Canadian National Railway
) reported a dull first quarter 2013, hurt by unfavorable weather
conditions across Western Canada that impeded operations, slowed
down network activities and restricted volume growth. Steeper
fuel costs were no less responsible for the deterioration.
Adjusted earnings per share of C$1.22 (approximately $1.21)
missed the Zacks Consensus Estimate of $1.23. The results however
increased 3% from the adjusted earnings of C$1.18 ($1.17) in the
year-ago quarter, aided by better services, higher train velocity
and lower freight car dwell times.
Quarterly revenues increased 5% year over year to C$2,466 million
(approximately $2,447 million) but failed to match the Zacks
Consensus Estimate of $2,512 million. The year-over-year growth
was attributed to improved performance across most of Canadian
National's commodity segments.
Carloads (volumes) increased 2% year over year and revenue ton
miles, which measure the relative weight and distance of rail
freight transported by Canadian National, moved up 3% from the
On a year-over-year basis, revenues increased 17% for Petroleum
and Chemicals, 7% for Intermodal, 3% for Metals and Minerals, 2%
for Forest Products, 2% for Automotive and 1% for Grain and
Fertilizers. Coal business witnessed a drop of 1%.
In the first quarter, adjusted operating income declined 2% year
over year to C$780 million (approximately $774 million), while
operating expenses crept up 9% year over year to C$1,686 million
(approximately $1,673 million). Operating ratio (defined as
operating expenses as a percentage of revenue) was 68.4%, up 220
As of Mar 31, 2013, Canadian National had cash and cash
equivalents of C$128 million ($127 million). The company had
long-term debt (including current portion) of C$7,411 million
($7,353 million), representing debt-to-capitalization ratio of
40.0%. Free cash flow utilized for the quarter was C$20 million
Canadian National expects growth in 2013 to be driven by upward
trends in the North American economic scenario, with carload
projected to improve 3%-4%.
The company expects earnings per share to register high
single-digit year-over-year growth in 2013, while free cash flows
are expected in the range of C$800 million to C$900 million. The
company targets capital expenditure of C$2 billion, of which
nearly C$1.1 billion will be directed toward maintenance of track
infrastructure and railway network.
Other Railroad Stocks
Rail transportation services firm
Union Pacific Corporation
) reported first quarter 2013 adjusted earnings of $2.03 per
share, surpassing the Zacks Consensus Estimate of $1.96 as well
as the year-ago earnings of $1.79. Higher pricing and an
improvement in operating ratio aided better-than-expected
CDN NATL RY CO (CNI): Free Stock Analysis
CDN PAC RLWY (CP): Free Stock Analysis Report
GATX CORP (GMT): Free Stock Analysis Report
UNION PAC CORP (UNP): Free Stock Analysis
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Of the other stocks in the sector,
Canadian Pacific Railway Limited
) will release its financial results on Apr 24, before the
opening bell, while
) is expected to report on Apr 25, also before the start of
Canadian National carries a Zacks Rank #3 (Hold). We expect
Canadian National to benefit from its supply chain collaboration
for Coal and Intermodal terminal service, which would aid volume
expansion. Additionally, market share gains, solid execution,
effective cost-control measures, a turnaround in automotive
production and gradual improvements in housing and related
segments would also remain favorable.