Canadian National Railway (NYSE:CNI) Announces Earnings Results

Key Points

• Q1 results met expectations: CN reported EPS of $1.31 and revenue of $3.15 billion (down 0.5% YoY), matching analysts' estimates despite EPS being well below last year's $1.85 per share.
• Strong cash generation and buybacks: Free cash flow was about CAD 900M (up ~CAD 275M YoY) and funded CAD 870M of share repurchases (6M shares), while leverage rose to roughly 2.7x.
• Operational improvement but safety and guidance risks: Network efficiency gains (faster car velocity, higher train speed, lower dwell) support volume growth without proportional cost increases, yet accidents rose (≈CAD 30M higher incident costs) and management kept flattish volume guidance, flagging a CAD 0.07 Q1 drag from fuel/FX that could pressure Q2 operating ratio.

Canadian National Railway (NYSE:CNI - Get Free Report) TSE: CNR posted its earnings results on Wednesday. The transportation company reported $1.31 EPS for the quarter, meeting analysts' consensus estimates of $1.31, Zacks reports. Canadian National Railway had a net margin of 27.22% and a return on equity of 21.95%. The company had revenue of $3.15 billion for the quarter, compared to analysts' expectations of $3.15 billion. During the same quarter in the prior year, the company posted $1.85 earnings per share. Canadian National Railway's revenue for the quarter was down .5% compared to the same quarter last year.

Here are the key takeaways from Canadian National Railway's conference call:

• Network efficiency gains drove operational improvement in Q1 — car velocity +6%, dwell -4%, train speed +6%, RTMs +3% and higher locomotive and T&E productivity, positioning CN to grow volumes without proportional cost increases.
• Free cash flow was ~CAD 900M (up ~CAD 275M YoY) and funded CAD 870M of share repurchases (6M shares), while leverage rose to ~2.7x, reflecting strong cash generation and capital returns to shareholders.
• Safety slipped in Q1 with accidents up year-over-year and roughly CAD 30M higher incident costs; management says targeted actions are underway and April showed early improvement.
• Management is maintaining directional guidance of flattish volumes with earnings slightly outpacing volumes, but flagged a CAD 0.07 Q1 drag from fuel and FX and higher fuel price volatility that could pressure Q2 operating ratio.
• Commercial intensity converted about CAD 100M of revenue in Q1 across grain, NGLs, potash and intermodal, and management cites a dynamic pipeline (~200 initiatives) with ~CAD 100M of near-term visibility for the next quarter.

Canadian National Railway Price Performance

Shares of CNI stock traded down $0.19 during mid-day trading on Friday, reaching $111.94. The stock had a trading volume of 1,516,055 shares, compared to its average volume of 1,677,889. Canadian National Railway has a 12-month low of $90.74 and a 12-month high of $115.80. The company has a market cap of $68.15 billion, a P/E ratio of 20.35, a price-to-earnings-growth ratio of 2.04 and a beta of 0.91. The business has a 50-day simple moving average of $107.47 and a 200 day simple moving average of $101.32. The company has a current ratio of 0.67, a quick ratio of 0.47 and a debt-to-equity ratio of 0.94.

Canadian National Railway Dividend Announcement

The company also recently declared a quarterly dividend, which will be paid on Tuesday, June 30th. Stockholders of record on Tuesday, June 9th will be given a $0.915 dividend. The ex-dividend date is Tuesday, June 9th. This represents a $3.66 dividend on an annualized basis and a dividend yield of 3.3%. Canadian National Railway's dividend payout ratio (DPR) is currently 49.36%.

Wall Street Analysts Forecast Growth

A number of analysts have issued reports on CNI shares. Stephens cut their price target on shares of Canadian National Railway from $105.00 to $100.00 and set an "equal weight" rating on the stock in a research note on Monday, February 2nd. UBS Group lowered shares of Canadian National Railway from a "strong-buy" rating to a "hold" rating in a research note on Monday, February 2nd. Royal Bank Of Canada upped their price target on Canadian National Railway from $160.00 to $178.00 and gave the company an "outperform" rating in a report on Thursday. Sanford C. Bernstein upped their price target on Canadian National Railway from $113.88 to $117.36 and gave the company a "market perform" rating in a report on Tuesday, March 31st. Finally, Vertical Research raised Canadian National Railway from a "hold" rating to a "buy" rating in a report on Monday, January 5th. Nine equities research analysts have rated the stock with a Buy rating and ten have issued a Hold rating to the company. According to data from MarketBeat.com, the company has an average rating of "Hold" and a consensus target price of $122.04.

Institutional Inflows and Outflows

Hedge funds have recently made changes to their positions in the company. Caitong International Asset Management Co. Ltd increased its position in shares of Canadian National Railway by 378.4% in the fourth quarter. Caitong International Asset Management Co. Ltd now owns 354 shares of the transportation company's stock valued at $35,000 after buying an additional 280 shares in the last quarter. Fulcrum Asset Management LLP purchased a new position in shares of Canadian National Railway in the third quarter valued at $51,000. Smartleaf Asset Management LLC increased its position in shares of Canadian National Railway by 19.4% in the fourth quarter. Smartleaf Asset Management LLC now owns 635 shares of the transportation company's stock valued at $63,000 after buying an additional 103 shares in the last quarter. EverSource Wealth Advisors LLC increased its position in shares of Canadian National Railway by 52.1% in the second quarter. EverSource Wealth Advisors LLC now owns 1,118 shares of the transportation company's stock valued at $116,000 after buying an additional 383 shares in the last quarter. Finally, Brown Brothers Harriman & Co. increased its position in shares of Canadian National Railway by 10.9% in the third quarter. Brown Brothers Harriman & Co. now owns 1,377 shares of the transportation company's stock valued at $130,000 after buying an additional 135 shares in the last quarter. Hedge funds and other institutional investors own 80.74% of the company's stock.

Canadian National Railway Company Profile

Canadian National Railway Company NYSE: CNI is a Class I freight railway that operates an integrated rail network across Canada and the United States. Headquartered in Montreal, Quebec, CN provides long-haul freight transportation and related logistics services that connect major ports, industrial centers and inland markets throughout North America. Its transcontinental system enables cross-border movement of goods and supports supply chains that span coast-to-coast in Canada and into the central and eastern United States.

CN's core business is the railborne transportation of a broad mix of commodities, including intermodal container traffic, forest and paper products, grain and other agricultural products, metallurgical and industrial products, petroleum and chemical products, coal and automotive shipments.

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