According to the law firm press release, KCS operates railroads in the Midwest and Mexico that run north to south, unlike most other U.S. railroads that run east to west.
The complaint alleges that during the Class Period, KCS issued materially false and misleading statements regarding the Company’s financial performance and future prospects and failed to disclose the following adverse facts: (i) that KCS’s utility coal volumes and crude oil shipments were declining below forecasted levels during its 2013 fourth quarter; (ii) that the construction of the Company’s new Port Arthur crude oil terminal was experiencing operational difficulties which was delaying its completion and the Company’s realization of the benefits from the plant; (iii) that carloads in the Company’s Chemical & Petroleum shipments to Mexico had declined during the fourth quarter of 2013 due to operational issues with the Company’s customers in Mexico; (iv) that KCS’s anticipated ramp-up of its Mexican auto shipment business was not advancing to the degree KCS led the market to believe, as the new plants were not coming on line and there would be a negligible benefit to KCS’s revenues and profits in 2014; and (v) that Mexican government officials were privately clamoring to take back or control the monopoly pricing power KCS had by way of an agreement giving KCS and another company exclusive use of tracks in Mexico. As a result of defendants’ false and misleading statements and omissions, KCS common stock traded at artificially inflated prices during the Class Period, reach a high of $125.96 per share on November 14, 2013.
On January 24, 2014, KCS issued a press release announcing its fourth quarter and fiscal 2013 financial results. The Company’s reported fourth quarter and fiscal 2013 net income significantly missed the net income the investment community had been led to expect based on defendants’ Class Period statements. The Company also offered a disappointing earnings growth outlook for fiscal 2014, forecasting per-share earnings for 2014 to rise only in the mid-teens, while the investment community had been led to expect 26% growth based on defendants’ Class Period statements. On this news, the price of KCS common stock declined more than $17.79 per share to close below $100 per share on January 24, 2014. Then, on February 18, 2014, the market learned that the lower house of the Mexican legislature had approved a new bill to increase rail competition in Mexico by giving third-party companies access to KCS’s exclusive freight and passenger rail networks, and to give the government control over tariffs. On this news, the price of KCS stock fell another $4.00 per share.
On June 11, 2015, the parties stipulated to a voluntary dismissal of this case. This action is closed.