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Rail News: Canadian National Railway - CN

CN: Solid Q1 results stem from 'executing well on all fronts'

CN’s strong operational performance led to strong financial performance in the first quarter, including a mid-60s operating ratio (OR), the Class I reported yesterday.

Revenue jumped 13 percent to $2.4 billion, operating income climbed 23 percent to $793 million, net income increased 16 percent to $775 million and adjusted diluted earnings per share (EPS), excluding a gain on the sale of line segments, rose 31 percent to $1.18 (all in Canadian dollars). In addition, volume rose 5 percent to 1.2 million units, revenue ton miles increased 6 percent to 49 million and the OR improved 2.8 points to 66.2.

“While CN benefited from a milder winter and improving economic conditions, our very solid first-quarter results underscore that our strategy is working,” said CN President and Chief Executive Officer Claude Mongeau in a prepared statement. “The CN team executed well on all key fronts, delivering high-quality service while handling solid volume growth at low incremental cost.”

Revenue increased in every sector except grain and fertilizers, which posted a 2 percent decline. Metals and minerals revenue jumped 31 percent, coal revenue climbed 18 percent, intermodal revenue rose 17 percent, petroleum and chemicals revenue shot up 15 percent, automotive revenue increased 13 percent and forest products revenue escalated 10 percent.

In terms of total operating expenses, first-quarter costs climbed 8 percent year over year to $1.5 billion (in Canadian dollars). Fuel and labor/fringe benefits expenses climbed, and were only partly offset by lower casualty and other expenses, CN officials said.

Due to the overall strong performance in Q1, CN has revised its financial outlook for 2012. The Class I now is projecting 10 percent growth in diluted EPS, on an adjusted basis, versus diluted EPS of $4.84 in 2011 despite significant headwinds from additional pension expenses. CN also expects to generate free cash flow of $950 million compared with previous guidance of $875 million.

“We believe our solid first-quarter performance and our clear focus on helping our customers succeed position us well to achieve this improved financial outlook for the year,” said Mongeau.

Contact Progressive Railroading editorial staff.

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