Kansas City Southern (NYSE:KSU) Q4 2014 Earnings Conference Call - Final Transcript

Jan 23, 2015 • 08:45 am ET

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Kansas City Southern (NYSE:KSU) Q4 2014 Earnings Conference Call - Final Transcript

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Presentation
Operator
operator

Greetings. Welcome to the Kansas City Southern Fourth Quarter and Full Year 2014 Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions) As a reminder, this conference is being recorded.

(Forward-Looking Cautionary Statements)

It is now my pleasure to introduce your host, David Starling, President and Chief Executive Officer for Kansas City Southern. Mr. Starling, you may begin.

Executive
David Starling

Thank you. Good morning. And welcome

Executive
David Starling

to the Kansas City Southern's fourth quarter 2014 earnings call. Presenting here with me today will be Jeff Songer, our Chief Transportation Officer; Pat Ottensmeye, our EVP Sales and Marketing; Mike Upchurch, EVP and Chief Financial Officer; and joining by phone for the Q&a will be Jose Zozaya, our President and Executive Representative from KCSM. Start with our fourth quarter review. For the fourth quarter, KCS revenues were up 4% on volume growth of 5% and a few items played into our revenue growth rate for the quarter.

First, as expected, we had very tough grain comps versus fourth quarter 2013. as you remember, it was during the fourth quarter of 2013, when we truly experience the surge in grain traffic, that surge provide a very tough comps for grain this past quarter. But our grain business was strong in the fourth quarter and it's strong right now. There's still a lot of corn to be shipped before the next harvest. We still feel very good about our grain franchise.

after impacting fourth quarter revenues within the combined effects of lower fuel costs on our fuel charge revenues and the peso-dollar exchange rate. Together, these two items resulted in a 2% hit to revenues. Despite the impact from low fuel costs and a weaker peso, revenues from our key strategic growth areas still increased a healthy 15% for the fourth quarter a year ago, as was the case throughout 2014.

automotive led the way, we also experience progressively stronger revenues coming from Lazaro Cardenas during the year and that business was especially good in the fourth quarter. Operational efficiencies, increased revenues and good cost controls helped us to achieve a 1.4 improvement in our operating ratio quarter-over-quarter.

Let's go to the full year for 2014, KCS met or exceeding its guidance targets. Our volume growth was 5%, matching our mid single-digit guidance. Revenue growth came in at 9% for the year, which matched our high single-digit projection.

We actually exceeded our operating ratio guidance, attaining a 1.7 point improvement and lastly, KCS 2014 adjusted diluted EPS growth of 21% was higher than our high-teens guidance. Mike Upchurch, will provide more detail on our EPS during his section of the presentation.So on the next page what are we looking at going forward? First of all, we expect to have another very good year. While mindful of the very volatile energy sector, we still expect good core business growth in most of

Executive
David Starling

our commodities segments.

We are comfortable in projecting volumes growing in the mid