Kansas City Southern’s Intermodal revenue
Earlier, we discussed Kansas City Southern’s (KSU) 1Q17 Energy segment’s freight revenue. In this article, we’ll discuss the company’s Intermodal segment’s performance in 1Q17. KSU’s 1Q17 intermodal revenue fell to $83.5 million compared to $85.1 million in 1Q16, a 2% year-over-year (or YoY) fall.
The company’s intermodal containers and trailers volumes fell 1% in 1Q17 on a YoY basis. Its segmental revenue per unit fell 1% in the reported quarter. Prevailing weakness in the general economy and trucking excess capacity and streamliners negatively impacted revenue.
Extremely competitive pricing from trucking companies and consolidations in the shipping industry negatively impacted KSU’s intermodal revenue.
KSU’s Intermodal segment is divided into four parts, each making up 25% of its portfolio. The company has been intensely investing in the Intermodal sector in the form of equipment and facilities such as terminals and yards. KSU expects a favorable business outlook for its cross-border intermodal business for the rest of 2017.
The cross-border interchange business will foster a partnership with Union Pacific (UNP) in the current year, according to KSU. Truck capacity tightening in 2H17 will propel growth for the company’s US intermodal business. The Lazaro and inter-Mexico intermodal businesses are expected to face strong competition in terms of trucking from the Lazaro Port to Mexico City in 2017.
KSU isn’t the only company that’s seen its intermodal revenue plummet. Union Pacific has also seen a fall in its intermodal revenue in recent quarters. However, things have started to change. Among the railroads that report 1Q17 earnings, CSX Corporation (CSX) reported a 7% rise in intermodal revenue. Canada’s second-largest freight rail, Canadian Pacific (CP) disclosed a 4% rise in its 1Q17 intermodal revenue.
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In the next part of this series, we’ll discuss KSU’s operating margin.