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July 22, 2020 4:30 PM, EDT

Kansas City Southern’s Q2 Profit, Revenue Decline

Kansas City SouthernComing from the tunnel in Vicksburg, Miss., a KCS manifest train passes the switch on its way to crossing the Mississippi River. (Kansas City Southern)

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The COVID-19 pandemic hit Kansas City Southern’s second-quarter profits as net income slipped to $110.3 million or $1.16 per share, compared with $129.1 million or $1.29 per share in second-quarter 2019, the Class I railroad reported July 17.

KCS also posted a drop in revenue of 23% — $547.9 million compared with $714 million in 2019.

Still, even with the decline, the railroad beat Wall Street expectations as Zacks Consensus Estimate said analysts forecast a share price of $1.12.

Despite the downturn, the railroad’s operating ratio improved to 67.1. from 70.9 in 2019.

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Operating ratio, or operating expenses as a percentage of revenue, is a key industry metric used to measure efficiency. The lower the ratio, the greater the company’s ability to generate profit.

The railroad’s leadership acknowledged the impact the virus had on operations in the quarter, especially in March and April, when thousands of businesses were shutting down.

“Kansas City Southern demonstrated excellent execution during an extremely challenging quarter,” CEO Patrick Ottensmeyer said. “Our network experienced a rapid decline in volumes followed by an unprecedented rebound, forcing us to quickly adjust our service model to match customer demand while optimizing our cost structure.”

Kansas City Southern

Ottensmeyer

Kansas City Southern is one of several Class I railroads that has aggressively moved to become more efficient by precision scheduled railroading.

Created by the late railroad executive Hunter Harrison, PSR involves transporting freight with fewer railcars and locomotives using a more simplified, direct line of transport across the network.

“Precision scheduled railroading is producing sustainable improvements to customer service and operations, and has been a key contributor to the company’s strong cost performance this quarter,” Ottensmeyer said.

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