Operating income of $160 million dipped slightly from the $162.9 million KCS notched in the 2013 first quarter.
Record revenue of $607 million, up 10% from the comparable 2013 period, was largely due to “a 40% increase in Agriculture and Minerals, primarily due to an increase in grain volumes,” the Class I railroad said Wednesday, April 16, 2014. Intermodal and Automotive sectors also contributed, KCS said.
KCS’s adjusted operating ratio for the quarter was 68.7%, a 1.8 point improvement from first quarter 2013.
“We are pleased with how our company performed during the first quarter,” stated Kansas City Southern President and CEO David L. Starling. “All six commodity groups reported year-over-year revenue gains led by Agriculture & Minerals, which increased 40% over the prior year. Later in the first quarter, KCS also recorded higher than expected utility coal volumes and revenues as a result of higher natural gas prices, which made coal a more competitive option benefitting certain plants we serve.”
“KCS maintained its high-single-digit revenue growth for 2014, but upside to such guidance could stem from a number factors, including potential new auto plants in Mexico and easy comparisons related to an extended General Motors plant outage last year,” observed Cowen and Company Managing Director and Railway Age Contributing Editor Jason Seidl. “Longer term, the energy reform legislation, which was passed in Mexico in December, ending 75 years of government-owned Pemex’s monopoly on oil production, appears to be moving along, with discussions of auxiliary laws currently under way in the Mexican Senate. The legislation is expected to be finalized in September, and implementation should begin thereafter. Pemex appears to be turning on its private sector competition mode, already building a pipeline to a rail transload facility. As private producers start springing up, opportunities for KCS to play a role in the movement of crude and other energy commodities should be abundant. We are encouraged that this promising long-term prospect appears to be moving along, [though] we expect no material benefit to KCS until 2017.”