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Canadian National Railway Positive after Its 3Q17 Earnings

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Canadian National Railway Positive after Its 3Q17 Earnings PART 1 OF 8

Canadian National Railway Meets 3Q17 Estimates, Stock Rose 1.7%

CNI’s 3Q17 earnings

On October 24, 2017, Canada’s largest freight rail, Canadian National Railway (CNI), released its 3Q17 results after the markets closed. CNI posted adjusted EPS (earnings per share) of $1.31 Canadian, just short of the Thomson Reuters–surveyed analyst estimate of $1.32 Canadian.

Canadian National’s 3Q17 diluted earnings of $1.31 Canadian were up 5.0% from $1.25 Canadian on a year-over-year basis.

Canadian National Railway Meets 3Q17 Estimates, Stock Rose 1.7%

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CNI’s stock performance

In the third quarter of 2017, Canadian National Railway led its industry peers in terms of YoY (year-over-year) freight volume growth. The company attracted the attention of Wall Street analysts with its steady freight volume growth. Unlike its US counterparts, the company has a positive view about the remainder of 2017.

On October 24, 2017, CNI stock jumped 1.7% to close at $83.10. The Montreal-headquartered Class I railroad’s stock is trading near its 52-week high of $84.50 posted on July 12, 2017. The performance of CNI’s peers on the same day follow:

  • Canadian Pacific Railway (CP): rose marginally
  • Union Pacific (UNP): fell 0.3%
  • Kansas City Southern (KSU): fell 1.9%
  • Norfolk Southern (NSC): rose 0.3%
  • CSX (CSX): rose 0.4%
  • Genesee & Wyoming (GWR): rose 0.5%

The Industrial Select Sector SPDR ETF (XLI) rose 0.6% on October 24, 2017. Major US railroads and airline companies make up 9.2% and 11.6%, respectively, of XLI’s portfolio holdings.

Management’s outlook

Ghislain Houle, CFO of Canadian National Railway, noted during the company’s 3Q17 earnings call, “We continue to experience a strong Canadian dollar versus the U.S. dollar. And assuming that the current spot rate of around $0.80, this will remain a headwind on earnings going forward. 

“As a reference, $0.01 appreciation in the Canadian dollar versus the U.S. dollar results in an annual headwind on net income of approximately $30 million or $0.04 of EPS. We remain confident about achieving our guidance and continually expect to deliver adjusted earnings per share in the range of $4.95 to $5.10 versus 2016 adjusted diluted EPS of $4.59.”

In this 3Q17 post-earnings series, we’ll dive into CNI’s segmental results. In the final part of the series, we’ll review the recommendations of Thomson Reuters–polled analysts on the CNI and its peers.

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