Kansas City Southern See Strong Gains

Kansas City Southern posted profits that increased by 7.2% during the third quarter thanks to strength in energy, automotive, petrochemical and intermodal transportation, despite being hit financially by as much as $23 million in its operating income by Hurricane Harvey.

The railroad freight carrier post a profit of $129.2 billion equal to $1.23 a share for its third quarter, which was 4 cents higher than Wall Street forecasts. Last year during the same quarter, profit was $120.5 million equal to $1.12 a share.

Revenue was up 8.6% compared to the previous year finishing at $656.4 million. The operating income reached $234 million, or 17% higher than its 2016 third quarter.

CEO Patrick Ottensmeyer at Kansas City Southern said that despite Mother Nature doing all she could to cause problems, the company ended with a very strong quarter.

On Monday, he said he spoke to Union Pacific CEO Lance Fritz who offered help of any kind.

Ottensmeyer praised the performance of the operating teams and the resilience to quickly make a detour to move trains loaded with grain to Laredo, Texas in order to serve the market in Mexico to minimize potential fallout financially.

Prior to the hurricane, Kansas City Southern averaged running 45,000 carloads, but then fell to only 37,000 during the week that Hurricane Harvey hit, but recovered to levels prior to the storm in just two weeks. Over the final two weeks in September, carloads surged ahead of levels prior to the storm to over 48,000.

Ottensmeyer said the railroad was moving along at a growth rate of between 6% and 7% compared to last year, prior to the hurricane hitting.

Obviously a 3% increase was reported in volume, so not all of it was given back.

He added that the important point was that the railroad was moving forward at a nice rate of growth until hit by the hurricane and some of that has already been recovered.

Hurricane Harvey has cost the railroad approximately between 12 and 14 cents a share, said a prepared statement released by the company.

Aside from a hit to operating income, there was $7 million more in incremental expenses that were related to the hurricane.

Company officials told their investors that it filed a claim with its insurer to recoup the costs. However, it cannot record any reimbursement until a 2018 settlement date.

Despite the hurricane, freight revenue for the full quarter was up 9.1% ending at $633.5 million while carloads increased 2.6% ending the quarter at 576,400 and per carload revenue was up 6.3% to over $1,099.

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