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Canadian National (CNI) Tops Q2 Earnings & Revenue Estimates

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Canadian National Railway Company (CNI - Free Report) posted better-than-expected earnings and revenues in second-quarter 2018, aided by shipment of key commodities.

The company’s earnings of $1.17 per share (C$1.77) surpassed the Zacks Consensus Estimate of $1.05. Moreover, the bottom line improved significantly from the prior-year quarter’s figure.

Quarterly revenues also increased year over year to $2,814 million (C$3,631 million) and beat the Zacks Consensus Estimate of $2,684.4 million. Rail freight revenues improved 10% year over year and accounted for 94.1% of the top line.

The impressive earnings results raised investors’ optimism on the stock, which inched up 1.5% in after-hour trading on Jul 24.

Operating Results

On a year-over-year basis, freight revenues rose in Petroleum and Chemicals (12%), Metals and Minerals (15%), Forest Products (6%), Coal (39%), Grain and Fertilizers (12%) as well as Intermodal (6%), while the same declined only at Automotive (1%). Overall, carloads (volumes) and revenue ton miles (RTMs) expanded 6% and 7%, respectively. Moreover, rail freight revenue per carload improved 4% in the quarter under review.

The Coal sub-group performed impressively with respect to car loads. In fact, the metric expanded 21%. In Petroleum and Chemicals, Metals and Minerals, Forest Products, Grain and Fertilizers as well as Intermodal, the same expanded 4%, 8%, 1%, 9% and 5%, respectively. However, the carloads contracted 3% in the Automotive segment.

Operating income increased 7% year over year to C$1,519 million. Operating ratio (defined as operating expenses, as a percentage of revenues) was 58.2% compared with 57.5% in the year-ago quarter. Higher fuel, labor and material costs induced this key metric’s deterioration.

Canadian National Railway Company Price, Consensus and EPS Surprise

 

Canadian National Railway Company Price, Consensus and EPS Surprise | Canadian National Railway Company Quote

Liquidity

This Zacks Rank #3 (Hold) exited the first half of the year with free cash flow of C$1,296 million compared with C$1,659 million in the year-ago period. As of Jun 30, 2018, adjusted debt was C$12,824 million compared with C$11,483 million a year ago. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Dividend

The company’s board of directors approved a dividend of 45.5 cents (C$0.4550) for the third quarter, payable on Sep 28, 2018 to shareholders of record as of Sep 7.

Bullish  Outlook

The company now expects adjusted earnings per share of C$5.30-C$5.45 for 2018. The previous outlook was in the range of C$5.10-C$5.25. The company raised view on the back of impressive second-quarter performance and increasing demand.

Capital Program Value Raised

The company has raised its C$3.4 billion capital program to C$3.5 billion. It plans to invest an additional amount toward buying of new rail cars.

Upcoming Releases

Investors interested in the broader Transportation Sector are awaiting second-quarter 2018 earnings reports from key players, namely Old Dominion Freight Line, Inc. (ODFL - Free Report) , ArcBest Corporation (ARCB - Free Report) and C.H. Robinson Worldwide, Inc. (CHRW - Free Report) . Old Dominion Freight line will release results on Jul 26. ArcBest and C.H. Robinson will announce the same on Jul 31.

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