Canadian National Railway raises profit forecast after record revenues

Revenue jumped $922 million to $4.5 billion, a 26% increase over last year

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Canadian National Railway Company is raising its full-year profit forecast after announcing record third-quarter revenue.

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Revenue for CN, Canada’s largest railroad, jumped $922 million in the quarter to $4.5 billion – a 26% increase over last year, which, according to the company, was mainly due to it increasing its freight rates and charging more for fuel, due to rising fuel prices. CN also benefited from a “positive translation effect of a weaker Canadian dollar,” the railroad said in a statement. financial update October 25.

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The gains generated record operating profit of $1.9 billion, up 44% year-over-year in the third quarter, which ended Sept. 30. Earnings per share fell 10% to $2.13, only because the year-over-year comparison was skewed. by an $886 million merger termination fee that CN received in the third quarter of 2021 after its bid to buy Kansas City Southern failed. But ignoring the impact of those termination fees, EPS of $2.13 represented a 40% increase on an adjusted basis, above the forecast of $2.01.

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In a note to investors, RBC Capital Markets analyst Walter Spracklin called the performance a “solid beat.”

The results prompted CN to update its official outlook for 2022, raising the forecast for adjusted EPS growth to “about 25%,” up from a previous forecast of 15-20%.

CN chief executive Tracy Robinson said the railroad is expecting “a busy fourth quarter” due to the Prairie grain harvest, which Statistics Canada forecasts will be around 75 million. tons.

The railroad said it moved more than 806,000 tonnes of western Canadian grain last week, beating its previous record of more than 50,000 metric tonnes. CN Chief Financial Officer Ghislain Houle said it would be one of the “five best grain crops of all time” in Canada.

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“This record also follows CN’s second-best September ever for moving western Canadian grain, with more than 2.64 million metric tonnes moved,” CN said in a statement. statement earlier this week.

But grain exporters are to complain that CN and its main competitor, Canadian Pacific Railway Ltd., are still unable to fill orders for grain cars. This year is one of the most anticipated Canadian grain harvests in living memory, after war in Ukraine destabilized one of the world’s largest breadbaskets and caused volatility in commodity markets. Canadian grain exporters and farmers, still reeling from an extreme drought that reduced yields by nearly 40% last year, are eager to get new grain to port to capitalize on demand.

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  1. A Canadian National Railway container at the intermodal terminals in Brampton, Ontario.

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  2. A worker unloads soybeans from a truck into a Viterra grain elevator near Rosser, Manitoba.

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  3. The Canadian National Railway Company operates a network that spans approximately 20,000 miles of route, crossing Canada, through the American Midwest and to the Gulf of Mexico.

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The railroads, however, have not been able to keep pace, according to weekly order fulfillment reports from the Ag Transport Coalition. CN and CP supplied just 70% of all grain cars ordered by elevators during the week of Sept. 18, marking a ‘significant drop’ from 83% the previous week, according to the coalition of groups. pressure from the grain industry. That execution rate steadily improved through September, reaching 86% in the first week of October – although the coalition said it was still “below the 90% threshold”.

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In its financial update, CN said it moved 3% more grain and fertilizer carloads in the third quarter than a year ago. Revenue from grain and fertilizer shipments increased by $621 million, a 22% increase over last year. The railroad earned almost a dollar more on every ton of grain and fertilizer it shipped per mile. Last quarter, it earned $5.20 per ton for every mile shipped, up from $4.33 a year ago.

“We saw a rapid increase in Canadian grain starting in September when the new crop started rolling out of the fields,” chief marketing officer Doug MacDonald told investors on an Oct. 25 conference call. “We quickly deployed resources and our customers are very impressed with how the entire team, commercial and operational, has come together to respond effectively to the increase in traffic.

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