Fourth-quarter 2020 net income was $165.7 million, or $1.80 per diluted share, compared with $127.2 million, or $1.30 per diluted share, for the fourth quarter of 2019.
Revenue totaled $693.4 million, compared with $729.5 million year-over-year. Revenue gains for Kansas City Southern’s (KCS) chemical and petroleum segment and its agricultural and minerals segment weren’t enough to offset losses seen in the industrial and consumer products segment, the energy segment and the intermodal and automotive segments.
Indeed, KCS’ intermodal and automotive segments may have been affected by the service interruption at Lazaro Cardenas in Mexico due to teachers’ protests. A lower fuel surcharge and fluctuations in foreign currency also contributed to a decrease in fourth-quarter revenue year-over-year, KCS said.
Fourth-quarter operating expenses were $431.1 million, compared with $493.5 million in the fourth quarter of 2019. Operating income was $262.3 million, compared with $236 million a year ago.
KCS’ operating ratio (OR) was 62.2% in the fourth quarter, compared with 67.6% for the same period in 2019. Investors use OR to gauge the financial health of a company, with a lower OR implying improved health. OR is a company’s operating expenses as a percentage of its revenue.
However, KCS provided an adjusted OR of 60.2% that took into consideration a write-off for software development costs. The adjusted OR also took into consideration the effect of the Mexico protest on operations, executives said during the company’s fourth-quarter earnings call on Friday.
Service metrics slipped in the fourth quarter, with average train speed down 13.8 mph from 15.2 mph a year ago and average terminal dwell time up to 25 hours from 19.9 hours year-over-year.
“Despite several significant challenges in the fourth quarter, including continued impacts from the pandemic, weather events and an extended outage from illegal protests on segments of our network in Mexico, KCS delivered strong fourth-quarter results,” KCS President and CEO Pat Ottensmeyer said in a release.
Over 2020, KCS’ train length grew by 12% while fuel efficiency rose by 5%, the company said. Savings from precision scheduled railroading (PSR) resulted in operating expense savings of $96 million in 2020, and KCS projects incremental savings of $50 million in 2021.
“As we turn our focus to 2021, our primary objective will be the implementation of PSR Phase 3, which combines improved operational performance with an intense focus on customer service and revenue growth,” Ottensmeyer said. “Phase 3 of PSR will help us capitalize on the unique growth opportunities available across our franchise.”