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Kansas City Southern CEO on the economic recovery from coronavirus

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The CEO of Kansas City Southern told CNBC on Friday he sees the company’s recovery from coronavirus business lows continuing for the rest of 2020, an optimistic sign for the broader U.S. economy.

The railroad operator reported third-quarter earnings earlier in the day, posting revenues of $660 million that missed Wall Street estimates of $663 million. However, Kansas City Southern’s per-share earnings of $1.96, excluding items, was better than the profits per share of $1.90 analysts had forecast.

“Across our industrial and consumer economy, we think it’s going to continue to be modestly strong from this point through the end of the year,” CEO Patrick Ottensmeyer said on “Closing Bell.”

Kansas City Southern also raised its full-year guidance Friday, saying it expects earnings per share to be slightly higher on a year-over-year basis. Shares of the company closed down 2.72% Friday to $179 apiece. The stock is up nearly 17% this year.

Carload volumes were down 4% in the third quarter compared with the year-ago period. But that is improving, Ottensmeyer said. “We’re up a little bit from last year and certainly above pre-Covid levels,” he said.

A Kansas City Southern (KSC) Railway locomotive passes through Knoche Yard in Kansas City, Missouri, on Tuesday, Jan. 7, 2020.

Whitney Curtis | Bloomberg | Getty Images

Railroad operators, with their exposure to multiple different industries, are often seen as bellwethers for the economy. The U.S. has added millions of jobs back in recent months after steep employment cuts from the pandemic, and sectors such as housing have seen impressive strength. However, there are questions now about the resilience of the recovery, especially as Congress has been unable to come to terms on another round of stimulus.

Ottensmeyer said Kansas City Southern’s strongest segment has been refined petroleum products, largely driven by moving fuel from Gulf Coast refineries into Mexico. The company also has experienced strength in its automotive segment, he said, as the auto industry rebounded from the coronavirus slowdown.

On the other hand, Ottensmeyer said Kansas City Southern has seen weakness in its intermodal volumes, which involve multiple modes of transportation. He said they’re lagging the industry there and “that has to do with some service interruptions, some issues going on in Mexico that we’re trying to deal with that have caused us to lose some business, at least for some period of time.”

In general, Kansas City Southern has seen an “incredible” V-shaped recovery on its shipping volumes from pandemic lows, according to Ottensmeyer. He said the last few months have been like a roller coaster “if you think about the things we needed to do, not knowing what was ahead, with volumes falling that quickly and that dramatically in the second quarter, and then bouncing back 90 days later.”


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‘We’ve been planning for this for months’

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Jim Cramer sees positives for investors after sell-off on Covid fears

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CNBC’s Jim Cramer said he sees positives for investors after steep market declines Wednesday as Wall Street grew further concerned about the coronavirus pandemic.

“I recognize the carnage, but I do think the carnage is reversible,” Cramer said Wednesday on “Closing Bell,” after the Dow Jones Industrial Average gave up 943 points, or 3.4%, in its worst day since June. The benchmark S&P 500 declined 3.5%, and the tech-heavy Nasdaq Composite fell 3.7%.

“It’s just that you do need to get past the election, and you have to start accepting the fact that because people don’t wear masks, they don’t practice social distancing, we don’t do contact tracing … that we’re going to have a lot of case loads,” Cramer said.

The “Mad Money” host said by recognizing the shortcomings of the U.S. response to the pandemic, investors will be able to spot individual opportunities in the market where there is upside. He pointed to the strong earnings report from Ford Motor, which illustrates the strength in the auto market, and General Electric.

“You get a one-off like Ford and a one-off like GE, and you get a couple more one-offs. Next thing you know you’re saying, ‘Why am I just selling everything?'” he said.

Cramer said the coronavirus case count in the United States is sure to rise in the coming days. That echoes comments made earlier Wednesday by former Food and Drug Commissioner Dr. Scott Gottlieb, who said that “things are going to get worse.”

“[Investors] know, and we have to build in the Covid case load,” Cramer said. “We have to build in the restaurant shutdowns. We have to build in who the heck knows with the election? At a certain point, it gets built in.”

“And then we say, ‘Well listen, I’m not inured to Covid. I don’t want anyone to have it. I don’t want to catch it,'” he added. “But at a certain point, how many times are you going to discount Covid?”

Wednesday’s sell-off was broad, with all 11 S&P 500 sectors finishing in the red, led by technology’s 4.33% decline. However, Cramer said that type of market movement lays the foundation for opportunities. “I’m not saying it’s artificial. But I am saying good news will create an upswing.”


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Dr. Fauci says U.S. is in a ‘bad position’ as daily cases hit record highs

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Dr. Anthony Fauci, director of the National Institute for Allergy and Infectious Diseases, testifies before the Senate Health, Education, Labor and Pensions (HELP) Committee hearing on Capitol Hill in Washington DC on June 30, 2020 in Washington, DC.

Kevin Dietsch | AFP via Getty Images

White House coronavirus advisor Dr. Anthony Fauci said Wednesday that the United States is in a “bad position” as coronavirus cases and hospitalizations surge in many parts of the nation.

Fauci said the U.S. never got its Covid-19 cases down to low enough levels after the initial surge in New York and other states earlier in the year. New cases had hit a peak in April of about 31,000 a day before steadily falling to about 20,000 cases a day by the end of May. After Memorial Day, new cases began to climb again, surging to about 70,000 cases a day in July before plateauing at around about 40,000 in September. They surged again and are now reaching record levels, Fauci said.

“That’s a bad position to be in,” the director of the National Institute of Allergy and Infectious Diseases said during an interview with JAMA. “When you look at the country and the heat map color, when you see red dots, which indicate that that part of the county, the city, the city is having an uptick in cases … all of that puts us in a precarious situation.”

“We should have been way down in baseline and daily cases and we’re not,” he said.

Fauci’s comments came after the U.S. reported its third consecutive record in average daily Covid-19 cases. Average new U.S. cases on Tuesday hit an all-time high of 71,832, topping the prior record set on Monday, according to a CNBC analysis of data from Johns Hopkins University. Figures are based on a weekly average to smooth out fluctuations in daily reporting.

Hospitalizations are also on the rise as well. As of Tuesday, Covid-19 hospitalizations were growing by 5% or more in 37 states, according to a CNBC analysis of data collected by the Covid Tracking Project. Fifteen states hit record highs in hospitalizations. The increase in hospitalizations could be especially dire as flu season approaches and more people seek treatment, medical experts warn.

Some parts of the country are relying on more restrictions to curb the virus’ spread. Illinois Gov. J.B. Pritzker announced on Tuesday that Chicago restaurants and bars will have to close their indoor dining sections beginning this Friday. El Paso, Texas, instituted an earlier curfew to protect  “overwhelmed and exhausted” hospitals and workers.

— CNBC’s Noah Higgins-Dunn contributed to this report.

This is a developing story. Please check back for updates.


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