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Canadian National (CNI) Q2 Earnings Beat Estimates, Rise Y/Y

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Canadian National Railway Company’s (CNI - Free Report) second-quarter 2021 earnings (excluding 2 cents from non-recurring items) of $1.21 per share (C$1.49) edged past the Zacks Consensus Estimate of $1.20. The bottom line increased year over year on lower costs.

Quarterly revenues of $2,929 million (C$3,598 million) lagged the Zacks Consensus Estimate of $2,988.6 million. The top line, however, improved year over year, driven by volume growth in almost every business unit. Particularly, industrial products, and international and domestic intermodal sub-groups performed very well.

Freight revenues (C$3,452 million), which contributed 95.9% to the top line, increased 14% year over year as economic activities gather pace. Freight revenues in all segments apart from grain and fertilizers, which declined 6%, improved year over year. Freight revenues at the petroleum and chemicals, metals and minerals, forest products, coal, intermodal and automotive units increased 17%, 22%, 9%, 13%, 19% and 96%, respectively.

While overall carloads (volumes) increased 14% year over year, revenue ton miles (RTMs) rose 13%. Segmentwise, carloads in the Petroleum and chemicals, metals and minerals, forest products, coal, intermodal and automotive improved 9%, 11%, 8%, 41%, 13% and 100%, respectively. Carloads at the grain and fertilizer segment were flat year over year. Freight revenues per carload were flat year over year in the reported quarter. Freight revenues per RTM inched up 1%.

Operating expenses for the second quarter decreased 9% to C$2,216 million owing to a favorable currency impact among other factors. Adjusted operating income increased 8.7% year over year to C$1,382 million. Adjusted operating ratio (defined as operating expenses as a percentage of revenues) deteriorated to 61.6% from the year-ago quarter’s 60.4%. Lower value of the metric is desirable.

Liquidity

This presently Zacks Rank #3 (Hold) company generated free cash flow of C$741 million during the June quarter compared with the year-ago quarter’s C$1,008 million.  Adjusted debt

amounted to C$14,643 million as of Jun 30, 2021 compared with C$15,136 million at December 2020 end. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

2021 Outlook

Canadian National still anticipates earnings per share to grow in double-digits during 2021 from adjusted earnings of C$5.31 in 2020. Volumes, measured in revenue ton miles (RTMs), are again expected to increase in high-single digits during the current year. The company estimates free cash flow of C$3-C$3.3 billion for 2021 compared with C$3.2 billion in 2020.

Sectorial Snapshots

Within the broader  Transportation  sector,  Delta Air Lines  (DAL - Free Report) ,  J.B. Hunt Transport Services  (JBHT - Free Report) and  Kansas City Southern (KSU - Free Report) recently reported second-quarter 2021 results.

Delta incurred a loss (excluding $2.09 from non-recurring items) of $1.07 per share, narrower than the Zacks Consensus Estimate of a loss of $1.41. Revenues of $7,126 million were substantially higher than the year-ago levels, buoyed by the recent uptick in air-travel demand. The metric also topped the Zacks Consensus Estimate of $6,340.9 million.

J.B. Hunt reported better-than-expected second-quarter 2021 results. Quarterly earnings of $1.61 per share surpassed the Zacks Consensus Estimate of $1.55. Total operating revenues of $2908.4 million outperformed the Zacks Consensus Estimate of $2722 million and also jumped 35.5% year over year.

Kansas City Southern reported second-quarter 2021 earnings (excluding $6.23 from non-recurring items) of $2.06 per share, missing the Zacks Consensus Estimate of $2.16.  Quarterly revenues of $749.5 million surpassed the Zacks Consensus Estimate of $733.1 million and increased 36.8% year over year, driven by the 31% rise in overall carload volumes.