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Why Is CN (CNI) Down 9.2% Since Last Earnings Report?
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A month has gone by since the last earnings report for Canadian National (CNI - Free Report) . Shares have lost about 9.2% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is CN due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Earnings Miss at Canadian National in Q1
Canadian National’s first-quarter 2022 earnings (excluding a penny from non-recurring items) of $1.04 per share (C$1.32) missed the Zacks Consensus Estimate of $1.08. Results were hurt by supply chain disruptions and severe winter weather conditions. However, the bottom line improved 7.2% year over year.
Quarterly revenues of $2,927.4 million (C$3,708 million) outperformed the Zacks Consensus Estimate of $2,898.6 million and increased 4.9% year over year, driven by strong freight demand, and higher fuel surcharge and freight rates.
Freight revenues (C$3,608 million), which contributed 97.3% to the top line, increased 5% year over year as economic activities gathered pace. Freight revenues at the Grain and fertilizers segment declined 15%, while the same at the Forest products unit dipped 1% year over year. Freight revenues at the Petroleum and Chemicals; Metals and minerals; Coal, Intermodal; and Automotive segments increased 14%, 10%, 55%, 9% and 4%, respectively.
While overall carloads (volumes) fell 6% year over year, revenue ton miles (RTMs) slipped 8%. Segment-wise, carloads in both Metals and mineral, and Automotive declined 6%. The same at Forest products, Grain and fertilizers and Intermodal decreased 9%, 18% and 13%, respectively. Carloads at the Petroleum and chemicals unit rose 6%, while the same at the Coal segment surged 71%. Freight revenues per carload climbed 12% year over year in the reported quarter, while freight revenues per RTM improved 15%.
Operating expenses (on a reported basis) ascended 12.4% to C$2,481 million. Due to high fuel prices, expenses on fuel climbed 44.2% year over year. Adjusted operating income increased 4% year over year to C$1,237 million. Adjusted operating ratio (defined as operating expenses as a percentage of revenues) deteriorated to 66.6% in the first quarter of 2022 from 66.3% in the fourth quarter of 2021. Lower the value of the metric, the better.
Liquidity
Canadian National generated free cash flow of C$571 million during the March quarter compared with the year-ago quarter’s C$539 million. Cash and cash equivalents amounted to C$490 million as of Mar 31, 2022 compared with C$838 million at December 2021 end.
2022 Outlook
Canadian National expects adjusted earnings to increase 15-20% year over year in 2022 compared with the previous expectation of a rise of approximately 20%. The downside is due to challenging operating conditions, including supply chain woes and the prevalent pandemic. Operating ratio is estimated to be below 60% for 2022, compared with the previous view of around 57%. The company anticipates free cash flow in the band of C$3.7 billion-C$4.0 billion in the current year compared with approximately C$4 billion forecast earlier. For 2022, the company expects capital expenditures to beapproximately 17% of revenues.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
VGM Scores
Currently, CN has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending downward for the stock, and the magnitude of these revisions looks promising. Notably, CN has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why Is CN (CNI) Down 9.2% Since Last Earnings Report?
A month has gone by since the last earnings report for Canadian National (CNI - Free Report) . Shares have lost about 9.2% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is CN due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Earnings Miss at Canadian National in Q1
Canadian National’s first-quarter 2022 earnings (excluding a penny from non-recurring items) of $1.04 per share (C$1.32) missed the Zacks Consensus Estimate of $1.08. Results were hurt by supply chain disruptions and severe winter weather conditions. However, the bottom line improved 7.2% year over year.
Quarterly revenues of $2,927.4 million (C$3,708 million) outperformed the Zacks Consensus Estimate of $2,898.6 million and increased 4.9% year over year, driven by strong freight demand, and higher fuel surcharge and freight rates.
Freight revenues (C$3,608 million), which contributed 97.3% to the top line, increased 5% year over year as economic activities gathered pace. Freight revenues at the Grain and fertilizers segment declined 15%, while the same at the Forest products unit dipped 1% year over year. Freight revenues at the Petroleum and Chemicals; Metals and minerals; Coal, Intermodal; and Automotive segments increased 14%, 10%, 55%, 9% and 4%, respectively.
While overall carloads (volumes) fell 6% year over year, revenue ton miles (RTMs) slipped 8%. Segment-wise, carloads in both Metals and mineral, and Automotive declined 6%. The same at Forest products, Grain and fertilizers and Intermodal decreased 9%, 18% and 13%, respectively. Carloads at the Petroleum and chemicals unit rose 6%, while the same at the Coal segment surged 71%. Freight revenues per carload climbed 12% year over year in the reported quarter, while freight revenues per RTM improved 15%.
Operating expenses (on a reported basis) ascended 12.4% to C$2,481 million. Due to high fuel prices, expenses on fuel climbed 44.2% year over year. Adjusted operating income increased 4% year over year to C$1,237 million. Adjusted operating ratio (defined as operating expenses as a percentage of revenues) deteriorated to 66.6% in the first quarter of 2022 from 66.3% in the fourth quarter of 2021. Lower the value of the metric, the better.
Liquidity
Canadian National generated free cash flow of C$571 million during the March quarter compared with the year-ago quarter’s C$539 million. Cash and cash equivalents amounted to C$490 million as of Mar 31, 2022 compared with C$838 million at December 2021 end.
2022 Outlook
Canadian National expects adjusted earnings to increase 15-20% year over year in 2022 compared with the previous expectation of a rise of approximately 20%. The downside is due to challenging operating conditions, including supply chain woes and the prevalent pandemic. Operating ratio is estimated to be below 60% for 2022, compared with the previous view of around 57%. The company anticipates free cash flow in the band of C$3.7 billion-C$4.0 billion in the current year compared with approximately C$4 billion forecast earlier. For 2022, the company expects capital expenditures to beapproximately 17% of revenues.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
VGM Scores
Currently, CN has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending downward for the stock, and the magnitude of these revisions looks promising. Notably, CN has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.