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Kansas City Southern (KSU) Q2 Earnings Top, Revenues Lag

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Kansas City Southern (KSU - Free Report) reported second-quarter 2016 earnings (on an adjusted basis) of $1.22 per share, beating the Zacks Consensus Estimate of $1.04. Earnings also improved 18.4% on a year-over-year basis, thanks to lower costs.

Kansas City Southern (KSU - Free Report) Street Actual & Estimate EPS - Last 5 Quarters | FindTheCompany

Including special items, the Kansas City, MO-based railroad operator reported earnings of $1.11 per share in the second quarter of 2016, up 10% year over year. Total revenue came in at $569 million, down 3% year over year and also below the Zacks Consensus Estimate of $574 million.

The year-over-year decline can be primarily attributed to a 16% drop in revenues at the Energy segment. The Mexican peso depreciation and lower U.S. fuel prices also hurt results.

In the reported quarter, operating income came in at $220 million, up 18% year over year. Meanwhile, operating ratio (operating expenses as a percentage of revenues) improved to 61.3% in the reported quarter compared with 68.1% a year ago. Carload volumes remained flat on a year-over-year basis.

Segment Results

The Chemical & Petroleum segment contributed $122.4 million to revenues, up 6% year over year. Also, volumes improved 8% year over year while revenues per carload declined 2% from the prior-year quarter.

The Industrial & Consumer Products generated revenues of $136.1 million, down 6% year over year. Moreover, business volumes decreased 4% while revenues per carload declined 2% from the prior-year quarter.

The Agriculture & Minerals segment’s revenues totaled $115.1 million, up 10% year over year. On a year-over-year basis, business volumes improved 9% while revenues per carload inched up 1% on a year-over-year basis.

The Energy segment generated $37.2 million in revenues, down 16% year over year. Below par performances of Frac Sand apart from coal & petroleum coke hurt the results at the segment. Business volumes dropped 5% year over year and revenues per carload also deteriorated 12%.

Intermodal revenues were $91.4 million, down 7% year over year. Business volumes dropped 2% while revenues per carload fell 5% year over year.

The Automotive segment accounted for $44.6 million of the total revenue, down 19% year over year. Business volumes were flat while revenues per carload dropped 19%.

Meanwhile, Other revenues totaled $21.7 million, down 8% year over year.

KANSAS CITY SOU Price, Consensus and EPS Surprise

KANSAS CITY SOU Price, Consensus and EPS Surprise | KANSAS CITY SOU Quote

Other notable releases this week

Railroad operators like Canadian Pacific Railway Ltd. (CP - Free Report) and Union Pacific Corp. (UNP - Free Report) are slated to release their second-quarter results on Jul 20 and Jul 21, respectively.

Zacks Rank & A Key Pick

Currently, Kansas City Southern has a Zacks Rank #3 (Hold). A better-ranked stock in the broader transportation space is United Parcel Services Inc. (UPS - Free Report) , carrying a Zacks Rank #2 (Buy).

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