(The following article by Randolph Heaster was posted on the Kansas City Star website on May 3.)
KANSAS CITY — Kansas City Southern’s stock jumped 11 percent Tuesday after the company reported strong first-quarter results and discussed prospects for new business from its Mexican railroad.
The railroad company earned $8 million, or 11 cents a share, on $388.4 million in revenue for the quarter. By comparison, last year’s first quarter resulted in earnings of $7 million, or 9 cents a share, on $368.3 million in revenue.
Wall Street analysts expected earnings of 6 cents a share for the first quarter.
Kansas City Southern’s stock rose to $27.20 a share Tuesday, up $2.73 in heavy trading on the New York Stock Exchange. Volume was nearly 4.6 million shares, about 4 million more than average.
In addition to the strong earnings, investors seemed impressed with the new business Kansas City Southern expected in Mexico.
Michael R. Haverty, chairman and chief executive of Kansas City Southern, discussed the new cross-border traffic in a conference call Tuesday with analysts. Whirlpool Corp. and General Motors Corp. are building new factories in Mexico and will ship products to the U.S. on Kansas City Southern. In addition, the railroad will serve a steel mill in Mississippi opening next year.
Also, Kansas City Southern has begun running a train from Lazaro Cardenas, a western Mexico port that the railroad officials hope becomes an alternative route to the U.S. for shipments from Asia.
Haverty said the company was integrating Kansas City Southern de Mexico into its overall operations. Haverty said the company was moving to integrate the sales and marketing staffs of the U.S. and Mexican units to better serve customers.
“We’re going through a transition, and we’ve had some challenges,” Haverty told analysts. “But we’re meeting those challenges. The outlook going forward is certainly bright. … There are many new business opportunities on the horizon.”
Rick Paterson, transportation analyst for UBS, put Kansas City Southern’s price target at $30 a share in a report issued Tuesday.
Paterson said investors should focus on Kansas City Southern’s success in reducing operating costs, as well as the potential for new customer contracts for freight shipment from Lazaro Cardenas.
Also on Tuesday, Kansas City Southern and Norfolk Southern completed a deal to boost capacity and improve service on a key Kansas City Southern line between Meridian, Miss., and Shreveport, La. Norfolk Southern has agreed to invest $300 million in the line.