The Kansas City Southern CEO told CNBC on Friday that he saw the company recover from the lows in the coronavirus business for the remainder of 2020, an optimistic sign for the broader U.S. economy.
Earlier in the day, the railroad operator reported third-quarter earnings and posted $ 660 million in revenue, which fell short of Wall Street's estimate of $ 663 million. However, Kansas City Southern's earnings per share of $ 1.96 excluding items were better than analysts' forecast earnings per share of $ 1.90.
"In our industrial and consumer economy, we believe that it will continue to be modestly strong from this point on until the end of the year," said CEO Patrick Ottensmeyer of "Closing Bell".
Kansas City Southern also raised its guidance for the full year on Friday, expecting earnings per share to be slightly higher year over year. The company's shares closed 2.72% on Friday to $ 179 apiece. The stock is up nearly 17% this year.
The wagon load volume decreased by 4% in the third quarter compared to the same period of the previous year. But that is improving, said Ottensmeyer. "We are a bit better than last year and certainly above the level before Covid," he said.
A Kansas City Southern (KSC) Railway locomotive travels through Knoche Yard in Kansas City, Missouri on Tuesday, January 7, 2020.
Whitney Curtis | Bloomberg | Getty Images
Railway operators operating in various industries are often seen as pioneers in business. The US has created millions of jobs in the past few months following the severe job cuts from the pandemic, and sectors such as housing have seen impressive strength. However, there are now questions about the resilience of the recovery, especially as Congress failed to agree on another round of incentives.
Ottensmeyer said the strongest segment of Kansas City Southern was refined petroleum products, driven mainly by the transportation of fuel from refineries on the Gulf Coast to Mexico. The company also experienced strength in its automotive segment as the auto industry recovered from the coronavirus slowdown.
On the flip side, Ottensmeyer said Kansas City Southern has seen a weakness in its intermodal volumes, which span multiple modes. He said they are lagging the industry there and "that has to do with some service disruptions, some issues in Mexico that we are trying to address have resulted in our losing business, at least for some time."
In general, Kansas City Southern has seen an "incredible" V-shaped rebound in its shipping volume from pandemic lows, Ottensmeyer said. He said the past few months have been like a roller coaster ride "when you think about the things we have to do without knowing what's ahead, with volumes falling so fast and so dramatically in the second quarter and then 90 days get back on your feet later. " . "