It was just a matter of time before declining oil prices were going to sideswipe railroad operators, responsible for moving most of North America’s crude oil and the shipment of sand and other materials essential to the oil shale fracking process.
Monday, the group
was derailed after Kansas City Southern KSU said that lower load volumes of Canadian crude oil would crimp 2015 results. KSU had warned in its January annual report that a significant, sustained decrease in crude oil prices could impact shipments. At the time, crude oil prices had already slumped from about $107 a barrel last June to under $50. Except for some brief rebounds, benchmark crude is hovering at about $47 a barrel, and some forecasters have said that that swelling supplies could push prices to $40 or lower.
was derailed after Kansas City Southern KSU said that lower load volumes of Canadian crude oil would crimp 2015 results. KSU had warned in its January annual report that a significant, sustained decrease in crude oil prices could impact shipments. At the time, crude oil prices had already slumped from about $107 a barrel last June to under $50. Except for some brief rebounds, benchmark crude is hovering at about $47 a barrel, and some forecasters have said that that swelling supplies could push prices to $40 or lower.
Kansas City Southern, which ships from the Midwest to key ports along the Gulf of Mexico, gets more than 30% of annual revenue from shipping petroleum, fracking sand and other energy-related products. Coal shipments from Wyoming’s Powder River Basin are also declining because of falling natural gas prices.
As recently as March 4, at a JPMorgan JPM investment conference, management said it expected full year revenue to match or surpass 2014’s 9% growth. But CFO Michael Upchurh conceded the company revenue had stalled. On Monday, the company lowered its outlook, saying full year revenue growth would be in the low single-digit range due to a 2% drop in rail shipments. First-quarter revenue is expected to be flat, down 4% from prior estimates.
The revised outlook pushed Kansas City Southern shares down 8% to $106.48. Nomura Securities retained a buy rating on the stock, but lowered its price target to $127 from $133.
No comments:
Post a Comment