Canadian National raised its outlook for the remainder of the year as the railway reported higher second-quarter revenue and profits Friday.
“With this momentum, we’re raising our guidance, and now expect earnings for the year of mid to high single-digits on the back of low single-digit volume” growth, Chief Executive Tracy Robinson told investors and analysts on the railway’s earnings call prior to the opening of markets. “The engine is running well. We’re executing against our strategy, and we can see the results.”
CN (NYSE: CNI) previously forecast flat volumes and low single-digit earnings growth.
Second-quarter operating income increased 9%, to US$1.26 billion as revenue grew 11%, to $3.37 billion. Earnings per share, adjusted for the impact of one-time items, increased 11%, to $1.48.
The railway’s operating ratio was 62.5%, an increase of 0.8 points. High fuel prices were a 2.1-point drag on the operating ratio.
Volume was up 5% when measured by revenue-ton miles, CN’s preferred metric, or down 0.35% on the basis of carloads and intermodal containers.
Chief Commercial Officer Janet Drysdale said the railway has a positive outlook for the remainder of the year for petroleum and chemicals traffic, grain, domestic intermodal, and automotive. The outlook is neutral for metals and minerals as well as coal. CN has a negative outlook on forest products, fertilizer, and international intermodal.
Key operating metrics largely held steady during the quarter. “The network is running well. Car velocity and network train speed were largely flat year over year while handling stronger volumes and maintaining solid customer service,” Chief Operating Officer Patrick Whitehead said.
The railway posted its best second-quarter and first half fuel efficiency figures, said Whitehead, while locomotive productivity increased 6% and train and engine crew productivity was up 13% as the railway ran longer trains.
CN’s capacity expansion projects in Western Canada are paying off in increased fluidity and velocity as the railway handles record grain and potash shipments, as well as higher volumes of refined petroleum products, natural gas liquids, and other commodities.
“Car velocity, train speed, and dwell improved roughly 3%,” Whitehead said of CN’s Western Region. “That combination matters. It demonstrates that the capacity investments we have made, disciplined train planning, and strong execution are allowing us to absorb growth while improving overall fluidity.”
The wildfires that are currently burning in northern Ontario and in British Columbia are not affecting CN’s operations or infrastructure. The Montreal-based carrier is closely monitoring the wildfires and has deployed its fleet of firefighting trains.
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