Kansas City Southern Anticipates Lower Q2 Revenue

Kansas City Southern KSU is bracing for lower revenues in the second quarter amid sharply lower rail volumes due to the coronavirus pandemic.

The railroad estimates that second-quarter revenue could be $550 million, according to a Tuesday filing to the U.S. Securities and Exchange Commission (SEC). The second quarter ends on June 30.

In comparison, second-quarter revenue in 2019 totaled $714 million, while first-quarter 2020 revenue was $731.7 million.

Kansas City Southern (KCS) also expects interest expenses for the second quarter of 2020 to be around $38 million, compared with $28 million in the second quarter of 2019 and $34.2 million in the first quarter of 2020.

KCS will report its second-quarter earnings on July 17.

To lower general and administrative staffing costs in the first half of the year, the railroad made travel and consulting restrictions and limited the backfills of open positions, according to the SEC filing. In the second half of the year, KCS will offer a voluntary separation plan, and it plans to reduce senior leadership salaries.

Although second-quarter-to-date volumes through last Sunday are down by about 23% and revenue is off by around 24%, "volumes are improving," KCS said. Carloads have grown by 31% since they bottomed out in early May, although total carloads are 8% below levels seen before the COVID-19 pandemic, the railroad said.

The railroad's efforts to address costs via precision scheduled railroading have also helped KCS achieve record average train length and absorb new volume with minimal new train and crew starts, KCS said. 

KCS is targeting about $500 million-plus of free cash flow in 2020, it said. 

According to data that KCS submitted to the Surface Transportation Board, KCS employed 2,739 workers in May, compared with 2,954 workers in April 2020 and 3,032 workers in May 2019.

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