Canadian National Railway
) reported mixed fourth quarter and full year results, based on
better slot utilization, improved productivity and favorable
pricing, partially offset by higher fuel costs and equipment
Adjusted earnings per share of C$1.41 (approximately $1.42) in
the fourth quarter of 2012 were in line with the Zacks Consensus
Estimate. The results increased 8% from the adjusted earnings of
C$1.30 ($1.31) in the year-ago quarter, aided by operational
excellence and better services.
Quarterly revenue increased 7% year over year to C$2,534 million
(approximately $2,556 million) but missed the Zacks Consensus
Estimate of $2,569 million. The year-over-year growth is
attributed to improved performance across most of its commodity
segments, especially from Petroleum and Chemicals, Coal as well
as Grain and Fertilizers.
Carloads (volumes) increased 3% year over year and revenue ton
miles, which measure the relative weight and distance of rail
freight transported by Canadian National, moved up 8.0% from the
On a year-over-year basis, revenues increased 13% for Petroleum
and Chemicals, 15% for Coal, 11% for Grain and Fertilizers, 5%
for Automotive and 7% for Intermodal. There was a drop in revenue
by 2% for Forest Products and 1% for Metals and Minerals.
For the full year, the company posted earnings per share of
C$5.61 or $5.66 (marginally beating our projection of $5.62 but
up 16% year over year), on revenue of C$9,920 million or $10,006
million (up 10% from the prior year).
In the fourth quarter, operating income increased 10% year over
year to C$922 million (approximately $930 million). Operating
expenses climbed 5% year over year to C$1,612 million
(approximately $1,626 million). Operating ratio (defined as
operating expenses as a percentage of revenue) was 63.6%, down
110 basis points.
Canadian National exited 2012 with cash and cash equivalents of
C$155 million ($156 million). The company had long-term debt
(including current portion) of C$6,900 million ($6,960 million),
representing debt-to-capitalization ratio of 38.5%. Free cash
flow for the year amounted to C$1,006 million ($1,015 million).
Canadian National's board of directors hiked the quarterly
dividend by 15% to 43 Canadian cents per share (C$1.72 per share
annualized). The dividend will be paid to shareholders of
record on Mar 28, payable on Mar 7.
Canadian National expects growth in 2013 to be driven by upward
trends in the North American economic scenario, various prospects
in domestic energy-related projects as well as opportunities in
the export market.
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.
Other Railroad Stocks
Of the other stocks in the sector,
Union Pacific Corporation
) will release its fourth quarter results on Jan 24, before the
opening bell, while
Canadian Pacific Railway Limited
) will release the same on Jan 29, also before the opening bell.
Another stock worth considering within the sector is
Genesee & Wyoming Inc
) that holds a Zacks Rank #1 (Strong Buy).
Canadian National holds a Zacks Rank #3, implying a short-term
Hold rating. We believe Canadian National is poised to benefit
from the improving demand and pricing trends. The company's
service improvements and expected growth across all segments bode
well for the projected double-digit earnings growth in the coming
CDN NATL RY CO (CNI): Free Stock Analysis
CDN PAC RLWY (CP): Free Stock Analysis Report
GENESEE & WYO (GWR): Free Stock Analysis
UNION PAC CORP (UNP): Free Stock Analysis
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