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Why Is CN (CNI) Up 3.8% Since Last Earnings Report?
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It has been about a month since the last earnings report for Canadian National (CNI - Free Report) . Shares have added about 3.8% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is CN due for a pullback? 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 catalysts.
Earnings Beat at Canadian National in Q1
Canadian National reported first quarter 2024 earnings of $1.28 per share (C$1.72), which surpassed the Zacks Consensus Estimate of $1.27. However, the bottom line declined 5.19% year over year.
Revenues for the first quarter of 2024 were $3.15 billion (C$4.25 billion), which missed the Zacks Consensus Estimate of $3.16 billion. This reflects a decrease of 1.19%. The decline was mainly due to lower Freight revenue per RTM, while volumes remained flat.
Volumes remained flat, mainly due to higher shipments of potash, refined petroleum products, frac sand, international intermodal and natural gas liquids, offset by lower shipments of coal, grain, forest products and crude oil.
Freight revenue per RTM decreased, mainly due to lower fuel surcharge revenues and an increase in the average length of haul, partly offset by freight rate increases.
Operating expenses for the first quarter of 2024 increased by 2% from the year-ago figure. The increase was mainly due to higher labor and fringe benefit expenses, driven by general wage increases and higher average headcount, partly offset by lower fuel prices.
The operating income for the first quarter of 2024 decreased by 7% when compared to the same period in 2023. The operating ratio, defined as operating expenses as a percentage of revenues, was 63.6% in the first quarter of 2024 compared to 61.5% in the first quarter of 2023.
Segmental Highlights
Freight revenues (C$4.14 billion), which contributed 97.6% to the top line, decreased 2% year over year, wider than our anticipated fall of 1%. Freight revenues at the Petroleum and chemicals increased 4%, and Forest Products, Coal and Intermodal segments fell 3%, 16% and 5%, respectively. Revenues at the Metals and minerals, Grain and fertilizers and Automotive segments were in line with the 2023 figures.
Segment-wise, carloads in Petroleum and Chemicals, Metals and Minerals and Intermodal increased 2%, 1% and 3%, respectively. The same at Forest Products, Coal, Grain and Fertilizers and Automotive declined 4%,14%, 4% and 7%, respectively, year over year.
Liquidity
CNI exited the quarter with cash, cash equivalents and restricted cash of C$861 million and a total debt of $16.75 billion. Canadian National generated free cash flow of C$529 million during the first quarter compared with C$593 million a year ago.
2024 Outlook
CNI reaffirms its 2024 outlook and expects to deliver adjusted diluted EPS growth of approximately 10% and expects to invest approximately C$3.5 billion in its capital program, net of amounts reimbursed by customers. The company also expects the return on invested capital to be within the targeted range of 15.
CNI reiterates its longer-term financial perspective and continues to target compounded annual diluted EPS growth in the range of 10 over the 2024-2026 period, driven by growing volumes more than the economy, pricing above rail inflation and incrementally improving efficiency, all of which assumes a supportive economy.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision flatlined during the past month.
VGM Scores
Currently, CN has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. Charting a somewhat similar path, 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 F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
CN has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
CN belongs to the Zacks Transportation - Rail industry. Another stock from the same industry, CSX (CSX - Free Report) , has gained 1% over the past month. More than a month has passed since the company reported results for the quarter ended March 2024.
CSX reported revenues of $3.68 billion in the last reported quarter, representing a year-over-year change of -0.7%. EPS of $0.46 for the same period compares with $0.48 a year ago.
For the current quarter, CSX is expected to post earnings of $0.48 per share, indicating a change of -2% from the year-ago quarter. The Zacks Consensus Estimate has changed +0.2% over the last 30 days.
CSX has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of C.
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Why Is CN (CNI) Up 3.8% Since Last Earnings Report?
It has been about a month since the last earnings report for Canadian National (CNI - Free Report) . Shares have added about 3.8% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is CN due for a pullback? 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 catalysts.
Earnings Beat at Canadian National in Q1
Canadian National reported first quarter 2024 earnings of $1.28 per share (C$1.72), which surpassed the Zacks Consensus Estimate of $1.27. However, the bottom line declined 5.19% year over year.
Revenues for the first quarter of 2024 were $3.15 billion (C$4.25 billion), which missed the Zacks Consensus Estimate of $3.16 billion. This reflects a decrease of 1.19%. The decline was mainly due to lower Freight revenue per RTM, while volumes remained flat.
Volumes remained flat, mainly due to higher shipments of potash, refined petroleum products, frac sand, international intermodal and natural gas liquids, offset by lower shipments of coal, grain, forest products and crude oil.
Freight revenue per RTM decreased, mainly due to lower fuel surcharge revenues and an increase in the average length of haul, partly offset by freight rate increases.
Operating expenses for the first quarter of 2024 increased by 2% from the year-ago figure. The increase was mainly due to higher labor and fringe benefit expenses, driven by general wage increases and higher average headcount, partly offset by lower fuel prices.
The operating income for the first quarter of 2024 decreased by 7% when compared to the same period in 2023. The operating ratio, defined as operating expenses as a percentage of revenues, was 63.6% in the first quarter of 2024 compared to 61.5% in the first quarter of 2023.
Segmental Highlights
Freight revenues (C$4.14 billion), which contributed 97.6% to the top line, decreased 2% year over year, wider than our anticipated fall of 1%. Freight revenues at the Petroleum and chemicals increased 4%, and Forest Products, Coal and Intermodal segments fell 3%, 16% and 5%, respectively. Revenues at the Metals and minerals, Grain and fertilizers and Automotive segments were in line with the 2023 figures.
Segment-wise, carloads in Petroleum and Chemicals, Metals and Minerals and Intermodal increased 2%, 1% and 3%, respectively. The same at Forest Products, Coal, Grain and Fertilizers and Automotive declined 4%,14%, 4% and 7%, respectively, year over year.
Liquidity
CNI exited the quarter with cash, cash equivalents and restricted cash of C$861 million and a total debt of $16.75 billion. Canadian National generated free cash flow of C$529 million during the first quarter compared with C$593 million a year ago.
2024 Outlook
CNI reaffirms its 2024 outlook and expects to deliver adjusted diluted EPS growth of approximately 10% and expects to invest approximately C$3.5 billion in its capital program, net of amounts reimbursed by customers. The company also expects the return on invested capital to be within the targeted range of 15.
CNI reiterates its longer-term financial perspective and continues to target compounded annual diluted EPS growth in the range of 10 over the 2024-2026 period, driven by growing volumes more than the economy, pricing above rail inflation and incrementally improving efficiency, all of which assumes a supportive economy.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision flatlined during the past month.
VGM Scores
Currently, CN has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. Charting a somewhat similar path, 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 F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
CN has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
CN belongs to the Zacks Transportation - Rail industry. Another stock from the same industry, CSX (CSX - Free Report) , has gained 1% over the past month. More than a month has passed since the company reported results for the quarter ended March 2024.
CSX reported revenues of $3.68 billion in the last reported quarter, representing a year-over-year change of -0.7%. EPS of $0.46 for the same period compares with $0.48 a year ago.
For the current quarter, CSX is expected to post earnings of $0.48 per share, indicating a change of -2% from the year-ago quarter. The Zacks Consensus Estimate has changed +0.2% over the last 30 days.
CSX has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of C.