in its active fleet compared to the first quarter of 2017, he said, adding that KCS believes this is adequate to meet current demand.
   Although KCS has no plans to buy locomotives this year, it is considering purchasing some in early 2019 in line with its volume growth outlook.