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Why Is CN (CNI) Down 4.6% 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 lost about 4.6% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is CN due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Earnings Miss at Canadian National in Q3
Canadian National reported third-quarter 2024 earnings of $1.26 per share (C$1.72), which missed the Zacks Consensus Estimate of $1.28. However, the bottom line remained flat on a year-over-year basis.
Revenues for the third quarter of 2024 were $3.01 billion (C$4.11 billion), which lagged the Zacks Consensus Estimate of $3.06 billion. However, this reflects an increase of 1.37% year over year, driven by higher volumes.
Revenue ton-miles (RTMs or a measure of volumes) increased 2% year over year due to higher shipments of international intermodal, Canadian grain exports and refined petroleum products. Carloads decreased by 1.7% on a year-over-year basis due to prolonged labor uncertainty that resulted in work stoppages, along with a softer macroeconomic environment that constrained volume growth.
Freight revenue per RTM rose by 1% year over year, fueled by freight rate increases and the positive translation impact of a weaker Canadian dollar.
Operating expenses for the third quarter of 2024 rose by 5.1% from the year-ago figure. The increase was mainly due to higher labor and fringe benefit expenses and fuel costs.
The operating income for the third quarter of 2024 remained flat at C$1.5 billion compared with the third-quarter 2023 actuals. The operating ratio, defined as operating expenses as a percentage of revenues, on an adjusted basis, deteriorated to 63.1% in the third quarter of 2024 from 62% in the third quarter of 2023. A lower value of the metric is preferable.
CNI’s Segmental Highlights
Freight revenues, which contributed 95.4% to the top line, increased 2.7% year over year. Freight revenues in petroleum and chemicals, and grain and fertilizers rose by 9% and 8%, respectively. However, revenues in the metals and minerals, coal and automotive segments fell by 3%, 5% and 8%, respectively, compared with 2023 figures.
Meanwhile, freight revenues from the forest products and intermodal segments remained flat at C$467 million and C$882 million.
Segment-wise, carloads in petroleum and chemicals, metals and minerals, forest products, coal, grain and fertilizers and automotive segments increased 9%, 6%, 4%, 1%, 2% and 8%, respectively. The same in the intermodal segment declined 1% year over year.
CNI’s Liquidity
Canadian National generated free cash flow of C$584 million during the third quarter compared with C$581 million a year ago. CNI exited the quarter with a long-term debt of C$18.6 billion compared with C$16.1 billion in the third quarter of 2023.
CNI’s 2024 Outlook
For full-year 2024, CNI continues to anticipate delivering adjusted diluted EPS growth in the low single-digit range and plans to invest approximately C$3.5 billion in its capital program, net of customer reimbursements. The company also expects adjusted return on invested capital to remain within the 13 range.
From 2024 to 2026, CNI aims for compounded annual adjusted diluted EPS growth in the high single-digit range.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
VGM Scores
At this time, CN has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. Following the exact same course, 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
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, 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 2.9% over the past month. More than a month has passed since the company reported results for the quarter ended September 2024.
CSX reported revenues of $3.62 billion in the last reported quarter, representing a year-over-year change of +1.3%. EPS of $0.46 for the same period compares with $0.42 a year ago.
CSX is expected to post earnings of $0.44 per share for the current quarter, representing a year-over-year change of -2.2%. Over the last 30 days, the Zacks Consensus Estimate has changed -1.4%.
CSX has a Zacks Rank #4 (Sell) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of D.
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Why Is CN (CNI) Down 4.6% Since Last Earnings Report?
It has been about a month since the last earnings report for Canadian National (CNI - Free Report) . Shares have lost about 4.6% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is CN due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Earnings Miss at Canadian National in Q3
Canadian National reported third-quarter 2024 earnings of $1.26 per share (C$1.72), which missed the Zacks Consensus Estimate of $1.28. However, the bottom line remained flat on a year-over-year basis.
Revenues for the third quarter of 2024 were $3.01 billion (C$4.11 billion), which lagged the Zacks Consensus Estimate of $3.06 billion. However, this reflects an increase of 1.37% year over year, driven by higher volumes.
Revenue ton-miles (RTMs or a measure of volumes) increased 2% year over year due to higher shipments of international intermodal, Canadian grain exports and refined petroleum products. Carloads decreased by 1.7% on a year-over-year basis due to prolonged labor uncertainty that resulted in work stoppages, along with a softer macroeconomic environment that constrained volume growth.
Freight revenue per RTM rose by 1% year over year, fueled by freight rate increases and the positive translation impact of a weaker Canadian dollar.
Operating expenses for the third quarter of 2024 rose by 5.1% from the year-ago figure. The increase was mainly due to higher labor and fringe benefit expenses and fuel costs.
The operating income for the third quarter of 2024 remained flat at C$1.5 billion compared with the third-quarter 2023 actuals. The operating ratio, defined as operating expenses as a percentage of revenues, on an adjusted basis, deteriorated to 63.1% in the third quarter of 2024 from 62% in the third quarter of 2023. A lower value of the metric is preferable.
CNI’s Segmental Highlights
Freight revenues, which contributed 95.4% to the top line, increased 2.7% year over year. Freight revenues in petroleum and chemicals, and grain and fertilizers rose by 9% and 8%, respectively. However, revenues in the metals and minerals, coal and automotive segments fell by 3%, 5% and 8%, respectively, compared with 2023 figures.
Meanwhile, freight revenues from the forest products and intermodal segments remained flat at C$467 million and C$882 million.
Segment-wise, carloads in petroleum and chemicals, metals and minerals, forest products, coal, grain and fertilizers and automotive segments increased 9%, 6%, 4%, 1%, 2% and 8%, respectively. The same in the intermodal segment declined 1% year over year.
CNI’s Liquidity
Canadian National generated free cash flow of C$584 million during the third quarter compared with C$581 million a year ago. CNI exited the quarter with a long-term debt of C$18.6 billion compared with C$16.1 billion in the third quarter of 2023.
CNI’s 2024 Outlook
For full-year 2024, CNI continues to anticipate delivering adjusted diluted EPS growth in the low single-digit range and plans to invest approximately C$3.5 billion in its capital program, net of customer reimbursements. The company also expects adjusted return on invested capital to remain within the 13 range.
From 2024 to 2026, CNI aims for compounded annual adjusted diluted EPS growth in the high single-digit range.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
VGM Scores
At this time, CN has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. Following the exact same course, 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
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, 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 2.9% over the past month. More than a month has passed since the company reported results for the quarter ended September 2024.
CSX reported revenues of $3.62 billion in the last reported quarter, representing a year-over-year change of +1.3%. EPS of $0.46 for the same period compares with $0.42 a year ago.
CSX is expected to post earnings of $0.44 per share for the current quarter, representing a year-over-year change of -2.2%. Over the last 30 days, the Zacks Consensus Estimate has changed -1.4%.
CSX has a Zacks Rank #4 (Sell) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of D.