Canadian National (CNI) Q3 Earnings Beat, Revenues Miss

Canadian National Railway Company 's CNI third-quarter 2016 earnings (on an adjusted basis) of C$1.25 per share (or 96 cents) beat the Zacks Consensus Estimate of 92 cents. Earnings declined marginally from C$1.26 per share reported a year ago. The company's bottom line benefited from better expense management.

However, the company's top-line performance was disappointing. Quarterly revenues of C$3,014 million (approximately $2,311 million) fell short of the Zacks Consensus Estimate of $2,366 million and deteriorated 6% on a year-over-year basis. Rail freight revenues, which accounted for bulk of the top line in the quarter, declined 7%. Canadian National's top line was primarily hurt by reduced shipments of energy-related commodities, declining North American demand for coal, and lower intermodal volumes.

In fact, several of Canadian National's peers like Union Pacific Corporation UNP , Kansas City Southern KSU and Norfolk Southern Corporation NSC have been struggling because of lower coal volumes.

Operating Results

On a year-over-year basis, freight revenues decreased 32% at the Coal segment, 13% at Petroleum and Chemicals, 20% at Metals and Minerals, and 4% at Intermodal. However, freight revenues increased 4% for Grain and Fertilizers, 2% at Forest Products, and 3% at Automotive. Carloads (volumes) dropped 4% and revenue ton miles (RTMs) fell 3% year over year.

In the quarter under review, operating income slipped 5% year over year to C$1,407 million. Operating ratio (defined as operating expenses as a percentage of revenues) was 53.3% as against 53.8% in the year-ago quarter.

Liquidity & Dividends

Canadian National exited the first nine months of 2016 with free cash flow of C$1,743 million compared with C$1,741 million in the prior-year quarter. Adjusted debt at the end of the third quarter was C$11,245 million compared with C$11,116 million a year ago.

The company's board of directors has approved a share repurchase program to buy back 33 million common shares from Oct 30, 2016 through Oct 29, 2017. The company also declared a quarterly dividend of C$0.375 which will be paid on Dec 30, to shareholders on record as of Dec 9, 2016.

CDN NATL RY CO Price, Consensus and EPS Surprise

CDN NATL RY CO Price, Consensus and EPS Surprise | CDN NATL RY CO Quote

Guidance Raised

Canadian National issued a revised guidance for 2016. The company now expects earnings per share to be up approximately 1% year over year in 2016. It had earlier expected 2016 earnings to remain flat with the 2015 level of C$4.44 per share.

The Zacks Rank #3 (Hold) company expects carloads to be lower compared to previous year in the mid single digit range while pricing is expected to stay above inflation. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

Confidential from Zacks

Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

KANSAS CITY SOU (KSU): Free Stock Analysis Report

UNION PAC CORP (UNP): Free Stock Analysis Report

CDN NATL RY CO (CNI): Free Stock Analysis Report

NORFOLK SOUTHRN (NSC): Free Stock Analysis Report

To read this article on click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story


Other Topics

Earnings Stocks

Latest Markets Videos