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Disappointing outlook drops Kansas City Southern shares 10.9 percent

“There is no question that KCS (Kansas City Southern) has been confronted with some challenges in 2015,” chief executive David Starling said in the earnings announcement.
“There is no question that KCS (Kansas City Southern) has been confronted with some challenges in 2015,” chief executive David Starling said in the earnings announcement.

Earnings at Kansas City Southern fell nearly 5 percent and management said auto shipments may weaken next year, driving the company’s stock sharply lower.

Shares of the railway operator tumbled $10.63, or 10.9 percent, to $87.37 at the close of trading Friday. The close was near the stock’s lowest price in the last 52 weeks, which came in August.

Profit of $131.6 million equaled $1.20 per share, compared with $138.1 million, or $1.25 per share, in the third quarter of last year.

Revenue of $631.9 million was hurt by a decline in the value of the Mexican peso and lower agricultural and mineral business, the Kansas City-based company said. Its chemical and petroleum business revenue increased.

During a conference call with analysts, the company also said shipments of autos by rail may weaken early next year.

“The first part of 2016 will be impacted by significant retooling efforts by our domestic automotive manufacturers,” chief marketing officer Brian Hancock said on the call, according to Bloomberg.

Management, however, offered a hopeful outlook overall, noting that third-quarter earnings, although down from a year ago, were higher than second-quarter earnings had been.

“There is no question that KCS (Kansas City Southern) has been confronted with some challenges in 2015,” chief executive David Starling said in the earnings announcement. “The resiliency of this company has been demonstrated by its ability to hit these challenges head-on and recover quickly while maintaining strong margins. We look to finish this year with continued strong commercial and operational improvement and ride this positive momentum into 2016.”

Revenue though the first nine months of 2015 was down 5.8 percent at $1.82 billion. Earnings so far this year were off 6.1 percent.

Mark Davis: 816-234-4372, @mdkcstar

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