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Canadian National (CNI) Beats on Q1 Earnings & Revenues

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Canadian National Railway Company’s (CNI - Free Report) first-quarter 2017 earnings (on an adjusted basis) of 88 cents per share (or C$1.15) beat the Zacks Consensus Estimate of 84 cents. Adjusted earnings climbed 20.55% from the year-ago figure. The company’s bottom line benefited from better expense management.

Quarterly revenues of $2,428.9 million (C$3,206 million) came in above of the Zacks Consensus Estimate of $2,402.5 million but climbed 12.5% year over year. Rail freight revenues, which accounted for bulk of the top line in the quarter, improved 8%. The top line was boosted by increased volumes of grain, frac sand, coal exports, overseas intermodal traffic among other factors.

Operating Results

On a year-over-year basis, freight revenues increased in various segments, 39% at Coal, 1% at Petroleum and Chemicals, 7% at intermodal, 10% at automotive, and 16% each at Metals and Minerals, and grain and fertilizers. However, the same declined 3% at the forest products unit. Overall carloads (volumes) also improved 9% and revenue ton miles (RTMs) climbed 14% year over year. Rail freight revenue per carload declined by 1% in the reported quarter.

Moreover, the metals and minerals sub group performed most impressively with respect to car loads that improved 30%. In fact, the grain and fertilizer segment was the other unit to post a double-digit volume growth. However, coal volumes decreased 8%.

In the quarter under review, operating income climbed 7% year over year to C$1,303 million. Operating ratio (defined as operating expenses as a percentage of revenues) was 59.4% as against 58.9% in the year-ago quarter. Higher fuel costs contributed to the increase in this key metric.

Liquidity

Canadian National exited the first quarter with free cash flow of C$848 million compared with C$584 million a year ago. Adjusted debt at the end of the quarter was C$11,440 million compared with C$10,715 million a year ago.

Dividend

This Zacks Rank # 3 (Hold) company’s board of directors approved a its quarterly cash dividend of C$0.4125 per share (annualized C$1.65). The second-quarter dividend will be paid on Jun 30 to shareholders on record as of Jun 9. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Outlook Tweaked

Canadian National now expects full-year 2017 earnings per share in the band of C$4.95 to C$5.10 (the earlier outlook had called for earnings per share in 2017 to grow in the mid-single-digit range over adjusted EPS of C$4.59 recorded in 2016). This Montreal-based company now expects to invest C$2.6 billion in 2017 pertaining to its capital program as opposed to C$2.5 billion expected earlier.

Upcoming Releases

Investors interested in the railroad space are also keenly waiting for first-quarter earnings reports from key players like Union Pacific Corporation (UNP - Free Report) , Norfolk Southern (NSC - Free Report) and Genesee & Wyoming Inc. . Norfolk Southern, Union Pacific and Genesee & Wyoming are scheduled to report on Apr 26, Apr 27 and May 2, respectively.

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