A CN Rail locomotive
Canadian National Railway reported earnings that easily beat analysts’ forecasts as strong volumes allowed the railroad to increase prices and fuel surcharges to offset rising costs.
Revenue in the second quarter was C$4.34-billion, topping the expected C$4.08-billion and 21% higher than last year. The company said it was helped by a combination of higher freight rates and fuel charges and strong volumes of coal and US grain. A weaker Canadian dollar also gave a boost.
Montreal-based Canadian National earned C$1.93 a share on an adjusted basis, beating analyst forecasts of C$1.76 per share. The company also reaffirmed an earlier outlook that calls for 15% to 20% earnings growth compared with 2021.
New CEO Tracy Robinson is under pressure to boost efficiency at the railway, which has underperformed Canadian Pacific Railway over the past several years. Robinson took the helm in February when former CEO Jean-Jacques Ruest departed following a campaign against him by one of the company’s largest shareholders, Christopher Hohn’s TCI Fund Management.
In April, Canadian National cut its outlook for profit growth and cash flow for 2022, saying it expected costs to be significantly higher, partly because of the soaring cost of fuel. It set a target of getting its operating ratio below 60% this year, less aggressive than a previous target of 57%.
Operating ratio in the second quarter was 59.3%. The number is a key gauge of railway efficiency that measures expenses as a percentage of revenues.
CN was hit by a labor strike during the last two weeks of June. The company has agreed to binding arbitration with 750 Canadian employees from the International Brotherhood of Electrical Workers.