(Reuters circulated the following on December 12.)
CHICAGO — Regional U.S. railroad Kansas City Southern (KSU.N: Quote, Profile, Research, Stock Buzz) warned on Friday that weakness in the U.S. and global economies had pushed down freight volumes and would hurt fourth-quarter results, sending the company’s stock down more than 9 percent.
The Kansas City, Missouri-based company said volumes were down across most of its commodity groups for the current quarter and warned revenue for the current quarter would be about 5 percent below the $460.3 million in fourth-quarter revenue it reported in 2007.
The railroad, which has operations in Mexico, also warned that the continued decline of the peso would result in a fourth-quarter charge greater than the 5 cents per share in foreign exchange losses the company reported for the third quarter.
Kansas City Southern said that “in light of the current economic conditions” it has “taken measures to reduce planned capital spending” for the first half of 2009.
The company’s revised spending plan is based on the assumption that economic and industrial conditions will improve in the second half of next year. If they do not, Kansas City Southern said it “intends to make further reductions to its 2009 capital spending plan to achieve positive cash flow.”
In recent quarters, the major U.S. railroads have posted robust profits despite weakening freight volumes, thanks to strong pricing power.
But analysts now warn the coming year could bring significant declines in freight volumes that will undermine the railroads’ ability to raise prices.
In trading on the New York Stock Exchange, Kansas City Southern shares were down $1.74, or 9.19 percent, at $17.19. The railroad’s shares hit a 12-month high of $55.90 on July 31 and a 12-month low of $16.75 on Nov 21.