Canadian National Railway
) reported a mixed second quarter 2013. The company's efficient
operating base, improved services and cost-control measures were
partially offset by higher costs associated with purchased
services, materials and fuel.
Adjusted earnings per share of C$1.66 (approximately $1.62)
comfortably beat the Zacks Consensus Estimate of $1.58. The
results also increased 11% from adjusted earnings of C$1.50
($1.47) in the year-ago quarter on higher freight rates and
Quarterly revenues increased 5% year over year to C$2,666 million
(approximately $2,605 million) but failed to meet the Zacks
Consensus Estimate of $2,628 million. The year over year growth
was attributable to improved performance across most of Canadian
National's commodity segments along with market share gains.
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 5% from the
On a year-over-year basis, revenues increased 18% for Petroleum
and Chemicals, 3% for Intermodal, 4% for Metals and Minerals, 4%
for Forest Products and 5% for Grain and Fertilizers. While
Automotive business witnessed a drop of 3%, Coal revenues
In the second quarter, adjusted operating income improved 6% year
over year to C$1,042 million (approximately $1,018 million),
despite operating expenses moving up 4% year over year to C$1,624
million (approximately $1,587 million). Operating ratio (defined
as operating expenses as a percentage of revenue) was 60.9%, down
40 basis points.
As of Jun 30, 2013, Canadian National had cash and cash
equivalents of C$87 million ($85 million). The company had
long-term debt (including current portion) of C$7,463 million
($7,292 million), representing debt-to-capitalization ratio of
39.6%. Free cash flow for the quarter was C$437 million ($427
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 Corp.
) reported second quarter 2013 adjusted earnings of $2.37 per
share, surpassing the Zacks Consensus Estimate of $2.35 and
year-ago earnings of $2.10. Better-than-expected earnings were
aided by higher pricing and an improvement in operating ratio.
Another transportation firm
) reported adjusted second-quarter 2013 earnings of 68 cents per
share, missing the Zacks Consensus Estimate of 85 cents. The
results reflected 15% deterioration from 80 cents reported in the
Of the other companies in the sector that are yet to report,
Canadian Pacific Railway Limited
) will release its financial results on Jul 24, before the
Canadian National carries a Zacks Rank #3 (Hold). We expect
Canadian National to benefit from favorable demand/supply
dynamics. The company's industry-leading operating ratio, service
improvements and expected growth across the board, particularly
in Intermodal, Crude and Forest products, bode well for its
projected earnings growth over the next few months.
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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