Canadian National Railway (TSE-CNR) sees earnings fall after decline in shipments

Canadian National Railway Company (TSE-CNR, Mkt cap 64.74B, P/E 18.51, Div/yield 0.38/1.79, EPS 4.54, Shares 774.62M) has reported a drop in earnings for the second quarter but said that business should improve in the second half of the year, partly due to a big grain harvest in Canada.

The railway operator reported on Monday that its net income for the three months ended June 30, 2016 was C$858m, compared with C$886m for the same period last year. Diluted earnings per share (EPS) remained flat at C$1.10.

A decline in shipments led to revenues falling 9% to C$2.8bn. CN said that carloadings were down 12% year-on-year to 1.25 million and revenue ton-miles dropped 11%.

Luc Jobin, president and CEO, commented: “CN continued to face a very challenging volume environment in the second quarter and maintained strong discipline in realigning resources to keep them in line with reduced freight demand. Service remained solid, key operating metrics advanced, and we continued to improve our safety record. An important product of our cost-management and productivity focus was a record second-quarter operating ratio of 54.5%.

“We expect the second quarter to be the volume trough for the year. For the balance of 2016, we continue to expect some markets to remain strong, including lumber and panels, automotive, and refined petroleum products, and we anticipate a bumper grain crop in Canada. At the same time, international intermodal volumes are expected to remain challenging while shipments of commodities related to oil and gas development, such as crude oil, frac sand and drilling pipe, are expected to decrease relative to last year.”

As a result of these expectations, the company has maintained its April 25, 2016, financial guidance for 2016 EPS in line with last year’s adjusted diluted EPS of C$4.44.

Canadian National Railway Company is engaged in the rail and related transportation business. The Company’s network of approximately 20,000 route miles of track spans Canada and mid-America, connecting approximately three coasts, including the Atlantic, the Pacific and the Gulf of Mexico. The Company’s freight includes approximately seven commodity groups, such as petroleum and chemicals, metals and minerals, forest products, coal, grain and fertilizers, intermodal and automotive. The petroleum and chemicals commodity group comprises various commodities, including chemicals and plastics, refined petroleum products, natural gas liquids, crude oil and sulfur. The metals and minerals commodity group consists primarily of materials related to oil and gas development, steel, iron ore, non-ferrous base metals and ores, construction materials and machinery, and dimensional loads. The forest products commodity group includes various types of lumber, panels, paper, wood pulp and other fibers. More from Reuters »

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