(Adds CEO comments on political climate)
Oct 19 (Reuters – Railroad operator Kansas City Southern on Friday reported a 34 percent jump in quarterly profit even though network congestion hurt operations in Mexico, where the company has extensive services.
Shares jumped 3.6 percent to $106.41 in early trading after Chief Executive Patrick Ottensmeyer said anxiety around U.S. trade skirmishes and Mexico’s leadership transition was dissipating.
Kansas City Southern dominates cross-border rail trade between the United States and Mexico and draws about 30 percent of its revenue from U.S.-Mexico shipments.
U.S. President Donald Trump’s reworked U.S., Mexico and Canada trade agreement is moving forward, although steel and aluminum tariffs “need to be worked through,” Ottensmeyer said on a conference call.
Comments from Mexico’s President-elect Andres Manuel Lopez Obrador, who takes office on Dec. 1, also has reduced political uncertainty.
“Most of the signals that we’ve gotten are positive and encouraging that we will not see any major shift in either foreign relations or economic policy on Mexico,” Ottensmeyer said.
The company’s operating ratio, which measures operating costs as a percentage of revenue, was 62 percent in the third quarter versus 64.4 percent a year earlier. A lower operating ratio means more efficiency and higher profitability.
Overall volumes increased 4 percent, but sales in its energy unit fell 2 percent.
The railroad lowered its full-year volume growth forecast on the heels of its third-quarter results. It now expects full-year volume growth in the low single-digit percentages instead of mid-single digits. It cited delays in the start of crude oil movement and its own struggles to meet robust demand.
Net income available to shareholders rose to $173.5 million, or $1.70 per share, in the quarter ended Sept. 30, from $129.2 million, or $1.23 per share, a year earlier.
On an adjusted basis, the company earned $1.57 per share, in line with analysts’ estimate, according to data from Refinitiv.
Revenue rose 6.5 percent to $699 million. (Reporting by Rachit Vats in Bengaluru; Editing by Maju Samuel; Editing by David Gregorio)