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Canadian National (CNI) Beats Q3 Earnings & Revenue Estimates

Zacks Equity Research
Updated

Canadian National Railway Company CNI posted better-than-expected earnings and revenues in third-quarter 2018 results, primarily owing to shipment of key commodities.

The company’s earnings of $1.15 per share (C$1.50) outpaced the Zacks Consensus Estimate of $1.12. Moreover, the bottom line improved significantly from the prior-year quarter’s figure.

Quarterly revenues also increased year over year to $2,822 million (C$3,688 million) and beat the Zacks Consensus Estimate of $2,722.4 million. Rail freight revenues improved 14.8% year over year and contributed 93.9% to the top line.

Operating Results

On a year-over-year basis, freight revenues rose in Petroleum and Chemicals (25%), Metals and Minerals (15%), Forest Products (15%), Coal (25%), Grain and Fertilizers (15%), Intermodal (8%) as well as Automotive (3%). Overall, carloads (volumes) and revenue ton miles (RTMs) expanded 3% and 4%, respectively. Moreover, rail freight revenue per carload improved 12% in the quarter under review. Additionally, rail freight revenue per RTM increased 10%.

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The Grain and Fertilizers sub-group performed impressively with respect to car loads. In fact, the metric expanded 8%. In Petroleum and Chemicals, Metals and Minerals, Forest Products, Coal as well as Intermodal, the same expanded 5%, 3%, 1%, 4% and 2%, respectively. However, the carloads contracted 3% in the Automotive segment.

Operating income increased 8.2% year over year to C$1,492 million. Operating ratio (defined as operating expenses, as a percentage of revenues) was 59.5% compared with 57.2% in the year-ago quarter. Higher fuel, labor and material costs as well as negative impact of softness in Canadian dollar led to the deterioration of the key metric.

Canadian National Railway Company Price, Consensus and EPS Surprise

 

Canadian National Railway Company Price, Consensus and EPS Surprise | Canadian National Railway Company Quote

 

Liquidity

This Zacks Rank #2 (Buy) company exited the third quarter with free cash flow of C$585 million compared with C$662 million in the year-ago period. As of Sep 30, 2018, adjusted debt was C$12,847 million compared with C$11,330 million a year ago. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Dividend

The board of directors approved a dividend of 45.5 cents (C$0.4550) for the fourth quarter, payable on Dec 28, 2018 to shareholders of record as of Dec 7.

2018 Earnings Outlook

Canadian National reaffirmed adjusted earnings per share of C$5.30-C$5.45 for 2018. Moreover, it anticipates RTMs to grow around 5%.

Share Repurchases

The board of directors cleared the buyback of shares under a new normal course issuer bid (NCIB). The NCIB allows the company to buy, for cancellation, up to 5.5 million shares of common stock. The bid will commence on Oct 30, 2018 and terminate by Jan 31, 2019.

Upcoming Releases

Investors interested in the broader Transportation Sector are awaiting third-quarter 2018 earnings reports from key players, namely Old Dominion Freight Line, Inc. ODFL, Union Pacific Corporation UNP and Alaska Air Group, Inc. ALK. All the stocks are scheduled to release results on Oct 25.

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Alaska Air Group, Inc. (ALK) : Free Stock Analysis Report
 
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Old Dominion Freight Line, Inc. (ODFL) : Free Stock Analysis Report
 
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