Canadian National (CNI) Beats on Q4 Earnings; Ups Dividend

Canadian National Railway Company’s CNI fourth-quarter 2016 earnings (on an adjusted basis) of 93 cents per share (or C$1.23) edged past the Zacks Consensus Estimate of 92 cents. Adjusted earnings climbed 5.7% from the year-ago figure. The company’s bottom line benefited from better expense management.

Quarterly revenues of $2,400.7 million (C$3,217 million) fell short of the Zacks Consensus Estimate of $2,455.9 million, but climbed over 1% on a year-over-year basis. Rail freight revenues, which accounted for bulk of the top line in the quarter, improved 1%.

Operating Results

On a year-over-year basis, freight revenues decreased 6% at the Coal segment, 5% at Petroleum and Chemicals, and  6% at Metals and Minerals. While Intermodal freight revenues climbed 1%, freight revenues for Grain and Fertilizers, and Automotive increased 14% and 4%, respectively. Freight revenues were flat at the Forest Products unit. Carloads (volumes) improved 3% and revenue ton miles (RTMs) climbed 4% year over year.

In fact, 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.

In the quarter under review, operating income climbed 3% year over year to C$1,395 million. Operating ratio (defined as operating expenses as a percentage of revenues) was 56.6% as against 57.2% in the year-ago quarter.

Liquidity

Canadian National exited 2016 with free cash flow of C$2,520 million compared with C$2,373 million in 2015. Adjusted debt at the end of 2016 was C$11,470 million compared with C$11,034 million a year ago.

Canadian National Railway Company Price, Consensus and EPS Surprise

 

Canadian National Railway Company Price, Consensus and EPS Surprise | Canadian National Railway Company Quote

Dividend Hiked

The company’s board of directors approved a 10% dividend hike in its quarterly cash dividend to C$0.4125 per share (annualized C$1.65). The first installment of the new dividend will be paid on Mar 31 to shareholders on record as of Mar 10, 2017.

Guidance

Canadian National expects earnings per share in 2017 to grow in the mid-single-digit range over adjusted EPS of C$4.59 recorded in 2016. The Zacks Rank #2 (Buy) company expects moderate volume growth in 2017. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.  

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