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Why Is Canadian National (CNI) Up 10.5% Since Its Last Earnings Report?
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A month has gone by since the last earnings report for Canadian National Railway Company (CNI - Free Report) . Shares have added about 10.5% in that time frame.
Will the recent positive trend continue leading up to its next earnings release, or is CNI due for a pullback? 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 drivers.
First-Quarter Earnings
Canadian National's first-quarter 2018 earnings per share of 79 cents (C$1) lagged the Zacks Consensus Estimate of 80 cents. Moreover, the bottom line plunged significantly from the year-ago figure. High operating expenses hurt results.
Quarterly revenues of $2,521.3 million (C$3,194 million) however, surpassed the Zacks Consensus Estimate of $2,482.6 million. Rail freight revenues, accounting for the bulk of the top line in the reported quarter, saw a marginal dip.
Operating Results
On a year-over-year basis, freight revenues rose in Metals and Minerals (7%), Coal (10%) and Intermodal (10%) segments. While the same declined at Petroleum and Chemicals (3%), Forest Products (6%), Grain and Fertilizers (11%) as well as Automotive (4%). Overall, carloads (volumes) expanded 3% while revenue ton miles (RTMs) slipped 4% year over year. Meanwhile, rail freight revenues per carload declined 3% in the quarter under review.
The Coal and Intermodal sub-groups performed impressively with respect to car loads. In fact, the metric expanded 10% each at the two segments. The same increased 4% at the Metals and minerals segment. However, in Petroleum and Chemicals, Forest Products, Grain and Fertilizers plus Automotive, the car loads contracted 3%, 7%, 12% and 4%, respectively.
In the period under discussion, operating income decreased 16% year over year to C$1,030 million. Operating ratio (defined as operating expenses as a percentage of revenues) was 67.8% compared with 61.8% in the year-ago quarter. Higher fuel and labor costs as well as harsh weather conditions and a low network resiliency induced this key metric’s deterioration.
Liquidity
The company exited the first quarter with free cash flow of C$322 million compared with C$848 million a year ago. As of Mar 31, 2018, adjusted debt was C$12,841 million compared with C$11,880 million in the prior year.
Dividend
The company’s board of directors approved a dividend of 45.5 cents (C$0.4550) for the second quarter, payable Jun 29, 2018 to shareholders of record as of Jun 8.
Bearish 2018 Outlook
The company now expects adjusted earnings per share of C$5.10-C$5.25 for 2018. tthe previous outlook was in the range of C$5.25-C$5.40. The company has trimmed its view due to lower-than-expected RTMs in the first quarter. Thehe longer-than-expected construction period for significant infrastructure capacity projects in the current year also contributed to the outlook being slashed.
Capital Program Value Raised
The company has increased its C$3.2 billion capital program to C$3.4 billion. It plans to invest approximately C$400 million in new track infrastructure, mainly in Western Canada to increase capacity and enhance resiliency.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month. There have been two revisions higher for the current quarter compared to five lower.
Canadian National Railway Company Price and Consensus
At this time, CNI has a poor Growth Score of F. Its Momentum is doing a lot better with a C. 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.
The company's stock is suitable solely for momentum based on our styles scores.
Outlook
Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. Notably, CNI has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why Is Canadian National (CNI) Up 10.5% Since Its Last Earnings Report?
A month has gone by since the last earnings report for Canadian National Railway Company (CNI - Free Report) . Shares have added about 10.5% in that time frame.
Will the recent positive trend continue leading up to its next earnings release, or is CNI due for a pullback? 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 drivers.
First-Quarter Earnings
Canadian National's first-quarter 2018 earnings per share of 79 cents (C$1) lagged the Zacks Consensus Estimate of 80 cents. Moreover, the bottom line plunged significantly from the year-ago figure. High operating expenses hurt results.
Quarterly revenues of $2,521.3 million (C$3,194 million) however, surpassed the Zacks Consensus Estimate of $2,482.6 million. Rail freight revenues, accounting for the bulk of the top line in the reported quarter, saw a marginal dip.
Operating Results
On a year-over-year basis, freight revenues rose in Metals and Minerals (7%), Coal (10%) and Intermodal (10%) segments. While the same declined at Petroleum and Chemicals (3%), Forest Products (6%), Grain and Fertilizers (11%) as well as Automotive (4%). Overall, carloads (volumes) expanded 3% while revenue ton miles (RTMs) slipped 4% year over year. Meanwhile, rail freight revenues per carload declined 3% in the quarter under review.
The Coal and Intermodal sub-groups performed impressively with respect to car loads. In fact, the metric expanded 10% each at the two segments. The same increased 4% at the Metals and minerals segment. However, in Petroleum and Chemicals, Forest Products, Grain and Fertilizers plus Automotive, the car loads contracted 3%, 7%, 12% and 4%, respectively.
In the period under discussion, operating income decreased 16% year over year to C$1,030 million. Operating ratio (defined as operating expenses as a percentage of revenues) was 67.8% compared with 61.8% in the year-ago quarter. Higher fuel and labor costs as well as harsh weather conditions and a low network resiliency induced this key metric’s deterioration.
Liquidity
The company exited the first quarter with free cash flow of C$322 million compared with C$848 million a year ago. As of Mar 31, 2018, adjusted debt was C$12,841 million compared with C$11,880 million in the prior year.
Dividend
The company’s board of directors approved a dividend of 45.5 cents (C$0.4550) for the second quarter, payable Jun 29, 2018 to shareholders of record as of Jun 8.
Bearish 2018 Outlook
The company now expects adjusted earnings per share of C$5.10-C$5.25 for 2018. tthe previous outlook was in the range of C$5.25-C$5.40. The company has trimmed its view due to lower-than-expected RTMs in the first quarter. Thehe longer-than-expected construction period for significant infrastructure capacity projects in the current year also contributed to the outlook being slashed.
Capital Program Value Raised
The company has increased its C$3.2 billion capital program to C$3.4 billion. It plans to invest approximately C$400 million in new track infrastructure, mainly in Western Canada to increase capacity and enhance resiliency.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month. There have been two revisions higher for the current quarter compared to five lower.
Canadian National Railway Company Price and Consensus
Canadian National Railway Company Price and Consensus | Canadian National Railway Company Quote
VGM Scores
At this time, CNI has a poor Growth Score of F. Its Momentum is doing a lot better with a C. 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.
The company's stock is suitable solely for momentum based on our styles scores.
Outlook
Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. Notably, CNI has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.