Back to top

Analyst Blog

This page is temporarily not available.  Please check later as it should be available shortly. If you have any questions, please email customer support at support@zacks.com or call 800-767-3771 ext.  9339.

Kansas City Southern (KSU - Analyst Report) reported second quarter 2013 adjusted earnings of 96 cents per share, beating the Zacks Consensus Estimate by a penny. Adjusted earnings increased 9% from 88 cents in the year-ago quarter driven by higher freight rates and volumes.

Adjusted earnings excluded the impact of 82 cents per share of special items related to unfavorable adjustment for debt retirement costs and foreign exchange loss as well as a favorable adjustment related to foreign exchange component of income taxes.

Total revenue was $579.3 million in the second quarter, up 6% year over year and in line with the Zacks Consensus Estimate. The year-over-year increase was primarily attributable to 3% growth in carloads and solid revenue growth in the company’s Energy segment.

Operating income was $179 million, up 12% year over year. This resulted in operating ratio of 69%, improved 150 basis points year over year. The improvement was driven by higher revenues, mid single-digit growth in pricing and cost control.

Segment Wise Quarterly Results

Chemical & Petroleum contributed $109 million to revenues, up 11% year over year. Volume was up 2% year over year. Revenue per unit grew 9% year over year.

Industrial & Consumer Products generated revenues of $142.1 million, up 4% year over year. Business volume remained almost flat year over year. Revenue per carload was up 4% year over year.

Agriculture & Minerals revenues were $86.7 million, down 18% year over year. Business volume was down 13% year over year. Revenue per carload also dipped 6% year over year.

Energy generated $85.3 million in revenues, up 26% year over year. Business volume rose 12% year over year. Revenue per carload was also up by 12% year over year.

Intermodal revenues were $86.6 million, up 13% year over year. Business volume rose 5% year over year. Revenue per carload grew 8% year over year.

Automotive accounted for $47.5 million revenues, up 20% year over year. Business volume was up 7% year over year. Revenue per carload rose 12% year over year.

Quarterly Other revenues were $22.1 million, up 9% year over year.

Liquidity Position

The company exited the second quarter with cash and cash equivalents of $30.0 million compared with $72.6 million in 2012. Long-term debt increased to $1,765.7 million from $1,547.6 million in 2012. The company had free cash flows of $13.5 million at quarter end, compared with $76.8 million in the corresponding quarter a year ago.  

Capital expenditures for the quarter amounted to $265.9 million compared with $195.2 million a year ago.

Recommendation

We believe Kansas City Southern remains well positioned to reap benefits from the ongoing strong pricing trend. The company’s productivity initiatives and efficient cost control measures are expected to drive operating performance over the long term. Further, strategic investments in infrastructural development will help the company to achieve its growth goals.

However, we remain cautious on the stock due to competitive pressures, a unionized workforce, heavy investments and increased railroad regulation. Additionally, the ongoing uncertainties in the coal and agriculture industries may also pose significant headwinds for the company.

Kansas City Southern retains a Zacks Rank #3 (Hold).

Other Railroad Stocks

Second quarter results from other railroad companies – Canadian National Railway Company (CNI - Analyst Report), Norfolk Southern Corp. (NSC - Analyst Report) and Canadian Pacific Railway Limited (CP - Analyst Report) – are slated for release next week. The Zacks Consensus Estimate for the second quarter currently stands at $1.58, $1.50 and $1.48 per share for Canadian National, Norfolk Southern and Canadian Pacific, respectively.
 

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

Learn more

Start for as little as $4.50 per trade.

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
VERTEX ENERG VTNR 8.25 +10.59%
MODINE MANUF MOD 17.12 +8.77%
CLAYTON WILL CWEI 140.03 +7.27%
E*TRADE FINA ETFC 22.67 +5.44%
KNIGHTSBRIDG VLCCF 13.22 +5.42%