Canadian railways facing tough conditions
Canada’s sluggish economy and lower volumes of coal, grain and energy-related products could undermine the lofty 2015 earnings goals for the countrys two largest railways, say industry analysts.
Canadian National (TSX:CNR) and Canadian Pacific (TSX:CP) are expected to temper their earnings outlook when they report results next week.
Calgary-based CP had anticipated at least 25 per cent earnings per share growth for the year, while Montreal’s CN had suggested nearly 10 per cent growth.
But lower freight volumes in recent months prompted several analysts to trim their earnings forecasts for the second quarter and raise concerns about the current quarter that began July 1.
BMO Capital Markets analyst Fadi Chamoun warns of a “tough earnings season ahead,’’ adding that a turnaround in volumes may not come until later this year or early 2016.
CN’s volumes were down 7.3 per cent in the second quarter, led by double-digit decreases for coal and grain. CP volumes decreased 5.8 per cent, hurt by U.S. grain, crude and domestic intermodal.