CN profit surges 21% in latest quarter on record revenues

MONTREAL • Canadian National Railway says its net income surged 21% to $853million in the third quarter as revenues reached a record $3.12-billion.

Excluding one-time items, the earnings for the period ended Sept. 30 amounted to $1.04 per share, a penny shy of expectations, and compared with net income of $705-million or 86¢ last year, which included a $19-million income tax expense.

Revenues grew 16% from $2.7-billion as carloadings increased 11% to 1.47 million and revenue-ton miles were up 13%.

“Clearly we are growing much faster than the economy, which is our game plan,” CEO Claude Mongeau said Tuesday during a conference call.

CN’s operating ratio, a measure of efficiency, improved one percentage point to an all-time low of 58.8%.

The Montreal-based railway also said its board of directors authorized the repurchase over the next year of up to 28 million common shares, representing 3.4% of its outstanding shares. CN repur- chased 22.3 million common shares last year, returning $1.4-billion to shareholders.

CN had been expected to earn $1.05 per share in adjusted profits in the third quarter, according to analysts polled by Thomson Reuters. Revenues were forecast to grow 16.6% to $3.146-billion.

The railway saw its volume reached a record high in the quarter on robust grain shipments and strong growth in energy markets. Canadian grain shipments increased 50%.

It maintained its f ullyear outlook to deliver solid double-digit EPS growth over $3.06 in adjusted diluted EPS earned last year and to generate free cash flow in the range of $1.8 billion to $2 billion, excluding major asset sales.

Analysts foresee strong growth prospects for CN in crude oil and fracking sand, along with international intermodal from Prince Rupert, B.C.

Fadi Chamoun of BMO Capital Markets anticipates the railway will generate 14% compounded annual earnings per share growth over the next five years.

He expects CN’s crude volumes will increase to 200,000 carloads a year by 2015 from about 130,000 currently.