Canadian National Railway Company (CNI Quick QuoteCNI - Free Report) reported disappointing third-quarter 2023 results, wherein both earnings and revenues lagged the Zacks Consensus Estimate.

Quarterly earnings per share (EPS) of $1.26 (C$1.69) missed the Zacks Consensus Estimate of $1.29 and declined year over year.

Quarterly revenues of $2,972.2 million (C$3,987 million) missed the Zacks Consensus Estimate of $3,013.8 million and dipped year over year. The downfall was owing to a reduction in fuel surcharge revenues as a result of lower fuel prices and lackluster volumes of intermodal, crude oil and forest products.  

Reduced demand for freight services hurt volumes. The metric was also hit by the pacific-coast dock workers’ strike and unfavorable crude oil price spreads, among other factors. These were partly offset by freight rate increases, favorable translation impact of a weaker Canadian dollar and higher export volumes of Canadian grain.

Canadian National Railway Company Price, Consensus and EPS Surprise

Canadian National Railway Company price-consensus-eps-surprise-chart | Canadian National Railway Company Quote

Freight revenues (C$3,820 million), which contributed 95.8% to the top line, decreased 13% year over year, wider than our anticipated fall of 5.5%. Freight revenues at the Petroleum and chemicals, Metals and minerals, Forest products, Coal and Intermodal segments fell 11%, 4%, 15%, 6% and 34%, respectively. Revenues at the Grain and fertilizers and Automotive segments increased 16% and 14%, respectively.

Carloads revenues tumbled 10% year over year, greater than our projected dip of 1.4%. Segment-wise, carloads in Petroleum and chemicals, Forest products Coal and Intermodal declined 3%, 12%, 5% and 23%, respectively. The same at Grain and fertilizers, and Automotive grew by 13% each. The metric at Metals and minerals has been kept flat on a year-over-year basis.

Freight revenues per carload inched down 3% from the year-ago reported quarter, while freight revenues per revenue ton-miles were down 8%.  

Operating expenses contracted 4% year over year to C$2,470 million due to lower fuel prices partly offset by the negative translation impact of a weaker Canadian dollar.

Adjusted operating ratio (defined as operating expenses as a percentage of revenues) was 62% in third-quarter 2023, up from 57.2% in the year-ago reported quarter. The lower the metric, the better.

Liquidity

Canadian National generated free cash flow of C$581 million during the third quarter compared with C$1,356 million a year ago.

2023 Outlook

For 2023, Canadian National still anticipates flat to slightly negative year-over-year growth in adjusted EPS.

Currently, Canadian National carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Q3 Performance of Some Other Transportation Companies

United Airlines (UAL Quick QuoteUAL - Free Report) reported third-quarter 2023 earnings per share (excluding 23 cents from non-recurring items) of $3.65, which outpaced the Zacks Consensus Estimate of $3.40 and improved 29.9% year over year.

Operating revenues of $14,484 million beat the Zacks Consensus Estimate of $14,441.8 million. The top line increased 12.5% year over year due to upbeat air travel demand.

J.B. Hunt Transport Services, Inc.’s (JBHT Quick QuoteJBHT - Free Report) third-quarter 2023 earnings per share of $1.80 missed the Zacks Consensus Estimate of $1.85 and declined 30% year over year.

Total operating revenues of $3,163.8 million also lagged the Zacks Consensus Estimate of $3,224 million and plunged 18% year over year.