Kansas City Southern (KSU), a leading freight rail transportation company, reported solid financial results for the third quarter 2010. Quarterly net income was $50.2 million or 48 cents per share compared to a $25.4 million or 27 cents per share in the year-ago quarter. This was also above the Zacks Consensus Estimate of 45 cents.

Quarterly total revenue was $438.3 million, up 13.5% year-over-year.  However, this was below the Zacks Consensus Estimate of $449 million. This was primarily due to loss of around $33 million in revenue due to adverse impact of Hurricane Alex.

Quarterly operating ratio was 73.5% compared to 78.3% in the prior-year quarter. Total business volume in the reported quarter was 459,400, up 9% year-over-year. Operating income in the same quarter was $116 million, up 38.3% year-over-year. During the third quarter of 2010, Kansas City Southern generated $56.6 million of cash from operations.

Segment-wise Results

In the third quarter 2010, the Chemical & Petroleum segment accounted for $86.8 million of total revenue, down 2% year-over-year. Business volume was 60,800, down 6% year-over-year. Revenue per carload was $1,428, up 4% year-over-year.

Industrial & Consumer accounted for $103.9 million of total revenue, up 20% year-over-year. Business volume was 75,000, up 13% year-over-year. Revenue per carload was $1,385, up 7% year-over-year.

Agriculture & Minerals accounted for $97.2 million of total revenue, up 4% year-over-year. Business volume was 62,200, up 2% year-over-year. Revenue per carload was $1,563, up 1% year-over-year.

Coal accounted for $63.6 million of total revenue, up 29% year-over-year. Business volume was 74,200, down 8% year-over-year. Revenue per carload was $857, up 40% year-over-year.

Intermodal accounted for $47.7 million of total revenue, up 25% year-over-year. Business volume was 170,300, up 25% year-over-year. Revenue per carload was $280, down 1% year-over-year.

Automotive accounted for $23.3 million of total revenue, up 64% year-over-year. Business volume was 16,500, up 18% year-over-year. Revenue per carload was $1,412, up 39% year-over-year.

Quarterly Other revenue was $15.8 million, up 1% year-over-year.

We maintain our long-term Neutral recommendation for Kansas City Southern. Currently it is a short-term Zacks #3 Rank (Hold) stock.

 
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