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Canadian National's (CNI) Q1 Earnings Beat Estimates, Up Y/Y

Canadian National Railway Company’s CNI first-quarter 2020 earnings (excluding 15 cents from non-recurring items) of 91 cents per share (C$1.42) beat the Zacks Consensus Estimate by 15 cents. The bottom line increased 3.4% year over year.

Although quarterly revenues of $2,643.3 million (C$3,545 million) surpassed the Zacks Consensus Estimate of $2,455.7 million, the same declined year over year. The downtick was primarily caused by COVID-19-induced network disruptions. Lackluster freight demand also had a negative impact on the top line. However, freight revenues, which contributed 96.6% to the top line, marginally inched up in the quarter under review.

Canadian National Railway Company Price, Consensus and EPS Surprise

 

Canadian National Railway Company Price, Consensus and EPS Surprise

Canadian National Railway Company price-consensus-eps-surprise-chart | Canadian National Railway Company Quote

 

On a year-over-year basis, freight revenues declined across all segments.  Nevertheless, the same in the Petroleum and Chemicals, and Grain and Fertilizers segment increased 8% and 6%, respectively. Freight revenues in Metals and Minerals, Forest Products and Coal segments declined 4%, 5% and 12%, respectively. Moreover, the same also declined in the Automotive segment (9%).Revenues in the Intermodal segment edged down marginally to $849 million from $850 million, reported in the year ago quarter. While overall carloads declined 6% year over year, revenue ton miles (RTMs) slipped 1%. However, freight revenue per carload increased 7% in the reported quarter. Freight revenue per RTM also moved up 2%.

Segment-wise, carloads declined in the Forest Products, Intermodal and Automotive segments by 8%, 12% and 15%, respectively. The metric also dropped in the Coal by 4%. Meanwhile, the metric increased in the Petroleum and Chemicals, Metals and Minerals and Grain and Fertilizers by 3%, 3% and 1%, respectively. Operating expenses for the first quarter fell 5% to C$2,330 million, primarily owing to lower labor cost as well as depreciation and fuel expenses. Adjusted operating income increased 13% year over year to C$1,215 million. Adjusted operating ratio (defined as operating expenses as a percentage of revenues) improved to 65.7% from the year-ago quarter’s 69.5%. Notably, a lower value of this key metric is desirable.

Pulls Back Guidance

Canadian National withdraws its full-year guidance as well as the three-year targets it outlined in June on Investors Day 2019, citing coronavirus-led uncertainty.

Liquidity

This Zacks Rank #4 (Sell) company exited the year with cash and cash equivalents of C$488 million compared with the C$64 million recorded at the end of 2019. The company generated free cash flow of C$573 during the first quarter of 2020 compared with the year-ago quarter’s C$286 million. Long-term debt amounted to C$12,695 million as of Mar 31, 2020 compared with C$11,866 million at 2019-end. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Maintains Dividend

The company's board maintains its quarterly dividend at C$0.575, which will be paid out on Jun 30 to shareholders of record at the close of business on Jun 9.

Sectorial Snapshot

Apart from Canadian National, there are some other companies in the Zacks Transportation sector like CSX Corporation CSX, Union Pacific Corporation UNP and Canadian Pacific Railway Limited’s CP that have delivered better-than-expected earnings in the first quarter.

CSX reported first-quarter 2020 earnings of $1 per share, which beat the Zacks Consensus Estimate of 92 cents. However, the bottom line slipped approximately 2% year over year due to a drop in revenues.

Union Pacific’s first-quarter 2020 earnings of $2.15 per share surpassed the Zacks Consensus Estimate of $1.86. Moreover, the bottom line increased 11.4% on a year-over-year basis.

Canadian Pacific’s first-quarter 2020 earnings (excluding $1.08 from non-recurring items) of $3.3 (C$4.42) per share surpassed the Zacks Consensus Estimate of $2.86. Quarterly earnings surged more than 55% year over year.

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