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Canadian National Railway Positive after Its 3Q17 Earnings

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Part 4
Canadian National Railway Positive after Its 3Q17 Earnings PART 4 OF 8

Canadian National Railway: Petroleum and Chemical Revenues in 3Q17

Canadian National’s Chemicals revenues

Here, we’ll assess the Petroleum and Chemicals segment of Canadian National Railway (CNI). In 3Q17, this segment accounted for the second-largest share (16.5%) in CNI’s total operating revenues of ~$3.0 billion Canadian.

In 3Q17, the Petroleum and Chemicals vertical’s revenues totaled $532.0 million Canadian, equal to the segment’s revenues in 3Q16. However, on a constant currency basis, the division’s revenues rose 3.0% YoY (year-over-year) in 3Q17.

Canadian National Railway: Petroleum and Chemical Revenues in 3Q17

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Notably, CNI’s Petroleum and Chemicals freight revenues have fallen in recent quarters. The present levels of revenues indicate a 17.0% fall from its 1Q15 peak.

Petroleum and Chemicals carloads in 3Q17

In 3Q17, CNI’s Petroleum and Chemical segment’s revenue ton miles (or RTMs) rose 1.0%. However, the segmental revenue per RTM fell 1.0% in 3Q17. In that quarter, the Petroleum and Chemicals carloads jumped 3.0% to 154,000 railcars from 149,000 railcars in 3Q16.

Management’s outlook

Although crude oil (UNG) prices rose in 3Q17 on a sequential basis, they were much lower than the levels seen in 2014 and 2015. Low yield in crude led Canadian National Railway to take a growth pause on crude (SLB) shipments. The company noted that it would wait for an attractive entry point in the spot market after building incremental capacity.

With the recovery in energy-related commodity (ARLP) prices, CNI foresees higher volumes of fractionating sand, steel pipes, and heavy crude. The upsurge in Canada’s economic activities should support the volumes of refined petroleum products, chemicals (DOW), and metals and minerals (RIO) in the coming quarters.

Next, we’ll consider Canadian National’s Grain segment’s performance in 3Q17.

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