(Source: Kansas City Southern press release, January 17, 2020)
KANSAS CITY, Mo. — Kansas City Southern (KCS) reported strong fourth quarter and full year 2019 results, driven by implementation of Precision Scheduled Railroading (PSR) principles.
Fourth Quarter 2019
Fourth quarter revenues were $729.5 million, an increase of 5% primarily led by a 13% increase in Chemicals and Petroleum and an 11% increase in Industrial & Consumer Products as compared to fourth quarter 2018. Carloads were down 1%, as declines in Automotive and Intermodal offset carload growth in all other business units.
Fourth quarter operating expenses were $493.5 million, including $38.3 million of restructuring charges related to PSR initiatives. Operating income was $236.0 million and the reported operating ratio was 67.6%. Fourth quarter net income was $127.9 million, or $1.30 per diluted share.
“Kansas City Southern’s implementation of PSR principles has sustained momentum in the fourth quarter, driving strong results in the form of more consistent and reliable operations, improved customer service, improved cost structure and growth in shareholder returns,” stated President and Chief Executive Officer, Patrick J. Ottensmeyer. “Thanks to the hard work and dedication of KCS’s employees, we exited 2019 with network-wide velocity performing at record levels.”
Full Year 2019
Full year 2019 revenues were $2.9 billion, an increase of 6% on a 1% decline in carloads. Operating income was $886.3 million and the reported operating ratio was 69.1%. Full year 2019 net income was $540.8 million, or $5.40per diluted share.
During 2019, KCS significantly improved its operating performance, as demonstrated by an increase in gross velocity of 22%, a decline in terminal dwell of 16%, and an improvement to car miles per day of 19% as compared to 2018. PSR initiatives also contributed directly to operating expense savings of $58.0 million in 2019, and are projected to deliver incremental savings of $61.0 million in 2020.
“Year one of KCS’s PSR implementation has exceeded our own expectations for service, operational and financial improvement,” stated Ottensmeyer. “As we turn our focus to 2020, we look forward to growing our business while implementing our second year of PSR initiatives.
“These strong results have allowed us to improve guidance, and we now expect to deliver a 60% to 61% operating ratio in 2020, and below 60% in 2021. Additionally, we have improved our outlook for earnings per share growth to a mid-teens CAGR from 2019 through 2021. Finally, with improved asset utilization, we have reduced our outlook for capital expenditures to ~17% of revenue through 2022.”