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Kansas City Southern Misses Profit Forecast, Touts Canadian National Tie-Up

A KSU/CN combination "represents an exciting opportunity for KCS and CN stakeholders, and we look forward to delivering a safer, faster, cleaner and stronger railroad," said CEO Patrick Ottensmeyer.

Kansas City Southern  (KSU)  posted weaker-than-expected second quarter earnings Friday but said its recently-agreed merger with Canadian National would deliver a "faster, cleaner and stronger railroad."

Kansas City Southern said adjusted profits for the three months ending in June rose 79% from the same period last year to $2.06 per share, but missed the Street consensus forecast of $2.18 per share. Group revenues, the carrier said, jumped 36.9% to $749.5 billion, but again game in light of analysts' estimates of a $750 billion tally.

Carload volumes were up 31% compared to the pandemic-hit traffic levels of last year's second quarter, Kansas City Southern said, while its adjusted operating ratio, a key transportation industry metric, was pegged at 61.4%.

"KCS delivered strong second quarter volume growth, as our franchise benefited from unique growth drivers and the economy recovered from the COVID-19 downturn,” said CEO Patrick Ottensmeyer. “Although we are pleased with the strong volume growth, we fell short of our own expectations for customer service.

“Our operating team is focused on implementing structural and sustainable changes that will improve operational performance and the resiliency of our network," he added. "To that end, we have deployed additional assets and crews in support of our service recovery, setting the Company up to continue delivering robust volume growth while improving customer service in the second half of 2021."

Kansas City Southern shares were marked 0.9% lower in early trading immediately following the earnings release to change hands at $267.00 each.

Kansas City Southern shares have gain more than 32% so far this year, largely on the back of a bidding war between Canadian National and Canadian Pacific as the carriers vied for the right to merge with the U.S.-based group.

Earlier this month, Kansas City Southern agreed to Canadian National's $33.6 billion bid that the groups said will create he first comprehensive rail network connecting Mexico, Canada and the United States in the deal, which valued the rail operator at $325 per share.