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Canadian National Railway Beat 2Q17 Earnings, Stock Fell 1.9%

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CNI’s 2Q17 earnings

On July 25, 2017, Canada’s largest freight railway, Canadian National Railway (CNI), announced its 2Q17 results. The Montreal-headquartered rail carrier reported adjusted EPS (earnings per share) of $1.34 Canadian compared to the Reuter-surveyed analyst estimate of $1.32 Canadian. The company marginally beat the earnings estimate by 1.7%.

On a year-over-year basis, CNI’s 2Q17 diluted earnings of $1.36 Canadian rose 24.0%.

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CNI’s volumes and stock performance

Canadian National Railway undoubtedly dominated the YoY (year-over-year) freight volume growth in the first half of 2017. However, with its reported rise in volumes, the markets were expecting more. The narrow margin with which CNI beat analysts’ earnings estimate somewhat dampened the market’s expectation for the stock.

On July 26, 2017, CNI stock fell 1.9% to close at $79.60 on the New York Stock Exchange. CNI stock was hovering near its 52-week high of $84.50 on July 12, 2017.

Peer group volume change in 1H17

If you look at the above graph, you can see the stark difference between the volumes for Norfolk Southern (NSC) and its arch rival CSX (CSX). NSC reported a 6.0% rise in volumes, while CSX’s shipments rose just 0.60%. That means CNI gave CSX a run for its volumes.

CNI is a Warren Buffet–controlled BNSF railway (BRK-B). It posted a 10.3% rise in volumes for the first half of 2017. Its first competitor, Canadian Pacific Railway (CP), saw a 6.6% rise in carloads. Its prime contender, Union Pacific (UNP), reported a 5.0% rise in railcar shipments.

EPS outlook in 2017

Buoyed by its strong 2Q17 results, Canadian National Railway anticipates achieving adjusted diluted EPS of $4.95–$5.10 Canadian in fiscal 2017. In fiscal 2016, the company reported adjusted diluted EPS of $4.60 Canadian.

In this 2Q17 post-earnings series, we’ll take a look at CNI’s segmental performance. We’ll also look at Wall Street analysts’ recommendations to find out what they think about the company and its Class I peers (XLI).

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