Kansas City Southern (KCS) (NYSE: KSU) is updating its guidance for
full-year 2015. The Company now expects low single-digit revenue growth,
reduced from the mid single-digit revenue growth provided in the
previous full-year 2015 guidance issued in January 2015.
Revised Full-Year 2015 Guidance:
The reduced revenue guidance reflects slower year-to-date carload growth
primarily from the energy sector, along with a continued deterioration
in the value of the Mexican peso against the U.S. dollar and lower fuel
surcharge revenues driven by lower WTI prices, as shown in accompanying
Chart A. As shown in the accompanying Chart B, the Company expects the
impact of lower carload volumes to result in an approximate 2% lower
revenue growth for the year as compared to prior guidance. The Company
expects the combined impact of further foreign exchange rate
deterioration and lower fuel surcharge revenues to be an additional
approximate 2% reduction in revenue growth as compared to prior
guidance. The Company expects the impacts of foreign exchange and fuel
surcharges to be largely offset with lower expenses; however, the impact
of lower carload volumes is expected to reduce operating income. The
Company is changing its guidance for linehaul revenue growth in the
Energy commodity group from double-digit growth to single-digit growth
for 2015. Linehaul revenue growth for all other commodity groups,
overall carload growth and capital expenditures are all expected to be
in line with previous guidance.
First Quarter 2015 Expected Results:
As initially discussed by the Company in early March at investor
conferences, lower crude oil and natural gas prices are contributing to
an expected approximate 10% decline in first quarter 2015 energy
revenues. Due to the continued uncertainty in the energy markets with
the recent decline in crude prices to six-year lows, the Company
believes crude oil growth for 2015 will be lower than expected.
Additionally, lower natural gas prices continue to have a negative
impact on the Company’s coal business, resulting in an expected
approximate 20% decline in coal revenues during the first quarter of
2015. The Company is also experiencing lower than expected frac sand and
metals revenues related to a significant decline in new drilling
operations in the United States.
As a result of the slower than expected carload growth, the first
quarter 2015 revenue is approximately flat quarter to date to 2014.
Foreign exchange and fuel surcharge revenues are expected to negatively
impact first quarter 2015 revenues by approximately 4% compared to first
quarter 2014. Additionally, first quarter 2015 adjusted diluted earnings
per share is expected to be flat to slightly higher than first quarter
2014.
Headquartered in Kansas City, Mo., Kansas City Southern is a
transportation holding company that has railroad investments in the
U.S., Mexico and Panama. Its primary U.S. holding is The Kansas City
Southern Railway Company, serving the central and south central U.S. Its
international holdings include Kansas City Southern de Mexico, S.A. de
C.V., serving northeastern and central Mexico and the port cities of
Lázaro Cárdenas, Tampico and Veracruz, and a 50 percent interest in
Panama Canal Railway Company, providing ocean-to-ocean freight and
passenger service along the Panama Canal. Kansas City Southern's North
American rail holdings and strategic alliances are primary components of
a NAFTA Railway system, linking the commercial and industrial centers of
the U.S., Mexico and Canada.
This news release contains “forward-looking statements” within the
meaning of the securities laws concerning potential future events
involving KCS and its subsidiaries, which could materially differ from
the events that actually occur. Words such as “projects,” “estimates,”
“forecasts,” “believes,” “intends,” “expects,” “anticipates,” and
similar expressions are intended to identify many of these
forward-looking statements. Such forward-looking statements are based
upon information currently available to management and management’s
perception thereof as of the date of this news release. Differences that
actually occur could be caused by a number of external factors over
which management has little or no control, including: competition and
consolidation within the transportation industry; the business
environment in industries that produce and use items shipped by rail;
loss of the rail concession of KCS’ subsidiary, Kansas City Southern de
México, S.A. de C.V.; the termination of, or failure to renew,
agreements with customers, other railroads and third parties; interest
rates; access to capital; disruptions to KCS’ technology infrastructure,
including its computer systems; natural events such as severe weather,
hurricanes and floods; market and regulatory responses to climate
change; credit risk of customers and counterparties and their failure to
meet their financial obligations; legislative and regulatory
developments and disputes; rail accidents or other incidents or
accidents on KCS’ rail network or at KCS’ facilities or customer
facilities involving the release of hazardous materials, including toxic
inhalation hazards; fluctuation in prices or availability of key
materials, in particular diesel fuel; dependency on certain key
suppliers of core rail equipment; changes in securities and capital
markets; availability of qualified personnel; labor difficulties,
including strikes and work stoppages; insufficiency of insurance to
cover lost revenue, profits or other damages; acts of terrorism or risk
of terrorist activities; war or risk of war; domestic and international
economic conditions; political and economic conditions in Mexico and the
level of trade between the United States and Mexico; increased demand
and traffic congestion; the outcome of claims and litigation involving
KCS or its subsidiaries; and other factors affecting the operation of
the business. More detailed information about factors that could affect
future events may be found in filings by KCS with the Securities and
Exchange Commission, including KCS’ Annual Report on Form 10-K for the
year ended December 31, 2014 (File No. 1-4717) and subsequent reports.
Forward-looking statements are not, and should not be relied upon as, a
guarantee of future performance or results, nor will they necessarily
prove to be accurate indications of the times at or by which any such
performance or results will be achieved. As a result, actual outcomes
and results may differ materially from those expressed in
forward-looking statements. KCS is not obligated to update any
forward-looking statements in this news release to reflect future events
or developments.
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