Kansas City Southern volumes are ‘improving’ off of early-May bottom; stock gains

Shares of Kansas City Southern rose 1% in premarket trading Tuesday, after the railroad operator said at an investor presentation that while the second quarter has been "challenging" as a result of the COVID-19 pandemic, volumes have been "improving." The company said carloads have improved by 31% since bottoming in early May, but they remain 8% below pre-COVID-19 levels. For the second quarter to date, volume has declined 23% from a year ago and revenue has been down 24%, with revenue "pacing" to about $550 million for the quarter, compared with the current FactSet consensus of $584 million implies an 18% decline. The company said it was targeting free cash flow of more than $550 million in 2020, compared with the FactSet consensus of $530 million. Meanwhile, the company said "service plan optimization" was resulting in crew start reductions ahead of volume declines, as so far in June U.S. line road crew starts are down 31% from a year ago on a 9% drop in volume. The stock has rallied 44.8% over the past three months through Monday, while the Dow Jones Transportation Average has hiked up 35.2% and the Dow Jones Industrial Average has climbed 40.0%.

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