S&P lowers Kansas City view to stable

Standard & Poor’s said it revised the outlook on Kansas City Southern to stable from positive.

The agency also said it affirmed the company’s BBB- long-term and A-3 short-term ratings.

S&P also said it affirmed the A-3 short-term rating on Kansas City Southern de Mexico SA de CV, along with the A-3 short-term issue ratings on the commercial-paper programs issued by Kansas City Southern Railway Co. and Kansas City Southern de Mexico.

The outlook revision reflects an expectation that Kansas City’s credit metrics will weaken over the next 12 to 18 months due to the combination of increased leverage from its new share repurchase program and earnings and revenue pressures from foreign-exchange headwinds, volatile domestic fuel prices and the fitful climate for energy-related commodities, S&P said.

Although the pricing environment remains generally positive, the agency said it believes that the company’s volume growth will be more affected by the softness in energy-related markets, such as coal, metals and frac sand, the agency said.

The company should continue to benefit from healthy intermodal and automotive demand, S&P said, as well as its ongoing efficiency efforts and capacity/infrastructure investments.

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