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Kansas City Southern sees 2011 gains, Mexico growth

By: | at 07:00 PM | Channel(s): Intermodal  

U.S. railroad Kansas City Southern reported quarterly results that beat forecasts as commodity shipments rose, and said revenue should grow in the low double digits this year.

The company expects intermodal and vehicle shipments to boost its revenue, and anticipates single-digit volume and price gains as an improving economy boosts industrial production and consumer confidence.

Intermodal means shipping goods in containers that can be moved from one from of transportation to another, like from a ship to a truck.

Mexico, where the company generates nearly half its revenue, will remain important, analysts said.

January volume and revenue were tracking above budget, and volume for the first 25 days of the month rose 9 percent, CEO Dave Sterling said on a conference call with analysts.

“They’ve got great prospects for 2011, particularly in Mexico as a lot of multinational companies are either establishing a brand new presence in Mexico or bolstering their presence,” said BB&T Capital Markets analyst Neal Deaton.

The Kansas City, Missouri-based company’s international holdings include Kansas City Southern de Mexico, a primary Mexican rail line that connects the United States and Mexico.

“The guidance for mid-single-digit volume growth could prove conservative,” said Deaton. “I continue to think the growth engine for them is going to be Mexico, with Mexico’s GDP and industrial production projected to grow at a higher rate than in the U.S. in 2011.”

That build-up comes as the cost of doing business in China rises.

Kansas City Southern’s outlook follows encouraging comments from larger U.S. railroads Norfolk Southern and CSX Corp , which reported strong results earlier this week, and from Union Pacific last week.

Norfolk Southern said it expects strong business growth in almost every segment in 2011. CSX plans to invest $2 billion in its business this year and expects carload volume to surpass gross domestic product and industrial production growth.

Kansas City Southern’s October-December net income was $52 million, or 50 cents a share. Excluding debt retirement costs, it earned 62 cents a share.

Analysts, on average, expected profit of 57 cents a share, according to Thomson Reuters I/B/E/S.

The company’s shares rose 0.7 percent to $48.78 at midday Thursday, matching the day’s gain in the Dow Jones Transportation Index The shares have risen about 55 percent in the past year, roughly double the index’s gain.

“Kansas City Southern says the vast majority of their intermodal at this point is still intra-Mexico, comes into Mexico and stays in Mexico, but they are very much gearing up for more cross-border traffic,” said Standard & Poor’s equity analyst Kevin Kirkeby. (Reuters)