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Kansas City Southern Misses Profit Forecast, Confirms 2021 Guidance

COVID-linked shutdowns and February's polar vortex clipped first quarter carload volumes for rail operator Kansas City Southern.

Kansas City Southern  (KSU) - Get Kansas City Southern Report posted weaker-than-expected first quarter earnings Friday as the polar vortex and coronavirus shutdowns hit cargo volumes, but confirmed its full-year profit guidance as it prepares for its $25 billion takeover by Canadian Pacific  (CP) - Get Canadian Pacific Railway Limited Report.

Kansas City Southern said profits for the three months ending in March fell 14.3% to $1.68 per share, missing the Street consensus forecast, while revenues slumped 4% to $706 million as carload volumes fell 1% from last year.

Looking into the current financial year, Kansas City Southern reiterated its forecast that sees double-digit revenue growth, earnings north of $9 per share and an operating ratio of 57.5%. 

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"Although our first quarter performance was impacted by several unique and challenging events, including the Polar Vortex, and lingering network congestion, our operating team is focused on improving operating metrics and customer service through PSR phase III,” said CEO  Patrick Ottensmeyer. “Based on an outlook for improvement in volume growth and operational trends, we can confidently confirm our 2021 guidance.”  

Kansas City Southern shares were marked 0.25% higher in early trading following the earnings release to change hands at $259.50 each. 

Last month, Kansas City Southern agreed to CP's $25 billion all-cash takeover that the groups said will create he first comprehensive rail network connecting Mexico, Canada and the United States.

Kansas City Southern shareholders will receive 0.489 of a Canadian Pacific shares for each holding, as well as $90 in cash, in the deal, which valued the rail operator at $275 per share. 

"This combination is expected to provide an enhanced competitive alternative to existing rail service providers, resulting in improved service to customers of all sizes," Ottensmeyer said Friday. "This transaction represents an exciting opportunity for KCS and CP stakeholders, and we look forward to delivering the benefits to our customers, employees, investors, and communities."