Kansas City Southern Thursday reported that second-quarter net income declined more than 86% to $6.7 million, 7 cents per share, compared with $50.5 million, or 56 cents a share, in the second quarter of 2008. That fell short of Wall Street analyst projections of 8 cents a share.
Revenue also fell short of projections of $357.9 million for the quarter; KCS notched revenue of $341.3 million, down from $486.2 million in the year-ago period. The railroad attributed some of the decline to lower fuel prices, resulting in a 72% drop in fuel surcharges.
Wall Street traders ignored the missed projections, sending shares of the company up 4.4% to $20.52 in late morning trading; KCS stock was up more than 6% Thursday afternoon.
“In the second quarter, KCS continued to demonstrate its ability to combat declining volumes with persistent efforts to improve operating efficiencies and to keep costs down," said Dahlman Rose & Co. analyst and <i>Railway Age</i> Contributing Editor Jason Seidl, who called the railroad’s long term prospects “attractive.” Siedl also said KCS’s new Victoria-Rosenberg line in Texas “will eventually lead to solid long term growth.”
“With the rail industry still trying to cope with the most drastic volume declines in recent history, we believe management will continue to focus its efforts on cutting costs and reducing capital expenditures,” Seidl added. “However, despite the significant spending reduction, KCS announced that it did complete its Victoria-Rosenberg line in the second quarter as it had projected. While many may question the need for expansionary capital in a recessionary environment, this line should help reduce costs and improve service for the railroad’s burgeoning cross border intermodal business.”