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Canadian National's (CNI) Q3 Earnings Miss Estimates, Down Y/Y

Zacks Equity Research
·4 min read

Canadian National Railway Company’s CNI third-quarter 2020 earnings of $1.04 per share (C$1.38) missed the Zacks Consensus Estimate by 5 cents. Moreover, the bottom line declined 17.5% year over year.

Quarterly revenues of $2,558.6 million (C$3,409 million) missed the Zacks Consensus Estimate of $2,661 million and declined 11.8% year over year. The downside was primarily caused by COVID-19-induced lower volumes across most commodity groups and lower fuel surcharge rates.

Lackluster freight demand also had a negative impact on the top line. Freight revenues (C$3,249), which contributed 95.3% to the top line, fell 10% year over year. On a year-over-year basis, freight revenues declined across all segments. Freight revenues in Petroleum and Chemicals, Metals and Minerals, Forest Products and Coal segment declined 25%, 20%, 6% and 30%, respectively. Moreover, the same also declined in the Automotive (18%) and Intermodal segment (3%). Nevertheless, revenues in the Grain and Fertilizers segment inched up 10%.

While overall carloads declined 6% year over year, revenue ton miles (RTMs) dropped 7%. Segment-wise, carloads declined in the Petroleum and Chemicals, Metals and Minerals, Forest Products, Coal by 22%, 13%, 10%, and 21%, respectively. Nevertheless, carloads in the Grain and Fertilizers segment moved up 12%. While the metric fell 13% in the Automotive segment, the same remained flat in Intermodal segment. Moreover, freight revenue per carload dropped 5% in the reported quarter. Freight revenue per RTM also fell 3%.

Operating expenses for the third quarter decreased 8% to C$2,043 million, due to lower fuel and labor costs, as well as decreased purchased services and material expense. Adjusted operating income declined 15% year over year to C$1,366 million. Adjusted operating ratio (defined as operating expenses as a percentage of revenues) deteriorated to 59.9% from the year-ago quarter’s figure of 57.9%. Notably, a smaller value of the metric is desirable.

Liquidity

This Zacks Rank #3 (Hold) company exited the September-end quarter with cash and cash equivalents of C$285 million compared with the C$64 million recorded at the end of 2019. The company generated free cash flow of C$506 during the third quarter of 2020 compared with the year-ago quarter’s C$700 million. Long-term debt amounted to C$12,915 million as of Sep 30, 2020 compared with C$11,866 million at 2019-end.

Canadian National Railway Company Price, Consensus and EPS Surprise

Canadian National Railway Company Price, Consensus and EPS Surprise
Canadian National Railway Company Price, Consensus and EPS Surprise

Canadian National Railway Company price-consensus-eps-surprise-chart | Canadian National Railway Company Quote

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Dividend

The company's board maintains its quarterly dividend of C$0.575 per share, which will be paid out on Dec 30 to shareholders of record at the close of business on Dec 9.

Sectorial Snapshot

Apart from Canadian National, let’s take a look into some other Zacks Transportation sector’s third-quarter earnings like Delta Air Lines DAL , J.B. Hunt Transport Services JBHT and  United Airlines Holdings, Inc. UAL.

Delta incurred a loss (excluding $5.17 from non-recurring items) of $3.30 per share in the September quarter, wider than the Zacks Consensus Estimate of a loss of $3.14. Meanwhile, Delta reported earnings of $2.32 per share (on an adjusted basis) in the year-ago quarter, driven by high passenger revenues as air-travel demand was buoyant at that time.

J.B. Hunt reported mixed third-quarter 2020 results, with earnings missing estimates while revenues beating the same. Quarterly earnings of $1.18 per share fell short of the Zacks Consensus Estimate of $1.26. Moreover, the bottom line declined 15.7% year over year due to disappointing performance of its intermodal (JBI) unit. Total operating revenues increased 4.6% to $2,472.5 million. Revenues also beat the consensus mark of $2,345.2 million.

United Airlines incurred a loss (excluding $1.83 from non-recurring items) of $8.16 per share, comparing unfavorably with the Zacks Consensus Estimate of a loss of $7.63. Results were hurt by the coronavirus-induced weakness in air-travel demand. Moreover, operating revenues of $2,489 million slumped 78.1% year over year and also lagged the Zacks Consensus Estimate of $2,570.1 million. This year-over-year plunge was due to 84.3% drop in passenger revenues to $1,649 million.

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Canadian National Railway Company (CNI) : Free Stock Analysis Report
 
Delta Air Lines, Inc. (DAL) : Free Stock Analysis Report
 
United Airlines Holdings Inc (UAL) : Free Stock Analysis Report
 
J.B. Hunt Transport Services, Inc. (JBHT) : Free Stock Analysis Report
 
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