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Kansas City Southern profit beats, signals strength in fourth quarter

A freight train of KCS Railway Company is pictured in Toluca

(Reuters) - Railroad operator Kansas City Southern <KSU.N> on Friday reported a better-than-expected quarterly profit, helped by an increase in refined fuel shipments to Mexico and ongoing cost cuts.

Shares of the company, which derives one-third of its revenue from Mexico, jumped 5.2% to $142.41 in early trading.

"We have a positive outlook for the rest of the year," Chief Executive Patrick Ottensmeyer said on a conference call with analysts.

The results come as the railroad industry is seeing volumes fall because of competition from low-priced, long-haul truckers and U.S. President Donald Trump's bruising tariff disputes with key trade partners like China and Mexico.

Third-quarter net income available to common stockholders rose to $180.1 million, or $1.81 per share, from $173.5 million, or $1.70 per share, a year earlier.

Revenue rose 7% to $747.7 million.

Analysts, on average, had expected quarterly earnings of $1.79 per share and revenue of $734.9 million, according to IBES data from Refinitiv.

Refined fuel products and liquid petroleum gas shipments to Mexico rose sharply. Those were partly offset by lower revenue from frac sand, crude oil and automotive shipments.

Efficiency improved during the quarter, when operating ratio, a measure of operating expenses as a percentage of revenue and a key metric for Wall Street, fell 2.7 points to 60.7% from a year ago.

Executives, who are revising the railroad's forecasts on the heels of the strong results, signaled caution on roughly 30% of the railroad's overall revenue.

"We're currently being impacted by the GM strike," Michael Naatz, head of marketing, said of the United Auto Workers' strike at General Motors <GM.N> that affected the U.S. car maker's operations in Mexico and is rippling through the global supply chain. The two sides have reached an agreement that has yet to be finalized.

The company's intermodal business, which handles cargo that travels by ship, road and rail, is bearing the weight of tariff-weakened international trade and truck competition.

"We'll continue monitor the overall economic environment," Naatz said.

(Reporting by Dominic Roshan K.L. in Bengaluru and Lisa Baertlein in Los Angeles; Editing by Chizu Nomiyama and Steve Orlofsky)